The importance of the U.S. startup ecosystem was made crystal clear during the pandemic: Many of us came to rely on new technologies that had been developed over the past decade, including revolutionary vaccines and testing devices, cutting-edge video-conferencing software that kept workers productive and kids learning online, and financial technology that allowed restaurants and other small businesses to move their operations online to survive.
As we move into this period of national recovery, high-tech startup companies — and the venture-capital investors who back them — are poised to play a critical role in creating higher-paying jobs across the country. These jobs can be created in both the traditional U.S. technology centers and regions hit hard by the decline in manufacturing. Venture investors also help create and deploy technology (think advanced computer chips and electric-car batteries) that increase America’s economic competitiveness vis-à-vis China and help address the climate crisis. All of these are key goals of the Biden administration’s ambitious new jobs plan.
But these worthy goals could be hamstrung by policies that fail to account for the unique business model of high-tech startups. We must realize that we are in an increasingly fierce global competition for innovation. The share of global venture-capital dollars going to U.S. companies has dropped precipitously over the last two decades, from 84% in 2004 to 51% last year. Given that venture capital plays an enormous role in creating economic value, including new jobs, innovation, economic growth and tax revenues, we must refocus our efforts to keep the U.S. positioned as a global innovation and research and development leader.
Here are five policy recommendations we encourage Washington to consider:
Make it easier for brilliant entrepreneurs from other countries to start companies in the U.S. There is a guaranteed way to create new American companies: Pass a startup visa that recruits the world’s most talented entrepreneurs to our shores. Immigrant entrepreneurs have created thousands of U.S. companies, including Zoom, Intel and Moderna. But our immigration policy pushes away foreign-born founders because the U.S. does not have a dedicated visa category for job creators, while more than 20 other countries now have a startup visa category.
There is a guaranteed way to create new American companies: Pass a startup visa that recruits the world’s most talented entrepreneurs to our shores.
Enact policies like the Endless Frontier Act to grow economies in all regions and communities. The United States is the global leader in science and technological ingenuity and innovation. To maintain this leadership at a time when new technological capabilities are being adopted across all elements of our society, we must prioritize technology-focused economic development and create the jobs of the future here.
The key legislative proposal that the president’s plan relies on to achieve this is the Endless Frontier Act. This bipartisan bill, which is now moving through Congress, proposes a generational investment in federal basic research and technology commercialization activities that would lead to new high-tech companies being formed across the country, more technologies designed to address critical societal challenges, increased domestic manufacturing capacity, and greater economic opportunities for workers and communities. The Endless Frontier Act rightfully prioritizes new company formation and growth to encourage the participation of venture capital investors and entrepreneurs who will ultimately create and scale new American companies.
Utilize the innovative power of startups to address the climate crisis. Global carbon emissions are driving a rapidly increasing environmental crisis that will be one of the greatest challenges for our generation to solve. Fortunately, there are thousands of American entrepreneurs at work today building technologies to address the crisis, including new energy sources and storage, clean transportation technologies, carbon capture and utilization, and new, environmentally focused agricultural technologies. The president’s bold plan must take advantage of this generation of innovative startups because their success will be a major factor in the rate of our progress, and we know this is a race we can’t afford to lose.
Coordinate workforce development programs with new job creation opportunities at emerging companies. The jobs of the future are being created every day at VC-backed startups and emerging companies. As Congress considers how to craft workforce development programs, they should consider those that provide on-ramps to workers for jobs in the next generation of American companies, such as offering a refundable tax credit for emerging companies that create training programs for prospective employees. This could prove particularly effective at training non-college-educated workers for positions at high-growth companies.
Coordinate tax policy with the administration’s jobs strategies. We want to be constructive partners in these worthy efforts to expand economic opportunity and address societal challenges. But we caution that the administration’s proposals to increase taxes on capital gains, including carried interest, by more than 80% undercut our goals by specifically targeting the very entrepreneurs and long-term investment funds whose participation will ultimately determine whether the Build Back Better agenda is successful. We urge the administration to give the jobs plan every chance to succeed and avoid creating unintentional bottlenecks in the technology commercialization process with unprecedented tax increases.
As our economy continues to recover from the pandemic and we address the societal challenges of access to economic opportunity, climate and U.S. global competitiveness, we must remember that our country boasts the most vibrant startup ecosystem in the world. This ecosystem has provided technology to help us weather the pandemic and hopefully bring it to a close; launched the internet, biotechnology and climate technology industries; and led to the creation of millions of high-paying jobs.
The problems we seek to address may be unique to our time, but the source of our solutions remains the same. Expanding entrepreneurial activity will identify and scale the technologies needed to move our country forward and provide for a more secure and prosperous future for all. Let’s focus on working together to leverage this strength to solve our long-term challenges.