[Senate Hearing 112-429]
[From the U.S. Government Publishing Office]



                                                        S. Hrg. 112-429
 
       DEVELOPING AND STRENGTHENING HIGH-GROWTH ENTREPRENEURSHIP

=======================================================================




                               ROUNDTABLE

                               BEFORE THE

            COMMITTEE ON SMALL BUSINESS AND ENTREPRENEURSHIP

                          UNITED STATES SENATE

                      ONE HUNDRED TWELFTH CONGRESS

                             SECOND SESSION

                               __________

                            FEBRUARY 1, 2012

                               __________

    Printed for the Committee on Small Business and Entrepreneurship


         Available via the World Wide Web: http://www.fdsys.gov


            COMMITTEE ON SMALL BUSINESS AND ENTREPRENEURSHIP





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                      ONE HUNDRED TWELFTH CONGRESS

                              ----------                              
                   MARY L. LANDRIEU, Louisiana, Chair
                OLYMPIA J. SNOWE, Maine, Ranking Member
CARL LEVIN, Michigan                 DAVID VITTER, Louisiana
TOM HARKIN, Iowa                     JAMES E. RISCH, Idaho
JOHN F. KERRY, Massachusetts         MARCO RUBIO, Florida
JOSEPH I. LIEBERMAN, Connecticut     RAND PAUL, Kentucky
MARIA CANTWELL, Washington           KELLY AYOTTE, New Hampshire
MARK L. PRYOR, Arkansas              MICHAEL B. ENZI, Wyoming
BENJAMIN L. CARDIN, Maryland         SCOTT P. BROWN, Massachusetts
JEANNE SHAHEEN, New Hampshire        JERRY MORAN, Kansas
KAY R. HAGAN, North Carolina
  Donald R. Cravins, Jr., Democratic Staff Director and Chief Counsel
              Wallace K. Hsueh, Republican Staff Director


                            C O N T E N T S

                              ----------                              

                           Opening Statements

                                                                   Page

Landrieu, Hon. Mary L., Chair, and a U.S. Senator from Louisiana.     1
Brown, Hon. Scott P., a U.S. Senator from Massachusetts..........     3
Moran, Jerry, a U.S. Senator from Kansas.........................    38

                               Witnesses

Rowe, Tim, Founder and CEO, Cambridge Innovation Center..........     5
Crews, Wayne, Vice President for Policy, Competitive Enterprise 
  Institute......................................................     9
Kessler, Jim, Vice President for Policy, Third Way...............    12
Greene, Sean, Associate Administrator for Investment, U.S. Small 
  Business Administration........................................    16
Holtz-Eakin, Dr. Doug, President, American Action Forum..........    16
Farmer, Michael, Founder and CEO, Leap2..........................    16
Ezell, Stephen, Senior Analyst, Information Technology and 
  Innovation Foundation..........................................    17
Tomb, Diane, President and CEO, National Association of Women 
  Business Owners................................................    24
Evans, Barry, CEO, Calxeda.......................................    24
Sumption, Madeleine, Policy Analyst, Migration Policy Institute..    27
Evers, Ridgely, Managing Partner, Tapit Partners LLC.............    31
Finney, Michael, President and CEO, Michigan Economic Development 
  Corporation....................................................    31
Lindsey, Brink, Research and Policy Associate, Ewing Marion 
  Kauffman Foundation............................................    37
Ortmans, Jonathan, Senior Fellow, Ewing Marion Kauffman 
  Foundation.....................................................    37

