The White House launched Startup America Monday, an initiative designed to promote entrepreneurship and help people who want to start businesses gain access to the necessary capital and advice. The ultimate goal is to help create jobs through a partnership between the public sector and the private sector, but some are wary about the initiative’s prospect for success.
“I’m not yet convinced,” said Douglas Holtz-Eakin, president of the American Action Forum and former director of the Congressional Budget Office. Two specific aspects of the program, he said, “give me pause.”
One is the nature by which the government will allocate money to startups, giving to some and not to others. Holtz-Eakin calls this “heavy emphasis rifle shots” and says that he has doubts about the government’s ability to pick which companies will succeed and which won’t.
His other concern deals with the differences between the government and private venture capitalists.
“What venture capitalists do really well is they say no,” he said. “They yank either the money for failure or they yank the management,” adding that startups often get remade with new management.
“Government is terrible at both those things,” he said. “It doesn’t shut things down effectively at all.”
“They’re not well situated to do even what might be a well intentioned venture capital program,” he added.
Players on both the government and private sector sides, Holtz-Eakin suggested, were putting on something of a show. A lot of the things that the government proposed to do are already happening, he said, pointing to the many private sector programs to encourage entrepreneurship. As for the companies who added their name to the event, Holtz-Eakin said they were probably seeking publicity, hoping “we’ll get credit for what they’re doing.”
Many of the companies getting involved, who had executives at the launch meeting and were featured in the initiative’s press release, seem somewhat wary of letting themselves be tied too closely to the program.
Compared to The White House’s rhetoric of “partnership,” IBM Vice President Mike Riegel described his company’s involvement as simply “coordinating our efforts.” The company announced a $150 million investment into its Global Entrepreneur initiative in conjunction with the launch of Startup America.
For him, the coordination is beneficial because it helps put the issue of entrepreneurship in the “spotlight.”
“This combined focus will help drive more visibility and more focus” on entrepreneurship, he said, adding later that it will also help to “create an environment and atmosphere for more innovation.”
The U.S. Chamber of Commerce would seem to be a strange bedfellow for such a program. The Chamber is exceptionally vocal about its belief that it is the private sector that creates jobs, not the government, and has repeatedly clashed with the administration over that philosophy. Yet it is listed as one of the organization’s supporting the initiative. Moreover, the Chamber sent out a press release supporting the program. The release, however, focused primarily on publicizing the Chamber’s own efforts to promote entrepreneurship through its Campaign for Free Enterprise.
Stan Anderson, managing director of that Campaign, did not elaborate on that message, but described the initiative as exactly in line with the Chamber’s beliefs.
“There was not one word about public sector job creation,” he said. “Every word could have been spoken in the U.S. Chamber. It was all private sector job creation; that was the whole point.”
The initiative itself aside, Deven Parekh, managing director of Insight Venture Partners, a venture capital firm, sees this cooperation between the Chamber of Commerce and the government as a good thing.
“There’s been some well publicized conflicts between the administration and the Chamber of Commerce, and I think the fact that they’re finding areas where they can cooperate…is a positive,” he told The Daily Caller.
Likewise, he lauded “the fact that the administration is focusing on small businesses,” though he was careful to note that the difficult part would be translating talk into action.
But Dan Fishback, an entrepreneur who is the CEO of Demandtec, says that Startup America somewhat misses the mark.
“Every business I’ve ever started I’ve been more worried about paying the bills,” he said, giving as an example California’s requirement to pay a $1,600 fee each year for the right to set up a limited partnership.
“A lot of people don’t start a business cause they can’t afford” that fee, he said. “You’ve got to sell a lot of donuts to pay the fee.”
Instead of worrying about access to capital and advice, Fishback said, “I would rather see it easier to start businesses in the basic blocking and tackling.” For instance, he suggested creating more “simplified tax codes” so that businesses didn’t have to pay an accountant an exorbitant amount of money each year to do their taxes.
“We’ve made it too hard,” he said. “I just wish we’d make it easier.”