I was honored and excited to have been able to testify this week before the Senate Small Business and Entrepreneurship Committee on how we can accelerate startup success in the US.  Below you’ll find my written statement for the record, which is based on some ideas that I and others from Startup Massachusetts put together for the White House last month.

I’m also including links to the powerpoint presentation I used as well as the video footage of the complete session.

I have to say my expectations were limited of this whole process, yet it was one of the most  fascinating moments in my career.  I had the realization: “This is how we shape policy in our country,” and it was very cool to be part of it.  I felt that there was real listening going on.  Now we have to wait and see what comes out of the law-making effort to follow.

As always, I’m interested in your comments and suggestions.

- Tim

[From Tim's aide Sarah] Hi guys, If anyone is interested in seeing what Tim said, here are the key moments in the video:

• 15:12: Session begins
• 23:25 – 31:00 Tim is introduced by Senator Scott Brown and fields questions on the importance of training talent and crowdfunding
• 64:40 – 74:40: Tim’s delivers his presentation on his five policy suggestions for Congress
• 128:55 – 130:14: Closing remarks

Tim giving his closing statement to the Senate Committee on Small Business and Entrepreneurship

I was excited and honored to be invited down to the White House last Thursday, along with about 18 other regional representatives from around the country, to discuss with President Obama and DC policymakers what is going on in the major startup clusters in the US, and what the US government can do to promote further growth of innovation and entrepreneurship in the United States.

The impetus for this meeting dates back to a stunning piece of new research from the US Census Bureau and the Kauffman Foundation that found that for the last quarter century ALL net new jobs in the United States have come from companies five years old and younger. Existing firms (that is, all those 6 years old and older) collectively lost jobs during the quarter-century analyzed (1980 to 2005) while the new firms created loads of jobs. For every job lost by existing firms, new firms generated three!

On the basis of this finding, the Administration and Congress began to focus national economic policy on spurring the creation of new companies. As part of this, the White House launched Startup America–a policy initiative intended to make it easier to create new firms in this country. They also spawned an effort led by AOL Founder Steve Case called the Startup America Partnership, a not-for-profit that works alongside the Administration to promote these goals.

The multiple gatherings in DC over the course of the day brought together the President, the CTO of the US (Aneesh Chopra), key policy makers at the White House focused on Science and Technology Policy (notably Tom Kalil and Doug Rand of OSTP), key individuals from the Small Business Administration and the Department Commerce (Sean Greene and Paul Corson, respectively), the Kauffman Foundation (Carl Schramm), regional delegates from around the country (the MA delegation included myself, Michael Gaiss of Highland Capital Partners, Cory Bolotsky of Mass Challenge, and local entrepreneur Claudia Espinola of Casa Couture), and the folks from the Startup America Partnership and their Board (Steve Case, Reid Hoffman from LinkedIn, Kevin Plank from UnderArmour, and other successful entrepreneurs). (Alas the regional delegates didn’t make it into the session with the President, but we met with all of the policy makers.)

In our presentation we called for 5 policy changes:

1. Change visa laws to make it easier for those who come to the US to study to stay in the US and start companies
2. Change laws to create an “on ramp” to being a public company, by reducing paperwork requirements for the first 5 years after an IPO.
3. Change laws to permit crowd-funding of startups. The proposal is that startups should be able to raise up to $1M from any number of investors, without having to file for an IPO, so long as no single investor goes over $1K.
4. Change laws to ban non-compete agreements in employment agreements.
5. Focus the government’s workforce development programs on training the workforce needed by new companies. It makes no sense that we have both high unemployment and hundreds of thousands of unfilled job openings, particularly in tech fields, such as software developer jobs.

There are bills already in front of congress to address #1, #2, and #3 above (#3 was introduced in the Senate, by the way, by our Senator from MA, Scott Brown). We are hopeful that the administration will find some of these proposals to have merit, and that they will work to influence congress to enact them.

On #4, there is policy being debated in Massachusetts actively now around banning non-competes. I hope to see this issue also taken up federally (Sen. Brown?). For those unfamiliar with the non-compete agreement controversy, here is my view. Non-compete agreements are already banned in many states. In the states that still permit them, including Massachusetts, they gum up the system by blocking would-be entrepreneurs from leaving their existing jobs to pursue something new in their fields. Unfortunately, as we know well from innovation research, existing companies are very poor at innovating (due to the innovator’s dilemma). As a result, the innovation train often simply gets stopped in its tracks by these non-compete provisions. Since non-competes are in the private interest of existing companies, my colleagues and I running MA businesses are likely to continue to use them so long as our competitors can (who wants to unilaterally disarm?). But it would be better for the economy as a whole, and for our citizens, if they were banned.

It was a pleasure to join my colleagues to represent the Massachusetts innovation ecosystem in DC. If you have views on the above topics, I would love to hear them. Perhaps over a beer at Venture Cafe!

Tim Rowe
Founder/CEO
Cambridge Innovation Center