On April 10, I was honored to be one of 45 small business leaders and entrepreneurs invited to the White House to meet with senior administration officials and congressman Jared Polis (D- Colorado) to discus how tech startups and innovation can strengthen the economy and create jobs.
It’s an important topic, and a timely one, given that the number of new businesses formed last year and the number of jobs those businesses create are at historic lows. On average, around 500,000 new businesses are formed every year. Currently, the rate is closer to 400,000. And while these businesses historically have created an average of 3 million new jobs each year, today’s rate is only 2.4 million.
As the founder of a company based in Florida, it was encouraging to see that most of other companies in attendance were also from areas outside the Silicon Valley bubble. There were at least three other Florida-based companies, as well as several from New York, Chicago, Colorado, Oregon, and yes… California.
Perhaps as a result of this diversity, most of our discussion was not about the typical Silicon Valley debates you read about in the tech press, but on more tangible—albeit less sexy—topics.
Sure we dabbled a bit in Net Neutrality and other tech policy items, but the bulk of the discussion about the two resources that supersede tech in the minds of most company founders: Talent and Capital.
Talent and human capital is very much a broad-reaching topic that covers many areas and is a big concern for entrepreneurs. Almost every business in the room had many job openings that are going unfilled due to a lack of qualified candidates. Since pipeline of talent is important for job growth and competitiveness worldwide, the top to policy-related solutions discussed as possible solutions focused on education and immigration reform.
Education is obviously a tricky subject, and very political. But from a technology innovation standpoint there are some fairly uncontroversial suggestions that can be taken into account by our educators nationwide. Most important is the introduction of computer science at a young age. Already we’ve seen efforts to get young kids—particularly little girls—to start coding. Too often, computer science is just taught as a discipline of science and math, with less focus on the cool programs and things that can be created with this skill. A greater focus on the creative possibilities—similar to art class—might be a better way to encourage young people to explore programming more.
While this education effort is an investment in tomorrow, immigration reform is something that can pay off today. There is a wealth of computer programming talent available overseas whose hiring would help create additional jobs here at home. With more computer programmers, tech companies can innovate faster, create new products, which then open the door to new staff in marketing, sales, and customer service that can be filled with U.S. citizens. Certainly immigration policy is affected by issues other than its affect on tech startups, but it’s an important issue that needs to be addressed.
All the talent in the world won’t help if you don’t have the money to pay them. This is a particularly difficult problem for startups. And when talking money with the government, the two primary buckets of discussion involve taxes and funding.
On the tax front, there is a fundamental unfairness around the way growth-based businesses funded on sales are taxed vs companies funded on VC capital. Companies like Beachfront Media that operate purely on sales revenue have to cut a check to the government for sales and other taxes in stead of reinvesting that money in new jobs. VC-funded companies, meanwhile, are free to invest their capital in new jobs and products without the same tax burden. Why should companies like ours be punished for choosing not to sell off a piece of what we’ve created?
It’s not quite that simple, of course, but it’s a valid point that could be addressed with some type of tax break or accelerated depreciation for certain investments that contribute to job growth… rewarding companies to use their money to create jobs rather than paying more in taxes.
As for financial capital, the government has good intentions in creating small business loans, but have a long way to go to make these opportunities more accessible. The Small Business Innovation Research program makes $2.5 billion a year available in potential funding, but applying for it is incredibly laborious. Doing so involves completing and submitting 50 pages of documents and waiting six to nine months for a response. Compared to a VC pitch—which typically involves a quick 10-slide PowerPoint deck—it’s almost a non-starter.
If a closer partnership between an engaged group of entrepreneurs and government entities on the local, state, and federal level can do a better job addressing these concerns, the tech elements will work themselves out.