InTheCapital

By Charlie Warzel / @cwarzel

Job creation. We need it and small companies founded by entrepreneurs are the ones that can help. That is the central thesis of former AOL founder, Steve Case’s op-ed out today in the Washington Post. 

Case notes that startups are down over the past five years, as well as the number of IPOs. More important, the U.S. is in danger of falling behind as innovation and entrepreneurship continues it’s boom overseas. According to Case:

 Companies that are trying to expand have found that accessing capital and securing talent have become more challenging. Meanwhile, as the American entrepreneurial engine slows, the pace has picked up around the world. Indeed, globalization has affected not just manufacturing and services but also entrepreneurship.

Reading Case this morning gave us some reason for optimism and that optimism comes from an odd place…Congress. 

Turns out that folks on both sides of the aisle agree with Case that entrepreneurship needs to be a bigger priority. They’re putting their money where their mouth is, too and have introduced two bills in the House and Senate: the Startup Act and AGREE.

The bills are important as they will help lessen tax burdens on startups, make it easier for high-growth, mid-size companies to IPO, and allow crowdfunding, where average investors can band together and give early stage companies access to capital. The bills are backed by bipartisan support and we at InTheCapital will be following their progress in the House and Senate for you. 

Case’s op-ed made us think more on the gargantuan story in the New York Times this weekend, regarding Apple’s manufacturing jobs in China and the grim prospect for growing the middle class through big tech companies. American manufacturing simply can’t compete with scale, organization, and pay model that exists in Chinese manufacturing. Here’s a good example from the article:

Another critical advantage for Apple was that China provided engineers at a scale the United States could not match. Apple’s executives had estimated that about 8,700 industrial engineers were needed to oversee and guide the 200,000 assembly-line workers eventually involved in manufacturing iPhones. The company’s analysts had forecast it would take as long as nine months to find that many qualified engineers in the United States.

If nothing else, the Times article illustrates that the old manufacturing model is not the answer—we have to look elsewhere. Case notes that entrepreneurs grow jobs. He pulls up research to indicate that, ”firms less than five years old have produced 40 million American jobs over the past three decades — accounting for all of the net new jobs created in that period.” 

Startups, whether they be a service or goods producers, are smaller-scale and can create and keep jobs inside the United States, without having to scurry overseas to cheaper labor and increased ‘flexibility’, which reads to us as ‘less-stringent labor laws’. 

The true challenge, which both AGREE and the Startup Act look to address, is to reverse the outsourcing trend and bring innovators to America. Case notes touchy immigration policy that would need to be amended to bring the best and brightest to our shores. “If we want to create a new wave of Googles and Intels — firms that were co-founded by immigrant entrepreneurs — Congress should pass bipartisan legislation modifying the barriers to high-skilled immigration,” Case notes in the piece today.

The road to economic recovery is long and rocky for sure, but a path exists. America is a country built on the backs of innovators and fresh ideas. If we can follow Case’s lead and lobby Congress to allow innovators a smoother path to success, great things can happen. Traditional models like manufacturing will continue to be an important pillar of economic strength, but the tide does appear to be shifting. Let’s capitalize on new ideas and new talent to help usher in the next generation of economic growth and breed a culture of sustainable success in innovation.

[Lead image by amystarrallen.com]