          Alphabetical Listing and Appendix Material Submitted

Austin's Entrepreneurial Ecosystem
    Diagram......................................................    90
Brown, Hon. Scott P.
    Testimony....................................................     3
Computer & Communications Industry Association (CCIA)
    Letter.......................................................    88
Crews, Wayne
    Testimony....................................................     9
Evans, Barry
    Testimony....................................................    24
    Prepared statement...........................................    25
Evers, Ridgely
    Testimony....................................................    31
Ezell, Stephen
    Testimony....................................................    17
    Prepared statement...........................................    19
Farmer, Michael
    Testimony....................................................    16
Finney, Mike
    Testimony....................................................    31
    Prepared statement...........................................    33
Greene, Sean
    Testimony....................................................    16
Holtz-Eakin, Doug
    Testimony....................................................    16
Information Technology and Innovation Foundation (ITIF)
    Letter.......................................................    89
Kessler, Jim
    Testimony....................................................    12
    Prepared statement...........................................    13
Landrieu, Hon. Mary L.
    Testimony....................................................     1
Lindsey, Brink...................................................
    Testimony....................................................    37
Moran, Hon. Jerry
    Testimony....................................................    38
Ortmans, Jonathan
    Testimony....................................................    37
Rowe, Tim
    Testimony....................................................     5
    Prepared statement...........................................     7
    Slide presentation...........................................    47
Sumption, Madeleine
    Testimony....................................................    27
    Prepared statement...........................................    28
Tomb, Diane
    Testimony....................................................    24
The White House Office of the Press Secretary
    Remarks by the President before Cabinet Meeting..............    11


       DEVELOPING AND STRENGTHENING HIGH-GROWTH ENTREPRENEURSHIP

                              ----------                              


                      WEDNESDAY, FEBRUARY 1, 2012

                      United States Senate,
                        Committee on Small Business
                                      and Entrepreneurship,
                                                    Washington, DC.
    The Committee met, pursuant to notice, at 10:04 a.m., in 
Room 428-A, Russell Senate Office Building, Hon. Mary L. 
Landrieu, Chair of the Committee, presiding.
    Present: Senators Landrieu, Brown, and Moran.

