Startup America—Dead on Arrival

2/8/11Follow @sgblank

For its first few decades Silicon Valley was content flying under the radar of Washington politics. It wasn’t until Fairchild and Intel were almost bankrupted by Japanese semiconductor manufacturers in the early 1980’s that they formed Silicon Valley’s first lobbying group. Microsoft did not open a Washington office until 1995.

Fast forward to today. The words “startup,” “entrepreneur,” and “innovation” are used fast, loose and furious by both parties in Washington. Last week the White House announced Startup America, a public/private initiative to accelerate accelerate high-growth entrepreneurship in the U.S. by expanding startups access to capital (with two $1 billion programs); creating a national network of entrepreneurship education, commercializing federally-funded research and development programs and getting rid of tax and paperwork barriers for startups.

What’s not to like?

My observation. Startup America is a mashup of very smart programs by very smart people but not a strategy. It made for a great photo op, press announcement and impassioned speeches. (Heck, who wouldn’t go to the White House if the President called.) It engaged the best and the brightest who all bring enormous energy and talent to offer the country. The technorati were effusive in their praise.

I hope it succeeds. But I predict despite all of Washingtons’ good intentions, it’s dead on arrival.

Dead On Arrival
I got a call from a recruiter looking for a CEO for the Startup America Partnership. Looking at the job spec reminded me what it would be like to lead the official rules committee for the Union of Anarchists.

There are three problems. First, an entrepreneurship initiative needs to be an integral part of both a coherent economic policy and a national innovation policy – one that creates jobs for Main Street versus Wall Street. It should address not only the creation of new jobs, but also the continued hemorrhaging of jobs and entire strategic industries offshore.

Second, trying to create Startup America without understanding and articulating the distinctions among the four types of entrepreneurship (described later) means we have no roadmap of where to place the bets on job growth, innovation, legislation and incentives.

Third, the notion of a public/private partnership without giving entrepreneurs a seat at the policy table inside the White House is like telling the passengers they can fly the plane from their seats. It has zero authority, budget or influence. It’s the national cheerleader for startups.

The Four Types of Entrepreneurship
“Startup,” “entrepreneur,” and “innovation” now means everything to everyone. Which means in the end they mean nothing. There doesn’t seem to be a coherent policy distinction between small business startups, scalable startups, corporations dealing with disruptive innovation and social entrepreneurs. The words “startup,” “entrepreneur,” and “innovation” mean different things in Silicon Valley, Main Street, Corporate America and Non Profits. Unless the people who actually make policy (rather than the great people who advise them) understand the difference, and can communicate them clearly, the chance of any of the Startup America policies having a substantive effect on innovation, jobs or the gross domestic product is low.

1. Small Business Entrepreneurship
Today, the overwhelming number of entrepreneurs and startups in the United States are still small businesses. There are 5.7 million small businesses in the U.S. They make up 99.7% of all companies and employ 50% of all non-governmental workers.

Small businesses are grocery stores, hairdressers, consultants, … Next Page »

Steve Blank is the co-author of The Startup Owner's Manual and author of the Four Steps to the Epiphany, which details his Customer Development process for minimizing risk and optimizing chances for startup success. A retired serial entrepreneur, Steve teaches at Stanford University Engineering School and at U.C. Berkeley's Haas Business School. He blogs at www.steveblank.com. Follow @sgblank

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  • David L

    Steve, according to Brad Feld it sounds like there are a lot of smart folks with backgrounds in VC and early-stage tech companies involved. I’ve been critical of the administration’s efforts to date in stimulating the innovation economy, but this seems like a positive step. What am I missing? Would be interested to know what you’re basing your impressions on.

  • Lars M

    This is the same President who taxed “carried interest” not only for hedge funds, but for VCs — The most likely regulation to kill innovation.

  • JD

    Lars M,

    I think you put to much emphasis on the current Obama Administration when I believe it was specific individuals who introduced the bill originally (two senators).

    With that being said, it is the Obama Administration currently leading the entrepreneurship efforts in the US with Startup America compared to past administrations not mentioned here who have done very little.

  • JD

    Steve,

    I do not blame you, if I was your age, I would not want to lead this program either.

    I mean, not to say that you still don’t have the mojo, but lets be honest, your not up for the game to LEAD!

  • GS – Erie, PA

    To state that an Entrepreneurship Policy can’t be formulated by policy wonks and other types is like saying K – 12 Educational Tests and Standards can’t be created without the active buy-in of K – 12 students. BALONEY!

    Many in congress, economists, large corporate managers and economic developers indeed have run small businesses. Perhaps they have not segmented the market in the same way you have Steve.

    Regardless, this is a start, and a good one. I agree however that this kick-start program is not a substitute for comprehensive industrial development policy. The absence of such is a major chink in our domestic armor as global competitor’s methodically attack our industries and markets.

  • http://www.american-innovation.org Sergio M Perez

    Steve,
    I really liked your review of the different startups and a very good profile of “small business”. I am much more positive on the direction and value of Obama’s efforts. Besides adding more people with startup scars to the national team, what will be an effective national strategy?