Startups have long been a hallmark of the U.S. economy, building leading industries and creating the high-paying jobs of the future. America idealizes its most dynamic innovation hubs in places like Silicon Valley, Boston and New York, but the startup scene is present in small towns and large cities, red states and blue states, and in industries from technology and healthcare to retail and food service, too.
Today, Members of Congress celebrate the fourth annual Startup Day Across America by visiting entrepreneurs, incubators, accelerators, and other innovators in their communities. This year’s bipartisan, bicameral effort is led by Representatives Jared Polis (CO-2), Darrell Issa (CA-49), Blake Farenthold (TX-27) and Seth Moulton (MA-6) and Senators Gary Peters (MI), Steve Daines (MT), Mark Warner (VA) and Tim Scott (SC).
Startup Day provides local entrepreneurs with an opportunity to educate their representatives about the unique challenges they face. And it gives those Members a chance to meet the business leaders in their own backyards who are building the future. Last year, more than 70 Members of Congress traveled to their districts and states on Startup Day.
Entrepreneurs are vital architects of the U.S. economy. They commercialize the new technologies and pioneer the new business models that keep us productive and growing. They introduce dynamism into the local labor markets and are responsible for nearly all of the net new job creation in a given year. They challenge incumbents and keep markets competitive, ensuring that the economy works on the whole.
A litany of headline-grabbing technology startups prove that the United States can still produce the world’s greatest innovators and entrepreneurs, but on the whole, the United States is experiencing an unprecedented decline in new business formation as well as a geographic concentration of the startups that remain. In fact, the most recent economic recovery period — from 2010 to 2014 — saw only one-third the business creation of the recovery in the 1990s, and nearly 60 percent of all U.S. counties actually saw more businesses close than open.
It is more important than ever for our leaders in Washington to be attuned to the experiences and challenges of our innovators and entrepreneurs in every corner of America. Great ideas are the foundation of startups, but they require support from their community, educational institutions, investors and elected leaders to grow. Reversing the decline in entrepreneurship is one of the great economic challenges of our time — one we must tackle to ensure opportunity is broadly shared.
Thankfully, initiatives are popping up all across the country to revitalize local entrepreneurial ecosystems and build out the civic infrastructure that can increase the chances of a startup’s success. Recent research by Ian Hathaway at the Brookings Institution found that 54 of the country’s major metropolitan areas had a startup accelerator. Some cities, such as Cincinnati, Chattanooga, Nashville, Milwaukee, and Honolulu, even have two.
The capital that brings these ideas to life remains too scarce in too many places, though. Access to financing is essential for new businesses to grow and scale, but following the Great Recession, small business lending has fallen by a quarter and one in four community banks — the banking sector’s “boots on the ground” for our entrepreneurial ecosystems — have disappeared since 2008. Fully 78 percent of venture capital finance goes to California, Massachusetts, and New York alone. Angel capital is a little more distributed, but startups outside the major hubs still struggle to find investors. For example, Hathaway’s research found that almost two-thirds of accelerator-funded deals went to the Bay Area, Boston, and New York City. For startups to take root outside of these areas, they must be able to find investment closer to home.
That’s why EIG is working with policymakers from both sides of the aisle to ensure that more capital investment finds its way to all 50 states through the Investing in Opportunity Act. This legislation would create an innovative framework for getting idle capital off the sidelines to fund a new generation of entrepreneurs and enterprise in economically distressed areas of the country. Broadening access to opportunity for all Americans requires expanding the map of entrepreneurship. Place matters, and unless we can find ways to stimulate new businesses and industries to take root, we risk leaving huge portions of the country behind.
At EIG, we’re excited to work with and convene leaders in the policymaking, investor, and academic communities to help foster a startup-friendly environment for the next generation of American innovators. And in October, we’re looking forward to seeing some of them firsthand when we join Revolution’s Rise of the Rest 5.0 tour.
Startup Day Across America showcases the proof that the U.S. is home to the world’s best and brightest entrepreneurial minds. Together, we can make sure that more American communities are outfitted with the essential ingredients of a robust startup ecosystem in order to generate economic opportunity and prosperity for decades to come.