 OPENING STATEMENT OF HON. MARY L. LANDRIEU, CHAIR, AND A U.S. 
                     SENATOR FROM LOUISIANA

    Chair Landrieu. Good morning, everyone. I would like to 
call the Small Business roundtable on entrepreneurship 
together, and I thank all of you for making the special trip 
and effort.
    I know some of you have come from the West Coast for 24 
hours on the ground, so we really appreciate the effort by this 
spectacular team of experts on entrepreneurship and the 
entrepreneurship ecosystem in our country and, in some cases, 
of the world. I thank you so much.
    I am going to give a brief opening statement. We are 
expecting one or two other members of the Committee. When they 
come, they will be recognized.
    This is different from a hearing in that what we are hoping 
for is a lot of interactive exchange between the participants. 
I will be leading off, of course, with questions, et cetera. 
Let me set the tone for this morning, again thanking you for 
coming.
    This Roundtable is the first of a series of three that I 
will be organizing through this Committee to explore options 
and opportunities to strengthen the ecosystem for 
entrepreneurship in America.
    Welcome, Senator Brown.
    We have assembled an impressive group of experts and 
entrepreneurs to discuss of some of the more exciting ideas 
that are being discussed here on Capitol Hill.
    According to the Webster dictionary, the definition of 
entrepreneur is, ``one who organizes, manages, and assumes the 
risk of a business or enterprise.''
    The term was originally a loan word from the French and was 
first defined by the Irish-French economist, Richard Cantillon. 
Entrepreneur in English is a term applied to a person who is 
willing to help launch a new venture, enterprise, and accept 
full responsibility for the outcome.
    Jean-Bapiste Say, a French economist, is believed to have 
popularized this word in the 19th century. He defined an 
entrepreneur as one who undertakes an enterprise, especially a 
contractor acting as an intermediary between capital and labor.
    Whatever your definition of an entrepreneur is, we believe 
that we need more of them in America and we need entrepreneurs 
who can grow companies quickly and create the jobs that we need 
in the future.
    New York Times op ed columnist, Tom Friedman, wrote 
recently, the future, ``will require our kids not so much to 
find their next job as to invent their next job.''
    That is what this Roundtable is about today.
    It is often said that America's nearly 28,000,000 small 
businesses are the backbone of this country's economy, and I 
agree. Federal law defines a small business as all of those 
businesses having anywhere from one to 500 employees or less. 
They may all fit under the same broad category as far as our 
Federal Government is concerned but they are very, very 
different in size, shape, leadership, and potential to change 
the landscape of our economy in the United States.
    So, it makes no sense to me for the Federal Government to 
have a one-size fits all policy, and that is what we are going 
to try to break down today. We must put a special focus on 
those firms that have the capacity to grow quickly in the near 
future.
    If small businesses are the backbone of our economy, and I 
believe that they are, then high-growth firms are the engine of 
our economic growth. According to studies provided by the 
Kauffman Foundation that are here with us today represented by 
Brink and Jonathan, fast growing young firms comprising less 
than 1 percent of all companies generate roughly 10 percent of 
new jobs in any given year.
    Additionally, as stated in the interim report from the 
President's Council on Job Competitiveness, over the last three 
decades, young firms less than five years old have created 40 
million net new jobs according to the U.S. labor data. Those 40 
million jobs actually account for all net new jobs created in 
the United States over that period.
    It is clear from this data that some entrepreneurs have the 
secret sauce or found the secret sauce that led them to be 
successful and grow their workforce.
    According to Steve Case, Chairman of the founding board of 
Startup America Partnership, ``America's best chance to achieve 
robust, sustainable growth and prosperity is by ensuring that 
the United States increases its entrepreneurial competitiveness 
relative to the rest of the world.''
    Many of us continue to believe that America is still the 
world's greatest home for innovation, entrepreneurship and that 
our small businesses are the most innovative. We have some 
evidence to suggest that that remains true.
    The U.S. Patent and Trademark Office reports the U.S. filed 
more than twice as many patents as any other country in 2010. 
More specifically, the U.S. filed nearly 108,000 followed by 
Japan, a far second at 50,000.
    In particular, small firms are a significant source of 
innovation and patent activity. SBA's studies shows that from 
last October small businesses developed more patents per 
employee than large businesses did. With the smallest firms, 
those with fewer than 25 employees producing the greatest 
number of patents per employee.
    Finally, small firm patents tend to be more significant 
than large firms, outperforming them in any number of 
categories including growth, citation, impact, and originality.
    This is largely because small firms tend to specialize in 
high-tech, high-growth industries such as biotechnology, 
pharmaceuticals, information technology, semiconductors to name 
just a few, which brings us back to the purpose of this 
roundtable, to give entrepreneurs a platform in the United 
States Capitol, to give this issue the focus that it deserves 
in the current economic climate, to discuss what the federal 
role should be, if any, in creating and strengthening an 
ecosystem for entrepreneurs that results in more successful 
startups and more high-growth firms and, in my mind, spread 
more evenly throughout the country.
    Today's discussion is the first in a series of three 
roundtables, as I said, and I will continue after these three 
roundtables on a variety of different subjects to then move to 
a hearing on a piece of legislation that will combine some of 
the ideas, the best ideas out there, and then have a markup 
some time in early spring. That is our goal for this Committee.
    I recognize that some of the specific pieces of what will 
be discussed today will have to be taken up in the Finance 
Committee or the Commerce Committee or the Banking Committee 
because they have primary jurisdiction over these issues.
    But this Committee has the platform for entrepreneurship, 
and I want to make sure this issue is getting the attention 
that I believe it deserves in the current political debate.
    So, let me begin by, of course, recognizing Senator Brown 
for any opening remarks that he might have. He has to sit at 
10:30.
    Senator Brown. In managing the floor, yes.
    Chair Landrieu. At 10:30. So, we will recognize him for 
opening remarks and then I think he has a question or two and 
then we will go to introductions.
    Senator Brown.

