How Federal Government Can Help Entrepreneurship

This afternoon in Boulder I’ll be on a panel as part of the White House Startup America Roundtable. If you weren’t invited to the event, there is a web site called Reducing Barriers to Innovation that you can participate in.

Over the past few years, I’ve spent some time thinking about how the government can help entrepreneurship. It started with my role as the co-chairman of the Colorado Governors Innovation Council which was my first involvement in any formal way with any government initiative. More recently, I’ve focused my energy on the Startup Visa movement and the Startup America Partnership.

When I was reviewing the agenda for the Reducing Barriers to Innovation program, the goal of the program was pretty clear:

“The Startup America: Reducing Barriers event is a regional platform that allows federal agencies to hear directly, from entrepreneurs and local leaders like you, how we can achieve our goal of reducing the barriers faced by America’s entrepreneurs. Senior Obama administration officials need input on what changes are needed to build a more supportive environment for entrepreneurship. “

On my run yesterday, I mulled over the big activities that I thought the federal government could do to “build a more supportive environment for entrepreneurship.” I came up with five things that I think are relatively easy to measure over the long run. Following are short thoughts on each of these areas with one specific idea (in italics) that I think would materially impact entrepreneurship in America in a positive way.

Tax Policy: Incent people to invest in startups. While there are several well understood tax policies that could be implemented, the simplest is to provide long term tax breaks for individuals to invest in new startup companies. As with anything tax related, there are endless politics involved and many of the things that actual get rolled out are so obscure that they either never get implemented or are to difficult for investors to understand. Make it simple – eliminate capital gains if an individual (who is an accredited investor) invests equity (i.e. risk of 100% loss of investment) in a private company with less than 100 employees.

Immigration Policy: Make it easy for foreigner entrepreneurs to come to the US, or for foreign students to stay in the US, and start companies. This is the essence of what we’ve been trying to solve with the Startup Visa movement. The new Startup Visa Act of 2011 has plenty of improvements over the 2010 Act (which was introduced but never went anywhere) but still is stuck in Congress. If the White House wants to make a difference here, it should prioritize the Startup Visa separately from “broad immigration reform” and help get it passed since the Startup Visa is much less about immigration and much more about entrepreneurship, innovation, and jobs.

Regulatory Policy: Cut as much paperwork and bureaucracy out of the system. While this one is talked about regularly by the people in government that I know, the regulatory environment just seems to get more and more complicated. The solution so far has seemed to be “hire more people to process more paper faster.” This clearly hasn’t worked – how about taking the opposite approach and cut 20% of all jobs within various government agencies responsible for regulatory activity? I don’t care if you pay the fired people for two years – give them healthy severances and incentives to go work in the private sector. Necessity will drive efficiency.

Investment: Focus investment in university research. Then open source the results. The federal government has been a historically successful investor in innovation and the creation of new technologies, often through funding university research. If you want a good example of this, read Bright Boys. Unfortunately, this has gotten really messed up recently due to our byzantine patent system and the evolving dynamics of university technology licensing organizations. The government should allocate even more money to university research programs, but the results of this research should not be able to be patented and should be free for anyone to license. This would drastically change the technology licensing game by simplifying it and shifting economic incentives aggressively to companies that actually commercialize (or productize) this research, rather than simply claim ownership to the “intellectual property.”

Customer: The federal government is an enormous consumer of products and services. While it claims to want to do business with entrepreneurial companies and so far pays its bills in a predictable manner, it’s a miserable customer to deal with. The procurement process is painful, many entrepreneurial companies have to work through government contractor gatekeepers (who take up to a 30% tax for doing nothing other than being the contracting party), and often the execution and implementation process is a disaster. Unfortunately, I don’t really have a suggestion for how to improve this since there are so many rules and regulations around this – I guess the answer is “see regulatory policy” above.

I’m continuing to think through this and refine my thoughts on it, so as always I’m open to any and all feedback, including “Feld – you are such a knucklehead – that’s a stupid idea and will never work, but try this.” Fire away.

  • http://sco.tt Scott Yates

    I thought you didn’t do panels anymore.

    As this is an official-sounding event, I hope you’ll increase your use of expletives!

  • http://stevenhb.myopenid.com/ StevenHB

    It seems to me that almost every “interface point” with the federal bureaucracy has its own industry dedicated to helping the non-professional use the interface successfully (e.g. IRS/tax prep industry, the “procurement assistance” industry, and the “immigration assistance” industry). The only counter-example that I can think of is the ease with which one can get or renew a passport. The need for the support industries is a signal that the interface points are too hard to use.

