The endangered American startup

Editor’s note: This post was republished with permission from the Ewing Marion Kauffman Foundation’s Growthology blog.

Dane Stangler, to the U.S. Senate Committee: “Policy, like technology, should create, not destroy, more opportunities for entrepreneurship.”

Dane Stangler, vice president of Research and Policy at the Kauffman Foundation, addressed members of the U.S. Senate Committee on Small Business and Entrepreneurship, at a hearing entitled  “America Without Entrepreneurs: The Consequences of Dwindling Startup Activity.”

Stangler discussed entrepreneurship and the trends that shed light on the opportunities and challenges facing it. For example, there is a “startup deficit” represented by lower levels of business creation. However, there is evidence that entrepreneurship is on the road to recovery and that entrepreneurial quality has been higher, despite the evident decline in quantity.

In addition, demographic and technological changes might impact entrepreneurship. The oldest Millennials are currently 34, but as they begin to reach “peak age” for entrepreneurship (age 40), they might lead an entrepreneurial resurgence in this country.  Technological change is helping push entrepreneurial activity into sectors that have long seemed immune to it. Technology will continue to create, not destroy, more opportunities for entrepreneurship.

Stangler focused on five federal policy solutions to help renew entrepreneurial growth in the United States. The recommendations included:

1.    Scrutinize existing programs.

There is no shortage of federal efforts in this area. By one count, there are 45 different federal government programs that aim to help entrepreneurs. Congress and the administrative agencies should devote resources to understanding their effectiveness and where cuts might be possible. Lowering costs of entrepreneurial experimentation promises to foster more entrepreneurship than another government program.

2.    Reduce policy uncertainty and regulatory complexity.

This would help all American firms, not just entrepreneurs. But young businesses face particular burdens when it comes to dealing with regulations. While there are already special regulatory provisions that apply to small businesses, Congress should consider extending these provisions to young companies as well.

3.    Increase immigration.

Immigrants start new businesses at twice the rate of native-born Americans. Yet the United States is losing ground to other countries: 15 countries now have a startup visa dedicated to attracting immigrant entrepreneurs. The United States is not one of those countries. By creating new pathways for immigrant entrepreneurs, the United States can and should solidify its stature as the destination for entrepreneurs from all over the world.

4.    Resist and roll back incumbent bias.

Some laws and regulations make it harder for entrepreneurs to compete against incumbent companies. Policymakers must ensure that the playing field is level, which includes ensuring that young companies are heard in Washington like their older, more established counterparts.

5.    Invest in data collection.

The best way to monitor the health of American entrepreneurship is through data, and the Census Bureau has been a strong partner with the Kauffman Foundation and others in creating new datasets to allow researchers and policymakers to better understand entrepreneurship. Additional resources should be considered to augment and expand these efforts.

Watch the hearing here.

Chris Jackson is a research assistant in Research and Policy for the Ewing Marion Kauffman Foundation, assisting in the understanding of what policies and environments best promote entrepreneurship and education in the pursuit of economic growth.

Emily Fetsch is a research assistant in Research and Policy for the Ewing Marion Kauffman Foundation, and assists in the processing of new grants including grant research, grant write-ups, setting deadlines, and reviewing financials. She also assists in writing literature reviews and informative briefs, and conducts quantitative and/or qualitative analysis on the economy, policy, and entrepreneurship.

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