 OPENING STATEMENT OF HON. SCOTT P. BROWN, A U.S. SENATOR FROM 
                         MASSACHUSETTS

    Senator Brown. Thank you, Madam Chair. I appreciate you all 
doing that. I am on the Insider-Trading Bill. It is my bill, 
and I am managing the floor along with Senators Lieberman and 
Collins. So, I appreciate that consideration and appreciate 
your holding this roundtable this morning to encourage 
entrepreneurship.
    I would also like to thank Tim Rowe for participating in 
this roundtable. Tim is the CEO and founder of the Cambridge 
Innovation Center in Cambridge, Massachusetts.
    Really you should see it. It is an amazing facility. We 
have 450 startup businesses, some in the size of a phone booth, 
others in the size of this room. The new Droid application 
process was started in his building which is now obviously 
taking over technology in certain sectors, and I am proud that 
the Commonwealth of Massachusetts, as you know, is an 
innovative state and we are an incubator for high-tech and 
biotech startups.
    We can do better in helping encourage small businesses not 
only in Massachusetts but nationally, and people like Tim are 
an example of a truly unique entrepreneur who recognizes that 
creating an environment where startups feel nurtured creates 
unbelievable growth, and we need to have more risk-taking in 
the economy.
    This past November, I introduced the Democratizing Access 
to Capital Act, which allows for crowdfunding which is 
something that the President quite frankly referenced in his 
State of the Union.
    I was thankful for that. I think I need to have another, 
hey, by the way, Mr. President, that bill is already ready to 
go and it is stuck in Committee, and maybe he will put that on 
Fox and get that out again so we can get it heard right away.
    As you know, that bill allows the average person with no 
more than $1,000 to invest up to $1 million and not deal with a 
lot of the SEC regulations that do not allow for that simple 
model of investing. It is kind of a no-brainer.
    So, we need to figure out how to do that and how to get 
that sort of thing out. And as I referenced, the President 
referenced it in his State of the Union. I have talked about it 
long before that.
    One other thing that will not help business creation right 
now and, as I travel around Massachusetts, the number one thing 
I recognize is the lack of certainty and stability, the fear of 
not knowing what is next, whether it is regulatory certainty, 
tax certainty, you do not know if we are going to have an 
estate tax, do not know if we are going to have a lot of the 
incentives associated with the R&D tax credit, the investment 
tax credit. You do not know if they are going to be around.
    So as a result, a lot of these businesses that I visited in 
Massachusetts are especially are saying, you know, we are just 
going to hang tight. We are not going to do A, B, C, or D, and 
raising taxes in the middle of a three-year recession and not 
having that certainty and stability is a problem.
    I was happy and honored to sign on to the bill of Senators 
Landrieu and Snowe and the Small Business Tax Extenders of 
2012. There is more that we can do.
    The Learn to Earn Reemployment Training Improvement Act is 
once again a bill that is done. It is ready to go. It is 
sitting in the HELP Committee.
    That is one of the biggest problems. We have a lot of great 
ideas not only in other committees but in this Committee in 
particular. You look at crowdfunding, the Small Business Tax 
Extenders, the Innovate America Act with Senator Klobuchar, the 
SBIR reauthorization, the overregulation.
    I have had the opportunity in Massachusetts to hold jobs 
fairs in Massachusetts. We had 3,013 people show up at the last 
one. That day a bank, TD Bank, hired 10 people on the spot. So 
there are jobs. People are hungry to do them, and sometimes we 
need to cut through the impersonal nature of the Internet and 
actually do a face-to-face and let those folks convince 
themselves why they want a job and why you would want to hire.
    So, I appreciate your holding this. I would like to start 
out with two questions, if that is okay.
    Chair Landrieu. Go ahead.
    Senator Brown. I will start with Tim.
    Tim, thank you for taking time out of your busy schedule to 
come. From your on-the-ground perspective and everything you 
have been doing at the Cambridge Innovation Center, what do you 