  • http://paulroales.com PaulRoales

    I think the agenda is very close to what we need – the only problem is that very little of this will become reality just because its a good idea, or the right thing to do, or because we have a lot of proof that it will work. Unfortunately, an agenda this broad (which we need) needs a lot of people pushing it forward from a lot of different angels. We need people tweeting, people writing their members of Congress, people getting involved in campaigns and people writing checks to PAC’s and as straight campaign donors.

    I know we have disagreed about money and politics – but you asked for feedback in the last paragraph – and so I wanted to add to the record my thoughts. That we need a broad coalition all pushing the rock up the hill in our own small unique way…

  • http://twitter.com/restum Richard Stump

    I agree with most of this list. In the case of University patented technology, I don’t think it is likely they would give up the potential revenue from licensing fees etc even thought they are a pittance for most Universities. What I do think could be achievable and really solves the problem interacting with the Tech Transfer offices at these Universities (which I have a lot). Standardize the licensing terms for technology created with federal dollars and being licensed to companies with less than 50 employees. This would make the economics around these patents palatable and would remove the biggest obstacle which is the Universities themselves.

  • http://blog.tomevslin.com Tom Evslin

    Brad:

    I’m for all this except the tax break. We need to go the other way and get all the special wrinkles out of the tax code IMHO – then we can lower the rates and avoid investments being allocated by what the government happens to favor, even if it’s entrepreneurship that’s being favored.

    Government as customer is huge. You could take a quarter of the people who now allocate government grants for whatever happens to be politically popular and have them work on really smart purchasing with long term goals but good economics; government orders would then vastly accelerate the switchover to new technologies by bringing them to scale or the buildout of infrastructure – natural gas or electricity fueling stations, for example. Look what having NASA as a purchaser did or early government-university-defense industry use of the Internet.

    My recent time in government has re-convinced me that government as an “investor” or grant-giver (other than for the kind of research you suggested, is a very bad solution. I’m glad you didn’t suggest that.

  • http://twitter.com/brianylim Brian Lim

    I agree with all the points, but I believe that the Tax Policy will have the greatest potential impact. It might make sense to focus the resources & effort on this one, tackling one or two policies at a time to improve the probability of success.

  • SC_Gene

    Two words — laissez faire.

  • Anonymous

    If we have to do one thing at a time, I’d pick this one, ”
    Customer”
    , ”
    it’s a miserable customer to deal with”. Here’s one idea, easily implementable, Reward those gov employees who take the initiative to work with technology entrepreneurs sensibly (not offering them any huge contract or the like but start with small trial purchase if certain key criteria are met. It’s that simple if all the nonsense and excessive regs aren’t in the way…

    • SC_Gene

      Baloney –

      The problem is that government has gotten itself WAY WAY too involved in private enterprise. That is what is killing entrepreneurship in the U.S. The next time I hear a politician talk about making “investments,” my head is going to explode.

      • Anonymous

        The comment is totally off mark of the subject matter. The author states that gov is a DIFFICULT customer when it becomes one for an entrepreneur. Not gov should or not should get involved in private business. You should go back to primary school to learn the basics to begin with! PERIOD.

        • SC_Gene

          K-N-B, I think you should re-read the article and my comment, which is exactly the point. Government can do NOTHING at all to encourage entrepreneurism. Nor should it. What government can do, is to create an environment that is hostile to business. Every action that this administration has taken since the inauguration has been anti-business. So, it is little wonder that entrepreneurism is down, and business in general is suffering.

          • Rich

            Entrepreneurism is not down. There are still tons of entrepreneurs in the US. The just can’t get funding and help they need.

            I worked for a year to get funding for a startup software development organization. I’ve had to do it on a shoestring, I found no funding.

            I offer custom software developement for in-house systems. Also for anyone who wants to create a software product to sell, I offer end-to-end development services (requirements to support).

            There are software projects failing everyday because people don’t know the proper process, but yet I could not get any funding to start my biz.

      • Rich

        I have to partially agree with you SC_Gene. Government is way too involved with private enterprise.

        However, entrepreneurship is not being killed. Entrepreneurship is alive and well. It’s the fight entrepreneurship is in that’s the problem. Many entrepreneurs are out there struggling to get a start. The person who would help them is being steam rolled by taxes and inflation.

  • http://www.drawbloodpokerblog.com/learnpoker.html drawBloodPoker

    President Omaba should of put most the money he spent on other things and used this system.

  • http://www.pointsandfigures.com pointsnfigures

    blogged about this in micro (state and local) at blog.hydeparkangels.com

    One idea, eliminate quotas, also eliminate taxes for people that invest in angel funds, not just the angels that make investments themselves.

