With an Eye Toward Job Creation, Entrepreneurs Get a Lobbyist of Their Own
July 24, 2017
July 24, 2017
If John Dearie had doubts how to mark the launch of his entrepreneurship advocacy organization, they were dispelled on June 10. That day the Trump administration announced the delay and probable demise of the so-called startup visa rule, which would have helped foreign founders build businesses here.
Dearie, founder and president of the nonprofit Center for American Entrepreneurship, will spend today–his organization’s formal kickoff–meeting with members of Congress to explain why axing the rule is a bad idea. A 2011 study found that immigrants to the United States or their children started 40% of the nation’s largest companies Dearie points out. “So how in the world is this in the interest of the American worker?” he says. “We must change policy to keep these great folks in the country–not just keep them but attract them.”
Startup visas are just one of many issues that the Center for American Entrepreneurship plans to tackle from its Washington-adjacent office in Great Falls, Virginia. The venture was born from a pair of research findings that Dearie came across while he was policy director for an organization representing major financial institutions. First: that new and young businesses account for nearly all of net new job creation. And second: that the rate of business starts has been declining since 1977. For a nation eager to get back to 3.5% annual GDP growth, the implication of those studies, taken together, should be obvious. To riff on the tagline of the TV show “Heroes,” “Save the entrepreneur. Save the world.”
Yet the federal government has largely failed to create conditions favorable for business starts and scaling. Some policies–not just the quashing of the visa rule but also, for example, cuts to publicly funded research and development and potential changes to the definition of an accredited investor–may even suppress them. Dearie says Washington isn’t intentionally trying to thwart entrepreneurs. It just doesn’t get how important they are to the economy. And because it doesn’t understand their specific needs, it doesn’t know how to help them.
“Most economic policy is made with large businesses in mind, or there is all kinds of lip service paid to small business because it is politically appealing,” says Dearie. “You hear over and over again here in Washington that small business is the engine of job creation. No. New businesses are the engine of job creation.”
(Of course startups are, by definition, small. The distinction is between businesses that are small on the way to becoming large and businesses that are small by design.)
Enter the Center for American Entrepreneurship: a non-partisan advocacy, research, and policy organization representing entrepreneurs’ interests across the board. CAE, which has two full-time employees and seven more on retainer, differs from organizations like the Kauffman Foundation and Steve Case’s Rise of the Rest in that its sole focus is influencing policy on the ground in Washington. (And soon in state capitals and city halls.) “You can’t parachute into Washington and engage on one-off issues and expect to move the needle on anything,” says Dearie. “You need to be on the ground doing the day-to-day relationship building with key members of Congress and their staffs, key officials in the administration, and key regulators. Even before the center’s official launch, Dearie and others on staff have begun meeting with members of Congress from both parties.
“Policy makers have all these issues they are trying to address, and organized groups that care about those issues come and talk to them all the time,” says Jason Wiens, policy director at the Kauffman Foundation, which has provided CAE with a grant of $475,000. The organization’s annual budget is just under $1.5 million. Other funders include Visa, Wells Fargo, UPS, Bank of America, and Goldman Sachs. “For entrepreneurs that kind of advocacy has been lacking. CAE will be a regular presence: reiterating the message, reiterating the importance of entrepreneurship.
“There’s value to being in the mix,” says Wiens. “They are able to bring the voice of entrepreneurs directly to lawmakers.”
Dearie wasn’t thinking about entrepreneurship in 2011. Back then, he was policy director of the Financial Services Forum, a group for CEOs of the nation’s largest financial institutions. “Despite government’s throwing the kitchen sink at the problem, that spring we still had 24 million people out of work,” says Dearie, “You could feel this collective shrug here in Washington. I thought we should do something to provide policymakers with new ideas.”
In short order, Dearie came across the job-creation research, conducted by University of Maryland professor John Haltiwanger using Census Bureau data. (Others, including the Kauffman Foundation, subsequently expanded on that study.) He then learned from Kauffman about the decline in startup rates. “I asked the obvious question: ‘Why is this happening?'” says Dearie. “They said, ‘We have certain suspicions, certain theories. But we don’t know.’ I thought if you knew then you would have a potential roadmap to fix it.”
A fan of the horse’s mouth, Dearie set off with a colleague on a cross-country fact-finding trip. Panel discussions with more than 200 entrepreneurs in 12 cities produced a shared set of obstacles to company launch, survival, and growth. Dearie reported those findings in “Where the Jobs Are: Entrepreneurship and the Soul of the American Economy.” That book included 30 policy proposals for revitalizing startups. Those proposals are now distilled into the Center for American Entrepreneurship’s agenda, which falls into four buckets: access to new ideas, skilled talent, and capital; and relief from regulatory and tax-related uncertainty.
Some of the Center for American Entrepreneurship’s agenda items are predictable. Instruct the U.S. Small Business Administration to work with lending institutions to draw clear distinctions between small and growth business, and to make SBA-backed lending more start-up friendly. Make some provisions of crowd-funding rules less restrictive. Lower business tax rates through simplification. Limit noncompete agreements. Enact education reforms that promote work-study arrangements and apprenticeships.
Other positions are intriguing. For example, the center proposes that for their first five years startups be subject only to the most essential product safety, environmental, and worker protection rules; and that they be shielded during that period from changes in regulations. The implication of these and related proposals is that startups on a growth trajectory need special care during their fragile infancies. But they are expected to outgrow that need, unlike ordinary small businesses, which, for example, may never be able to afford the expertise to cope with complex regulations.
Some of the Center for American Entrepreneurship’s proposals would help all companies–not just entrepreneurial ones. For example, the organization has adopted an idea from Michael Mandel, an economist at the Progressive Policy Institute, for a Regulatory Improvement Commission comparable to the military base-closing commissions launched in 1988. “The commission would look at a whole section of the regulatory code at a time; hold open hearings with the full range of stakeholders; and then make recommendations in terms of sun-setting, streamlining, or simplifying,” says Dearie. “Then Congress would vote the whole thing up or down, so members could not go in there and meddle.”
Senator Jerry Moran (R-Kansas) is among those already in conversations with the center. While the organization was coming together, he spoke with Dearie about the Startup Act–first introduced in 2011–which would make the tax code, immigration laws, and the the regualtory system more entrepreneur-friendly. “As policymakers it is our responsibility to take a hard look at the areas in which we can create a positive environment to encourage Americans to take the leap and open new businesses,” says Moran, a co-sponsor of the Startup Act.
“Organizations like the Center for American Entrepreneurship can play an important role in educating Congress on how important entrepreneur-friendly policies are.”