think the biggest problems facing small business entrepreneurs 
right now are?
    Mr. Rowe. One of the biggest problems is lack of talent, 
enough talented people----
    Chair Landrieu. You all have to press your mic and you are 
going to have to speak into it.
    Mr. Rowe. This is my first time in one of these forums.
    Chair Landrieu. That is okay, Tim. You are doing great. 
Just press that button and lean right into it.
    Mr. Rowe. Nobody told me I was going to get the first 
question.
    Senator Brown. That is the way it is.
    Mr. Rowe. I think the biggest problem is access to talent. 
We talk about the challenge of unemployment in this country, 
and I know it is high. But you would not know that in the tech 
sector.
    Everyone, what I hear is they cannot find people to hire. 
They cannot find enough qualified people in the tech fields in 
particular.
    So, you know, what we are really looking for is in two 
areas. One is let us follow the President's lead also in the 
State of the Union where he called for more work at the 
community college level to get the mid-skilled workers, people 
who do not have jobs, trained up so they can take some of these 
tech jobs.
    The second area that you hear very often is access to 
capital. You know, we are very excited about the crowdfunding 
bill. In other countries, in India we call it micro finance. It 
is the hottest thing in development economics.
    If anyone has never heard of micro-finance, I would be 
surprised. We do not have it in this country because it is 
illegal. You cannot invest $100 in a startup or you cannot ask, 
you know, a thousand people to invest $100 in your startup. 
That is called a public offering and you would have to go file 
a full million-dollar SEC filing. It just does not happen.
    Those are probably the two biggest areas that we think need 
to be addressed. And I would make one last comment.
    When we heard about this bill, one of the entrepreneurs in 
my center said, look, I think that is a great idea. I want to 
build a startup that helps people do crowdfunding, and he 
started a startup called Wefunder.
    They launched on Saturday. I think Sunday was the official 
launch. By Monday, they had something like 1,200 people who had 
committed to, this is yesterday, 1,200 people who committed to 
invest $1,000 each if the crowdfunding bill goes through. They 
are asking Congress to make it possible to do this. And I think 
they had about $4 million just over a couple of days. Saying 
let us do this.
    Chair Landrieu. Good job.
    Senator Brown. It is interesting that you say that. We have 
a high-skilled bill that Senator Lee and I are working on and 
it is ready to go to allow people when they graduate, MIT, 
Harvard, et cetera, BC, WPI, and Massachusetts alone. I know 
all of you have your own interests. You graduate and you get 
not only a diploma but you get a work visa here. We are losing 
a lot of that talent.
    Mr. Rowe. So there is research that says that, and I just 
got this out of Berkeley where they did this, that 52 percent 
of companies in Silicon Valley, this is the place they 
researched. It is probably true elsewhere. Fifty-two percent 
have a founder who is not American born. More than half of our 
startups have at least one of their founders who is not 
American born.
    This resource, these are job creators that come to this 
country to study, and it is really a shame that when they 
graduate, they want to stay here, they want to build companies, 
and I get these people talking to me all the time. And we say, 
no, you have to leave because you are taking an American job, 
and these people are not the people that are taking American 
jobs.
    Most of them, by the way, overwhelmingly, and if you are 
interested later, I can show you charts and things, the lion's 
share are doctoral students.
    Chair Landrieu. Who are creating jobs.
    Mr. Rowe. These are people coming out of places like MIT 
and Harvard and Worcester Polytechnic and other schools around 
the country. It looks like about 80 percent of them are doctors 
and masters students. About 70 percent hard doctor students. 
These are not the people taking the production jobs in Detroit.
    Senator Brown. Right.
    Mr. Rowe. These are people creating businesses that are 
going to create jobs and we need to invite them and encourage 
them to stay.
    [The statement of Mr. Rowe follows:]
    [GRAPHIC] [TIFF OMITTED] 73268.004
    