    • Rich

      I emailed you but am not getting any response.

  • Scott Dalgleish

    I would like the government to to allow me to be a responsible husband and father and entrepreneur. (Not all start-ups are done by in-experienced single 20 year olds).

    Insurance:

    – We have come a long way to make improvements to giving people access to health care but when I did my bootstrap start-up a few years ago, I had to do some really creative things (that I won’t discuss) due to a pre-existing medical condition to keep health insurance for my family. I was willing to take some big risks with my start-up, but it seemed crazy that I was expected to risk the health of my kids and wife for my start-up.

    – I have tried to be a responsible father and husband by paying into disability insurance since I have been the primary bread winner. The day I launched my start-up, my salary went to zero, and so did the payout on my disability policy (that was based on my salary). If I got hit by a truck as an entrepreneur, my family would have been horribly SOL. I had to keep paying into my disability policy (even though the payout was zero) because stopping and re-starting the policy later would have doubled the premium. It is much cheaper to get disability insurance as a 30 year old compared to a 45 year old.

    *In short, plug the holes in the insurance industry that force entrepreneurs to expose their families to horrible unnecessary risks that non-innovative corporate crank-turners are not expected to take.

    Support/Strengthen the Next Generation of Innovators:

    – Fund classes for kids that are fundamental to innovative design skills. No…. not the same old science and math blaaa blaa blaaa. Wood shop and metal shop. I use my shop skills every day in my innovation role. Calculus? Never. See: http://www.90percentdone.com/2011/01/eliminating-woodshop-metalshop-and-innovation-in-america.html

    If you like that post, then more on this topic of promoting real innovation skills development: http://www.90percentdone.com/2010/11/developing-independent-learners-a-critical-and-foreign-concept-to-many-parents.html

    • http://www.sixstringcpa.com Geoffrey

      Getting ready to post my reply & see you touched on a similar topic Scott. KUDOS to you.

    • http://www.eliainsider.com Elia Freedman

      I also want to second this. My eldest daughter goes to kindergarten this fall and we thought it time to move to a better school district. The banks, though, are treating company losses as my own even though I run a C corporation and completely ignoring my income, even though I pay myself as a W-2 employee. They are more comfortable with an employee of Intel, for example, who would have no control over their future, than they are with me, who has complete control over my future. I am making more than enough per month to purchase a home here outside Portland, Ore.

      Furthermore, I am exploring a new business idea. I basically will have to make a decision this year if I can’t purchase but rent instead. I will have to decide between pursuing the new business and buying a home, as the losses associated with the early days of running a business will mean the banks won’t even consider me for a loan.

      Why is this a federal issue? Because the banks claim they are following federal home lending guidelines.

    • Rich

      “- Fund classes…”

      Entrepreneurs don’t spend their time in classes. They are out in the world making things happen. Classes on various hard skills are great. But, how do you teach someone to “Know what tomorrow holds”?

  • http://www.seeingbothsides.com bussgang

    Great theme, Brad. I touched on some of these points in my blog on my recent trip to DC with over 100 CEOs as part of the Progressive Business Leaders Network: http://bit.ly/34LJR3. I love that smart CEOs and VCs are starting to get engaged in this important dialog. I just hope the smart government leaders are listening!

  • http://www.sixstringcpa.com Geoffrey

    Brad:

    You make some interesting points. For what it is worth, here is my take on each of the 5
    points you layout in your post above.

    Tax Policy:
    I come from the viewpoint that the tax code needs to be simplified not complicated further. In addition, my viewpoint is also that U.S. tax policy has become an oft overused tool for social engineering. The U.S. has become a nation of growing inequality and it is my opinion and belief that the U.S. tax code is a tool that has been used to create some of this inequality; intentionally or not I do not know. This needs to stop. From my viewpoint, an approach like your above suggestion does nothing more than further the delineation between capital providers and the labor providing members of our nation – and by labor I am referring to factors of production not as in a ‘Labor’ political party, etc. I don’t believe that one factor of production is more important than the other. If capital was a more important factor then a couple of entrepreneurs could not start a successful business out of their basement with none to limited capital. And, labor is insufficient at times if building fast is important and creates lasting value to the economic system. So, both are important and both are necessary factors of production.

