In this session from Techonomy 2011 in Tuscon, Ariz., Steve Case, CEO of Revolution LLC, discusses the current state of entrepreneurship in the US, and what needs to happen to encourage growth and innovation. He says that changes to immigration law, access to capital, and changes in regulation are necessary to fuel entrepreneurship.
Case: The story of America really is the story of entrepreneurship. The history of the last 200 years has really been bold, pioneering people creating not just companies, but whole industries. We didn’t become the leading economic power by accident. It was the work of entrepreneurs, and Fortune 500 companies don’t just magically become large Fortune 500 companies. They start as start-ups and are built over time. So that’s why we are in the position we are in, but there is a concern that we have lost some of that energy and have to get things back on track. I know to this audience that is a little bit of a disconnect because people focus on Groupon or Facebook or Twitter, and social media and Silicon Valley is pretty hot, but if you look at entrepreneurship broadly, across all sectors, across all regions, it actually is in a difficult position. The number of new start-ups is down 23 percent over the last five years. If we kept the same number of start-ups we had then, we’d have 2 million more jobs right now. And there are a lot of different things that need to be focused on, both through the work of the Start Up America partnership and the jobs council. I chair the subcommittee around entrepreneurship and high growth companies. We’ve made a list of things that the private sector needs to lead on, some things that the administration in the White House can do on its own, and then some things that require congressional action. And obviously getting bipartisan support is challenging, but we need to do that. And I’ll just mention the three key areas and we can talk about it in more detail.
One is winning the global battle on talent. The immigration policy in this country is insane. We attract the best and brightest to come to this country, give them terrific educations and then force them to leave to create companies in other countries to compete with us. Which is just insanity, everybody knows that, but that’s been caught up in this battle around comprehensive immigration reform. Peeling that off and dealing with it in the context of comprehensive entrepreneurship reform is one key track, and there’s a number of things that need to happen on that front.
The second relates to access to capital, both in terms of early stage capital, and there’s some great initiatives now getting traction in Congress around crowdfunding. Right now it’s perfectly legal to go to Las Vegas and invest $10,000, you don’t have to be an accredited gambler, but it’s actually illegal to do that in terms of providing money through internet platforms because you have to be an accredited investor. So relaxing those provisions around crowd funding, seems like we’ve got good progress there; creating incentives around capital gains for early stage investments, particularly when you hold them a long period of time, for five years or so; and also relaxing some of the rules around IPOs for young companies. When AOL went public 20 years ago, we were pretty common. The market cap of $70 million, we raised $15 million. At the time most of the IPOs were relatively small; like 80 percent were under $50 million in terms of the deal size. Now it’s 20 percent are under that size. Most companies now recognize, partly because of Sarbanes-Oxley, they go public later or get sold. And that’s a problem because job creation, 90 percent of it happens after companies go public. So getting companies public more quickly is critical. So some of it is immigration, some of it is access to capital, some of it is regulation, including regulation around things like IPOs.