The Federal Policy on Startups Explained

Less than one month after launching the Startup America initiative, the White House convened the Winning the Future Forum at Cleveland State University to learn how cities across the nation can transform their economies as Cleveland did in the face of a national recession, an imploding manufacturing economy, the destruction of 78,000 production jobs since 2000, and a 10 percent population decline since 2000.

President Obama chose Northeast Ohio as the host region for his Forum because our challenges reflect those experienced by cities across the Midwest and because, as he put it, “Each time I come here, you’ve done more to retool and reinvent yourselves.”

He praised Cleveland for embracing new technologies that have led the city to emerge into a global leader in biotechnology and clean energy. The President asserted that “Entrepreneurs like [the ones in attendance at the Forum] create two out of every three new jobs in this country,” which is why the White House launched the Startup America initiative in January. With that program already in place to catalyze entrepreneurship nationwide, Obama, along with five cabinet members and two senior administration officials, asked local entrepreneurs about the obstacles and opportunities they face.

In five breakout sessions, the administration members initiated a dialogue on what is needed to support the growth of small businesses. They listened for ideas, concerns, and questions surrounding entrepreneurship, access to capital, workforce development, exports, and clean energy.

Reflecting the White House’s innovation-driven agenda is the Startup America Partnership, a private sector alliance of innovative entrepreneurs, corporations, foundations, and other business leaders whose goal it is to dramatically increase the prevalence and success of high growth enterprises in the United States. The federal government’s private partners, including the Kauffman Foundation, the Case Foundation, and dozens of leading technology companies, will commit resources to help spur the creation and growth of entrepreneurial companies — either by contributing funds to proven models or by developing new programs to help entrepreneurs.

The Startup America Partnership will facilitate the growth of new high potential firms through implementation efforts like JumpStart America, which will aggregate funds to accelerate regionally-based innovation and entrepreneurship programs, and private investments like IBM’s $150 million in 2011, which will fund new programs that support the growth of startups. In addition to mobilizing private sector resources, the Startup America initiative will utilize federal policy to help entrepreneurs start new businesses, raise capital, commercialize ideas, and create jobs. Among the incentives, there are five that do not involve significant new government spending. These noteworthy initiatives are funded from the redirection of departments across the federal government to support entrepreneurial activity.

• The Small Business Administration (SBA) will direct $2 billion over the next five years to match private sector investments. Half of the funds will provide a 2 to 1 match to private capital and will be committed to an Impact Investment Fund that will target investments in underserved communities and economically distressed areas. The other half will provide a 1 to 1 match to private capital and will be committed to an Early-Stage Innovation Fund that will back investments in early-stage companies seeking to commercialize innovative ideas. What is most interesting about this initiative, which utilizes SBA-guaranteed bonds disbursed through the Small Business Investment Company (SBIC) program, is its focus on entrepreneurs, who are not typically able to take advantage of the SBA’s loan programs since they have no cash flow to support debt. In order to target early-stage companies, the government will retain some of the match to cover interest payments for the first five years of the fund’s life. This innovative approach will leverage public capital to drive private investments in high potential businesses.
• The Department of Energy (DOE), SBA, and the Advanced Research Projects Agency-Energy (ARPA-E) will fund four private business accelerators that will support 100 clean energy startups across the nation. Through the Entrepreneurial Mentor Corps, high potential clean energy businesses will be matched with mentors to help the early-stage companies attract financing, create jobs, and grow their revenues. Who better to assist growing startups than entrepreneurs who have traversed a similar path and succeeded?
• The Department of Veterans Affairs (VA) will establish two business accelerators focused solely on helping our Veterans launch and sustain their own businesses. Those individuals who have served our nation will be coached on raising capital, hiring the right team, and the steps for taking an idea to the commercial market.
• The Economic Development Administration (EDA) will launch i6 Green, a federally-funded program designed to encourage groundbreaking ideas that accelerate technology commercialization, new venture formation, and job creation. This initiative will reward communities that utilize Proof of Concept Centers, supported by regional partners, to accelerate cleantech-based economic development. The i6 Green program will drive innovative clean technologies to market more quickly by bringing together entrepreneurs, experts in the field, academia, and public and private sector businesses.

The White House’s Startup America initiative illustrates the Administration’s understanding of the importance of entrepreneurship to the economy, and the President’s visit to Cleveland demonstrates his willingness to receive feedback from entrepreneurs on the front lines. Obama’s visit to Northeast Ohio was the first of eight that he will make to cities across the United States to hear from entrepreneurs about the challenges they face and to share current Administration efforts to spur and support entrepreneurship. Our next task is to leverage the momentum created by the Startup America initiative.

Leah’s primary focus as JumpStart’s Market Analyst is developing a deep understanding of the key challenges and opportunities facing entrepreneurs and early-stage companies. Using her experience leading research projects and framing problems to identify creative solutions, Leah works to build stakeholder relationships, ensure the growth and success of client and portfolio companies, and drive organizational strategies. Additionally, Leah brings her insights to life through communications and advocates for and connects entrepreneurs to additional capital and service resources beyond those provided by JumpStart.