    As a result, I do not think the approach you offer is the best course of action. I like to breakdown things into very basic components. So, at a basic level, your tax policy suggestion falls into the camp of rewarding risk taking (e.g. specifically the risk of providing investment capital) via tax benefits. I am more interested in policies that go to reducing the risk of actually creating startups? For example, what about the development of some kind of special entrepreneur/startup health insurance pools (or low/zero premium model) that might allow individuals currently trapped inside large corporations, because of their health benefits, to go out on their own and start a business more frequently? I think a risk reduction approach has a broader application than a risk-reward methodology via a special cap gains rate reduction because again a) not every startup requires large amounts of investment capital and b) the methodology is much less a ‘capital versus labor’ approach to solving the issue – creating more new businesses (and by labor I again mean the factor of production provided by the ‘ordinary income tax rate’ class of citizen not Labor from a political party standpoint).

    Any tax policy change that favors one class over another, whether in fact or in appearance, will do
    nothing more than further the U.S. down the path of class division and further infuriate a large (and growing) populace that feel they have little recourse, influence and possibility of getting a ‘fair shake.’ Taxes should be as low as prudently possible given the demands on a government and certain classes should not get preferential treatment ideally. I will state again that in my opinion social engineering via the tax code is one of the greatest threats we face because it pits us against ourselves over time. Continuing down the path of social engineering via the tax code is unproductive.

    Providers of capital to growing, private companies should be rewarded via higher rates of return as
    compared to other assets classes not by tax code manipulation. If the VC industry wants to take less percentage ownership for every dollar invested, or give more control to the founders, that is great but it is also their doing. Society should not be asked to subsidize their business practices by giving them a lower tax rate to offset any diminished returns. Brad, I recognize VCs are not the only entities/individuals that provide capital … I am using as an illustrative example only. So, if it is the rewarding of investment risk that is your objective, I cannot disagree with your Tax Policy statement more! If your goal is to attract additional venture-type capital to the system I would suggest other ways than tax rate reductions. For example, allowing L.P. members a chance to defer tax on their liquidation proceeds if they rollover their gains into another fund that invests in private companies. This then is a more sustainable reward mechanism. The tax rate is fair among the various factors of production providers and eventually the tax will be paid. The deferral however allows those committed to recycling their gains back into the economy a chance to do so on a tax deferred basis. This approach would be similar to say the Internal Revenue Code section 1031 dealing with like-kind exchanges. Brad, I recognize that you are a capital provider, so I understand your suggestion being something near and dear to your heart that might provide you with a benefit.

    Immigration Policy: I have concerns about some of the Startup Visa language as I understand it (and I do not claim to have mastered an understanding of this topic). At its core it appears investment is a requirement. The question is an investment by whom? I do not think that venture capitalists have any place deciding who gets to enter the U.S. I recognize the valuable service the VC industry plays in our economic engine. However, I personally want immigrants to be able to come into the country who have a burning desire for success, regardless if their ‘business plan’ has been approved and funded by a handful of VC’s who have deemed them ‘worthy.’ I understand your viewpoint that this is
    a job creation effort but, as a citizen, I have zero interest in outsourcing immigration policy to financiers. As a nation we definitely want the best & brightest to come to the U.S.A., but we also should want those folks that are determined and purposeful. I don’t think that determined & purposeful can be measured by who gets funding and who does not.

    Regulatory Policy: “cut 20% of all jobs within various government agencies responsible for regulatory activity? I don’t care if you pay the fired people for two years – give them healthy severances and incentives to go work in the private sector. Necessity will drive efficiency.” Wow! That is bold. On an experimental, trial basis I would support something like that. I tend to agree with you that necessity often drives efficiency, often through technological innovation.

    Investment:
    I am not very experienced in this area of your post but I tend see a lot of logic in your Open Source idea. If university’s research is created, especially from the largesse of the taxpayer, then any and all of the country’s citizens who can take this research and forge it into a viable commercial enterprise
    should be able to have a go at it. I am VERY leery that ‘everyone’ will be given a fair, or similar, chance however and that gives me pause for hesitant support in what you propose. Regardless I think that your efforts to bring this up are another bold initiative that should be discussed in greater detail.

    Customer:
    I have no direct knowledge or experience and limited second-hand experience in this area.

    By my count, I was able to somewhat credibly engage on four of your topics. Two of these were in favor and two opposed. I guess coming to the table with a complete stranger to discuss serious topics where both agree on 50% is not a bad starting point. Keep some discussion going. {edit: apologies for the more long winded thoughts on the tax policy – I used my reply to your blog entry today to cover some thoughts I had based on Fred Wilson’s blog post from last Monday, which I never got a chance to comment on last week. So, I took up a bit more digital real estate in your comments.}

  • http://anyessays.com/ pay for essay

    I totally agree with all the points!

