Access to Capital: Fueling Business Growth and Job Creation

Ed. Note: As part of the Startup America: Reducing Barriers Roundtable series, National Economic Council Director Gene Sperling and U.S. Small Business Administrator Karen Mills will take your questions and suggestions about what processes and regulations we need to adjust to foster a more nurturing environment for entrepreneurship and innovation.  Watch and participate today at 12:00pm EDT on whitehouse.gov/live.

I had the pleasure yesterday of sitting down with nearly 100 leading entrepreneurs, investors, underwriters, academics, and fund managers—including Chuck Newhall, the legendary co-Founder of one of the Nation’s most prestigious venture capital firms, New Enterprise Associates—at the Treasury Department’s Access to Capital Conference.  The event was one of a number of creative forums the Administration has held to generate new, actionable ideas to ensure that small businesses have the resources to achieve high growth.

The event built on President Obama’s January launch of Startup America, an initiative to celebrate, inspire, and accelerate high-growth American entrepreneurship that includes a number of commitments to expand access to capital for entrepreneurs. Capital, invested by the private sector, is what helps entrepreneurs realize their dreams and turn ideas into startups, and it’s what turns small businesses into fast-growing companies that create jobs and fuel sustainable economic growth.    

At yesterday’s conference, we took an important step forward in that mission with an open and honest dialogue about how best to cultivate investment and growth.  And we made real progress. 

One thing we heard is that small businesses are still struggling to access capital. In the past two years, financing has been tough for all companies, but it has been particularly tough for startups that lack existing collateral or cash flows for loans.  Small businesses create 64 percent of new jobs in the economy, and the nation needs these companies to keep adding good-paying jobs to maintain a sustainable, long-term recovery.

We also heard diverging views on market conditions.  The ability of a small, advanced manufacturing firm in the Midwest to raise funds can be quite different from that of a software start-up in Silicon Valley.  While people representing certain regions didn’t feel like there is a dearth of capital, people from other areas were clear that this is a challenging time for many of their local start-ups to raise sufficient capital. It is important to identify and bridge these market gaps and encourage investors seeking long-term, “hidden value” investment opportunities that exist in all parts of the country. 

In addition to fostering dialogue around the evolving market dynamics of small business and entrepreneurial finance, the conference helped generate a number of policy-related suggestions for the Administration, regulatory agencies, and Congress.  Building on President Obama’s proposal to make permanent the 100 percent capital gains tax exemption for investment in small businesses, entrepreneurs and investors suggested ways to maximize the adoption of this tax incentive and proposed other tax and regulatory “tweaks” that could improve capital access for small businesses. One participant proposed a task force on the topic to consider best approaches to attaching these small changes to existing laws. We are committed to exploring these types of policy improvements—ones that show promise of driving more private capital into worthy start-ups and high-growth firms. Please share your ideas on how to reduce barriers here.

We also heard about some inspiring examples of innovative financing, from the earliest stages with incubators and angel clubs to the later stages with private placement platforms. These advances, including digital platforms and new funding networks, remind us of the importance of having nimble regulations that encourage, not stifle, innovation. 

Finally, I would like to highlight one idea that stood out as having particular potential. Participants recognized that the Administration has many government programs to support entrepreneurs and extend lending to small businesses. However, there islittle or no transparency on customer service.We were challenged to launch a “Yelp”-like service to engage customer feedback on economic development programs and to use that information to continuously improve performance. It is a remarkably simple idea but could be a first step in pushing this dialogue forward.

Yesterday’s conference was just the beginning of this conversation. We are committed to exploring each and every proposal raised.  National Economic Council Director Gene Sperling ended the day by reminding us that, despite the challenges, our economy is ripe for innovation – more than half the companies on the Fortune 500 list were launched during a recession or bear market.  Small business growth will continue to be a top priority. Stay tuned for next steps.

Aneesh Chopra is the U.S. Chief Technology Officer