Startup culture, which began in the garages of Silicon Valley, has spread across the nation. From Provo to Portland and Nashville to New Orleans, entrepreneurs and risk-takers are launching new ventures in the hope that they will become the next big thing.
New research from TechNet and the Progressive Policy Institute (PPI) has found growing evidence that dynamism is returning to our economy. Net establishment formation is accelerating to pre-recession levels, showing that new companies are being formed and existing enterprises are expanding. Additionally, 48 percent of net establishment formation is happening outside of the 35 largest metro areas, clearly indicating the dynamism is spreading across the nation.
The conventional wisdom that dynamism and startup culture is confined to a few large cities is simply wrong. Using a new Metro Startup Economy Index, we identify what we call The Next in Tech — 25 emerging startup centers, including Washington D.C., Atlanta, New Orleans, and Minneapolis.
The study also finds that, if policymakers at the state and federal level put in place pro-startup policies, the U.S. can accelerate the creation of high-growth startups and generate an additional one million good-paying jobs per year. Such a startup agenda should be a top priority for the Trump administration, Congress, and state and local governments.
Now, why the focus on startups? The fact is that high-growth startups create jobs faster than traditional companies, and many of those jobs pay well above median wages. According to Census Bureau data, firms in their first five years of life in 2014 created 2.2 million jobs, even after netting out failures and closures.
By comparison, firms older than five years created only 450,000 jobs. So, startups created jobs at more than five times the rate of traditional companies. It’s clear that if we want to create more good-paying jobs across the country, we have to do all we can to nurture these companies.
Plus, the jobs created run the gamut. In Salt Lake City, Thumbtack is looking for a customer support agent with two or more years of experience that can help individuals who use the platform grow their business. In Cincinnati, Astronomer, which creates next generation data pipeline management software, is looking for a product designer with expertise in user experience. And in Detroit, ARE11 is looking for a senior steel detailer for work on structural steel buildings. These are but three examples of the tens of thousands of startup jobs available today.
The question becomes: what should policymakers do to foster more startup job growth? In our view, they should focus on four key areas: improving access to capital, access to talent, and access to markets, and reducing the regulatory burden on young companies.
First, many startups have trouble raising the funds they need to grow, especially outside of the traditional tech hubs. That’s why initiatives like the Revolution’s Rise of the Rest are so vital. They’re bringing venture funding to places that don’t traditionally have access to it. Additionally, the federal government should take a fresh look at the strict rules on crowdfunding instituted by the Securities and Exchange Commission.
Changing these rules would make it easier to raise money at the local level. Tax reform would help as well. Lowering of the corporate tax rate — which is the highest in the developed world — would encourage the risk-taking associated with startups and help the most successful new businesses put more money back into jobs, research and development, and growth here in the United States.
Second, our nation should launch a 21st century skills initiative, beginning with computer science education in every school in America. This initiative should also include technical training programs for high school graduates and retraining programs for individuals who are out of work. At the same time, we should make passage of high-skilled immigration reform a top priority. Immigrants or the children of immigrants have started more than 40 percent of Fortune 500 companies. These companies employ more than 10 million people. It is imperative that we do more as a nation to ensure that entrepreneurs are welcome to create jobs in America.
Third, successful startups need scale, and that means improving access to overseas markets. For example, 95 percent of eBay sellers export their goods abroad. Not only does improving access to more consumers help grow jobs, but it also drives economic growth and reduces trade deficits. Moreover, these transactions, which rely on digital platforms and payments, cannot take place without protections for cross-border data flows. That’s why we should do all we can to encourage exports by reducing tariff and non-tariff trade barriers alike.
Finally, we must reduce the regulatory burden on startups. This doesn’t mean deregulation or gutting consumer protection. Rather, we should remove obsolete or duplicative regulations that stand in the way of startup growth. Similar efforts should happen at the state level to improve the local business climate and ensure a level playing field for startups and incumbents.
Here’s the bottom line: it’s highly likely that the next great tech company won’t start in an incubator in Palo Alto, a loft in New York, or a lab in Boston. It could very well come from Cincinnati, Chicago, or two-dozen other cities across the nation. So we have an obligation to help these companies launch, develop, and thrive. In doing so, we will help our nation continue as the global technology leader, and more important, create more jobs for more Americans.
Linda Moore is the president and CEO of TechNet, a national bipartisan network of technology executives. Terry Howerton is CEO of TechNexus, a venture collaborative of technology entrepreneurs and investors.