  • DaveJ

    The problem with this whole thing is that it’s completely out of context. For example: you’re going to provide a no-tax opportunity to only *accredited* investors? A new tax cut for (explicitly!) millionaires? Cut 20% of regulatory employees – so OSHA, FDIC, SEC – everyone who keeps the “bad capitalists” in line? And even when you started talking about Startup Visa I think I pointed out that it needs to be in the context of broader immigration reform. U.S. politics are driven by a morality of ressentiment, so just proposing acontextual “improvements” may be an entertaining subject for cocktails or a high school debate topic, but is really just a waste of time.

    • Rich

      We have plenty of entrepreneurs in the US that need help. We don’t need to look off-shore for entrepreneurs. That being said, we don’t need to make it hard for people to immigrate to the US either.

  • Adrian Meli

    Some good thoughts here, thanks, though some would argue that excess government involvement in tax policy and creating bureacracy is currently disincentivizing people from forming start-ups. It seems like a tough nut to crack to suggest less red tape but then more policy for entrepneurs, though I think you have some interesting ideas.

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  • http://www.wadhwa.com Vivek Wadhwa

    Brad, excellent ideas.

  • http://twitter.com/OpenSesameNow OpenSesame

    I think you’ve focused on something really important with the government procurement piece. In general, the insanely complicated process incentivizes the government to stick with its existing contractors and vendors, for the simple reason that they’re already set up in the system. This limits the ability of the government itself to experiment with new vendors and support emerging technologies.

  • http://twitter.com/RedRussak Joshua ‘Red’ Russak

    GeekWire wrote a similar article focused on Gov’t involvement: “America’s chief geek Aneesh Chopra: ‘Today is the best time to be an innovator’” – http://www.geekwire.com/2011/americas-chief-geek-aneesh-chopra-today-time-innovator

    • Rich

      Glad you posted that link. In the article it says, “…laid out his vision for how America can boost entrepreneurship, spark more innovation and revolutionize industries such as health care and manufacturing…”

      Two years ago I talked to anyone who would listen about doing an EHR (electronic health records) system. I couldn’t get a dime of funding. I found others who were wanting to do some type of EHR system, but no funding.

      Believe me when I say “Entrepreneurism is alive and well in the US. The problem is no funding and not much help available.”

  • Brendan

    Brad –

    Great post about a very interesting topic. I think what you have suggested to create more entrepreneurship in the US is extremely good, and I wanted to compliment it by looking more broadly at the topic of innovation, which as you know is tied with entrepreneurship but not identical. I am also assuming that job creation is of great importance in this context as well. We looked at Mexico City’s innovation policy as part of my grad degree program, and I can say with confidence that this is a challenging subject, for two reasons.

    One, it is hard for federal governments to really do anything to create more innovation. The federal government must act in broad policy initiatives, whereas innovation tends to be highly localized around specific clusters – such as tech in Silicon Valley, autos in Detroit, financial services in New York. So implementing a system of policies at the federal level, though necessary to boost innovation broadly within a country, may not be sufficient to produce more innovation in the sectors that really matter (like green energy, high tech, infrastructure, even manufacturing as most unemployed workers are blue collar).

    Two, innovation clusters usually happen from the bottom up, rather than the top down. This makes them very difficult to create using public policy. Again, the federal government can create all the conditions necessary for innovation to emerge, but it just may or may not happen. Take Boulder for instance. Why did Boulder emerge as a high-tech cluster? Its cultural ties to the West Coast and Silicon Valley, its relatively low cost of living, its unique geography that offers a great lifestyle, a culture that values technology and creativity? (If it is the latter, how do you create culture?) Building a cluster from the top down is extremely difficult, and these things tend to pop up in such a way that make great sense ex-post, but are hard to predict ex-ante.

    As a result, policymakers interested in creating jobs and innovation can focus not just on getting the policies right at the federal level, but also finding ways to cooperate with and empower state and local governments to support innovation directly – in addition to all the items you mentioned. Take university funding, for example. The federal government can ramp up funding for public education broadly, and allow states that will have good value for money funding research and tech transfer units at universities to do so. Other states that need to focus more on primary education under this scheme can take that path. This will allow the US to bolster innovation clusters where it makes the most sense, while allowing investment in other sectors to happen as necessary.

    Finally, if the game is about innovation and job creation, it should also be kept in mind that although most innovation takes place in small companies, large companies also have a role to play. Research in pharmaceuticals comes to mind, as well as the development of large infrastructure assets. Many Americans work in large companies, and leveraging the economies of scale they have achieved is an important strategy. Government can help by establishing a coherent public-private partnership bureau – possible at both state and federal level – which can act as a platform to facilitate investments in projects that will have widespread benefits in terms of jobs and economic development.

    Anyway, just my $0.02. You may have already considered these ideas. Best of luck in the Startup America Roundtable!

    Kind regards,

    Brendan

    • Rich

      The reason Boulder emerged as a high-tech cluster is people like Brad. The government needs to get out of people’s way.

      I’ve talked with people all over the US and some people are making it happen and some are not. It’s all about the people who get involved.

  • Rich

    For the last year I have worked on starting different businesses and can give some feedback.

    I’ve called and/or emailed dozens of state agencies (various states) on entrepreneurship. They get me nowhere. The people working there want to help, but they either don’t have the resources or the bureaucracy makes helping impossible.

    Many agencies (yep they are agencies using private and public funding) on entrepreneurship are just selling courses/seminars. When you tell them you don’t want to learn bookeeping (or whatever) you’ll hire someone for that, they refer you to another agency that wants to sell you some more courses/seminars.

    I’m also a would be investor and I find it very difficult to invest. I’m not a high-wealth individual, but am still interested in investing in startups. Just try to find a way to invest smaller amounts (thousands instead of millions). You’ll be emailing and calling for months and you’ll get no where.

    The best way for the fed to help is stay out. Government is always a bureaucratic nightmare. Entrepreneurial activities need to be quick and nimble, not something government can or should be.

    Brad, keep up the good work and don’t let yourself get distracted.

    BTW, your phone directory doesn’t work. I wasn’t selected for the fly in program for startup week so I thought I would call to talk with you. But I can’t get through to you or anyone else at the Foundry Group by phone.

    • http://www.feld.com bfeld

      Thanks for the feedback. Sorry you were having trouble via phone – we hate
      the phone. Try email – brad@feld.com – and I’ll try to help.

      • Rich

        I’m going the opposite way and cutting down email and other “impersonal” communication. I’m really not building good relationships using email. Don’t get me wrong email is better than snail mail for a quick hello or sending large amounts of data.

        But for example, I really don’t feel I know you even though we’ve communicated many times via email. Also, I don’t feel our relationship is getting any stronger.

        Another problem is I don’t want to tell my best business ideas via email and I think we may have missed out on some partnering opportunities because of no personal contact.

        In my mind business is all about people and I don’t want to inject any barriers to creating the best relationships I can.

        Well there you have it, my contrarian two cents.

  • http://www.facebook.com/people/Eduardo-Sahione/645600909 Eduardo Sahione

    Brad,

    I have just graduated with honors from an American university, and will be graduating in 2 years with a professional degree in engineering from a prestigious American university.

    During this time I have spent my family’s savings to pay for tuition costs and a good standard of living, but I have not been allowed to follow through with my business ideas while studying for my degree.

    And I believe that it is in accordance with the American spirit to start a company in one’s living room, with nothing but an idea and one’s computer; just like Mark Zuckerberg founded Facebook while studying at Harvard and countless others have done just the same.

    Moreover, in a century where anyone with programming ability and motivation can develop the next Facebook with little to no costs, why shouldn’t international students be allowed to develop their ideas while studying?

    As an international student, even after graduation I will have to work for an American company. The Startup Visa Act makes it easier to start a company after graduation, if and only if the student has already found a sponsor for his H1-B visa.

    But why should anyone sponsor an international student’s H1-B visa, if the student wants to dedicate himself to his idea?

    Moreover, what if the student has an idea that he believed would become the ‘next Google’?

    Do you believe he would wait until graduation, then find venture capital and only then start working on his idea? Or would he go back to his birth country and implement it right away? In the modern world, timing is everything.

    Moreover, searching for investors wouldn’t work if the student did not have a working prototype and had launched the website prior to seeking venture capital. Venture capitalists are looking for evidence that a company will succeed, and it is impossible to do that with an idea.

    But it is also illegal for international students to start a company and work in it part-time.

    This is why I believe international students should be allowed to start their own companies while studying towards their degree.

    After graduation, I believe the current iteration of the Startup Visa Act could work perfectly, if international students were given some time to develop the company out of their own pockets if they wanted.

    You have to keep in mind that most great technological companies were founded by students, while they were studying. Probably because of a mix between the learning environment and young age.

    International students cannot do it as of today, and there is no reason why they shouldn’t be allowed to do so.

    Your goals with the Startup Visa Act are in line with what I believe. I just think that it won’t help as much as you think, unless some changes are made.

    • http://www.facebook.com/vivekzone Vivek Chandrasekhar

      Eduardo: I can very well relate to your situation since I went through the same 4 years back. I graduated from a US university but couldn’t do a startup while in school or right away after graduation. Many foreign students from my class left the US but I decided to figure it out . After 4 years of exploring various Visa permutations , now I am a Canadian permanent resident with a US entry visa. One thing I can tell you from my experience is that the time and effort required to figure this out while also focusing on the startup can be depressing . Perhaps you may wish to take the plunge right away and set yourself up wherever that might be and hope to come back into the US when you are funded.

      Regarding your point about VC backed startup visa, the proposed visa , I think, is a new class carved out of an existing visa category called EB-5, not H1-B. Yeah , it sounds a bit tricky to give certain class of investors this power. But then again , there are scores of foreigners who would be more than happy to shell out 100K to move to the US if that was all it takes to get a US residency. Here is the full text of the bill : http://www.govtrack.us/congress/billtext.xpd?bill=h112-1114

      Also, I think its unreasonable for us to have a sense of entitlement to US residency just because we studied in a US university. I would like to believe it will be a privilege if foreign students also get to stay and work on their business ideas while putting themselves on a path to residency.

  • Anonymous

    The obvious thing they can do is to stop borrowing money. Each $1 loaned to the government is a $`1 an investor didn’t loan to (or invest in) a private business. The well publicized credit crunch was exacerbated because banks capital requirements weight safe treasury bills as counting for more than risky investments. Due to shortfalls built into social security, medicare/medicaid, etc. programs the borrowing we have seen so far is only the tip of the iceberg. Unfunded liabilities, the money we are short to pay future benefits, are > $107 trillion! (according to the last US Treasury figure that government auditors didn’t complain about as being unrealistically optimistic) The public doesn’t realize how bad things are since they don’t have perspective. They hear “$trillions” and just think “big number, but its a big country”. However consider what happens when you translate our current debt&liability figures into averages per household and imagine how the public would react if it realized that:

    The federal government will need >$1 million per household to pay its IOUs!
    > $116 trillion =”official” debt plus money short for future social security, medicare, etc
    Even its “official debt” of $14.2 trillion is $123,754 per household!
    Details at http://StopNationalDebt.com with links to contact congress & complain.

    “POLL REVEALS: Americans Are Still In Deep Denial About The Deficit” http://read.bi/h6QDGR If they realized how bad it is politicians would need to act.

    Be among the first to join the new Facebook cause “Stop National Debt” : http://www.causes.com/causes/606425-stop-national-debt
    since if you don’t spread the word, who will?
    We need to spread the word virally to educate non news-junkies such as entrepreneurs too busy building their businesses to pay close attention.

  • Anonymous

    You forgot to mention the broken patent system.
    re: regulatory costs, a quote from http://StopNationalDebt.com shows how out of control the compliances costs are:”The government’s Small Business Administration (SBA) estimates that the cost for businesses to comply with federal regulations is $15,586 per household. An estimate by the California state government put the cost of state regulations at $13,801 per household (and it claimed this cost 3.8 million jobs). I haven’t found data for other states to compare to see if that figure is high. However there is also no data for the cost of local regulations so it seems safe to guess that nationally the average cost of state and local regulations combined is at least that much.”

  • John Ives

    The SBA, as part of their contribution to Startup America is attempting to crowd source the generation and ranking of “barrier removing” ideas. I’ve posted the Startup Visa idea here http://bit.ly/mjhYpd, a similar tax policy idea here http://bit.ly/mTIq3n and here http://bit.ly/jS3dNr. Only 19 more votes required to reach the top of the ranking! Check it out.

  • Anonymous

     More on the cost of regulation   here: http://www.downsizedc.org/blog/youre-paying-an-invisible-taxe.g.: “As Clyde Wayne Crews of CEI points out (http://bit.ly/l7oRVw) . . .* Regulatory costs already equal 11.9% of GDP * This almost twice the burden of the personal income tax* There have been 38,700 new regulations since 2001, and the 2010 federal register had 81,405 pages — a record* These numbers DON’T include the looming regulatory tsunami that Obamacare and Dodd-Frank will cause”

  • http://www.facebook.com/mike.pritchard Mike Pritchard

    How about reforming the patent system?

    • http://www.feld.com bfeld

      Yes – that would be another important one!

  • http://www.thegetdownguy.com willcole

    Stop funding incumbents with subsidies and bailouts would also be helpful.

    And in addition to the startup visa, make it easier for companies to sponsor immigrants to come work at a startup.  We should be allowing the most talented employees a streamlined ability to work here.

  • Anonymous

     This is great news. But, despite the good intentions, governments cannot sustain all the needs of entrepreneurs. They will most likely still be in need of funds even if they receive governmental help. This is why I would like to suggest using alternative techniques of gathering funds as the ones they can find here: http://www.vcgate.com/International_investors.htm! 

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  • Gene

     Feld, you’re a knucklehead . . . In all seriousness, your assertion that the government has been a successful investor in technology is way off the mark. After the Edison-Bell-Ford era of individual inventors, most of the technology we have today has come from private industry. Bell Labs, IBM, Xerox and dozens of other corporations have had orders of magnitude more technological innovation than the federal government. 

    One example, the Internet. It was originally a government network (using privately invented technology)  that languished. It when business became involved that it exploded.

    Here’s a challenge. Outside of military hardware, what great technological innovations came from government labs, ANY government?

    • http://www.feld.com bfeld

      Actually, I thought I stated it pretty clearly – the government’s innovation
      activity has primarily come through funding university research. And I think
      think they should do a lot more of this. And open source it – make it
      available to everyone.

      • Gene

        But, Feld, if government funded university research has no history of innovation, why throw more money at it? 

        • http://www.feld.com bfeld

          I disagree with your assertion that government funded university research
          has no history of innovation. I went to MIT – there is an enormous amount of
          government funded university research that has come out of that one
          institution over the past 75 years.

          • Gene

            I Your blog suggested that the federal government should fund more university research. So, just name 1 or 2 commercial successes that came out of MIT, or any other government funded university research to prove that it works.

          • http://www.feld.com bfeld

            How about Professor Robert Langer’s work as one example.

            http://web.mit.edu/langerlab/langer.html

            One guy. 200+ commercial products.

            For a history of his work, see http://web.mit.edu/langerlab/news.html

          • Gene

            Very impressive. What is a commercial product was he responsible for that we might recognize? The USPTO averages over 1000 patents issued a day, but very few are commercial successes.

            My point is, university research has a place, but it has not been a major factor in business. Businesses and individuals with a profit (gasp!) motive have been responsible for the vast majority of technological innovation. The way to fund this research going forward is to stop intimidating and taxing business into oblivion and to let them pursue innovation for business reasons.

            How do you motivate business to innovate? Simple, leave them alone and quit trying to control them. 

          • http://www.feld.com bfeld

            Besides stuff like transdermal medical delivery systems, how about the frizz
            fighter?

            http://www.livingproof.com/

            I disagree with your assertion that “university research … has not been a
            major factor in business.” Much university research, especially through tech
            transfer rules adopted as part of the Bayh–Dole Act in 1980, has had a very
            clear profit motive, both for universities and the individual inventors.

          • Gene

            That’s the best you’ve got? A trans-whatever and a frizz fighter? Feld, you’ve proven my point! 

            What we need is business doing what it has traditionally done best, inventing new things for profit. Every time I hear a politician, particularly a politician with NO business experience (cough-Obama) talking about “investing”, it makes my skin crawl. Government can do nothing to make the US more competitive, except get the heck out of the way and let business do what it does best. 

          • http://www.feld.com bfeld

            The transdermal drug delivery system is a very important medical invention.

            Re: Frizz fighter – I’m being cute on that one, but regardless it’s an
            example of a broad based consumer product that came out of the research. And
            apparently lots of women feel like it’s an important invention.

            I could give you thousands of examples. You don’t have to work very hard to
            find them on MIT, Caltech, and Stanford’s sites attributed to
            commercialization of technology that came from research and gigantic
            companies that emerged from this (e.g. Stanford begat Cisco, Sun, and Google
            among many others.)

            You seem to only want to say that “government can’t do anything useful but
            get out of the way.” But you aren’t willing to search for any real data
            other than pound on a dogmatic anti-government point. I encourage you to
            open your mind a little and look around.

          • Gene

            (You realize that Sun was created by a group of Bell Labs types, right?)

            I’ll tell you what I want. I want government to stop inhibiting business and stop the foolish talk about investments. Let business invest and let government fix the friggin’ potholes!

            Good discussion. We will never agree, but I appreciate the polite exchange of ideas.

          • http://www.feld.com bfeld

            I agree it’s a good discussion – I’m totally open to the challenge of ideas
            here.

            Re: Sun – I don’t think anyone from Bell Labs was involved. Three of the
            four founders were Stanford grads; one was a Berkeley grad student. See
            http://en.wikipedia.org/wiki/Sun_Microsystems

            “On February 24, 1982 Vinod Khosla
            , Andy Bechtolsheim , and Scott
            McNealy , all Stanford graduate
            students, founded *Sun Microsystems*. Bill
            Joy of
            Berkeley, a primary developer of
            BSD,
            joined soon after and is counted as one of the original
            founders.[8]
            The
            Sun name is derived from the initials of the Stanford University
            Network
            .[9] [10]
            Sun
            was profitable from its first quarter in July 1982.”

            And yes – it’d be great if all the damn potholes could get fixed.