    [GRAPHIC] [TIFF OMITTED] 73268.005
    
    Senator Brown. Thank you. And, Mr. Crews, my last question. 
You have written extensively about federal regs and the urgency 
of getting a hold of our regulatory oversight process. I know 
this Administration has had a tremendous amount of regulations 
come out and the burden of small businesses is great. What are 
your thoughts on that?
    Mr. Crews. Just quickly. I know we will hit a lot on this 
during the discussion but you mentioned regulatory uncertainty 
in the opening remarks, and I think that is the key thing 
because every year there are about 3,500 rules that are coming 
out from the federal agencies.
    And a lot of them are just budget rules, you know, they are 
relating to administration of Medicare and Social Security and 
other programs like that.
    But for the rest, it is really important to get a handle on 
what their real impacts are. If you look at the latest OMB 
report on costs and benefits of regulations, of the 3,500 or 
so, OMB looks at around 400.
    Of that subset, there are 66 that are so-called major, 
economically significant rules, and these are the big rules. 
EPA regulations, OSHA rules, and things like that.
    But even of those, it is only about 18 that have a cost-
benefit assessment on both sides. So, we know very little about 
the real impacts of regulation.
    What we are trying to do is emphasize that, and especially 
with some of the bills we will talk about today like the 
FREEDOM Act and some others.
    There are ways of enhancing the way we look at regulations 
coming down the pipeline that are about to have an affect on 
small business or may have an affect on small business.
    I think there is a lot of low hanging fruit kinds of things 
that we can do to deal with those with respect to reporting on 
those rules annually and knowing what the impacts are and 
quickly whether or not we can say anything with an assurance 
about their benefits and costs. Thank you.
    Senator Brown. Thank you.
    Thank you, Madam Chair.
    Chair Landrieu. Thank you, Senator Brown.
    I really appreciate you attending and I know you have to 
leave to manage your bill. But Massachusetts is so fortunate to 
be one of these states that receives a significant portion of 
federal research dollars, both through the university, through 
SBIR. They are one of the top recipients of SBIR funding and 
NIH funding.
    And we are going to present some documentation at the next 
hearing to show or ask, is there a relationship between federal 
investment and the creation of entrepreneurs; and if so, maybe 
we should be doing that in other states besides Massachusetts, 
New York, and California, who are the three largest recipients 
of federal research dollars. But that is a very interesting 
question.
    I want to submit, before we ask everyone, a portion of the 
President's statement at his first Cabinet meeting for the 
record of this Committee and to acknowledge and compliment the 
Administration for their moving Karen Mills as the 
Administrator for the Small Business Administration to a 
Cabinet-level position which really demonstrates this 
Administration's commitment to the subject at hand.
    Without objection, I want to submit a portion of that 
statement at his first Cabinet meeting which he directed the 
subject of entrepreneurship which I think is important.
    [The document follows:]
    [GRAPHIC] [TIFF OMITTED] 73268.006
    
    Chair Landrieu. All right. Let us start, Jim, with you if 
you do not mind; and if you could just go around and introduce 
yourself briefly, this is the 30-second, 60-second test, and 
just say either your best idea, throw it out there for 
strengthening the ecosystem or why you think this hearing is 
important or this topic is important.
    Mr. Kessler. I am Jim Kessler. I am the Vice President for 
Policy at Third Way, which is a centrist think tank and a 
startup ourselves.
    This is critical here in the US, the question, is there a 
federal role in the ecosystem? The answer is definitely yes.
    We have tons of ideas. I am going to second what Tim said. 
I think the biggest thing that we can do is we need to become a 
global magnet for talent in this country. We actually already 
are but we discard that talent. These are job creators. It is 
just a tremendous opportunity for us.
    Just imagine if we were facing the same problem and we were 
not attracting the most talented people in the world to our 
country and we had to attract them. Well, we already do. We 
just tell them to go home.
    [The statement of Mr. Kessler follows:]
    [GRAPHIC] [TIFF OMITTED] 73268.008
    
    [GRAPHIC] [TIFF OMITTED] 73268.009
    
    [GRAPHIC] [TIFF OMITTED] 73268.010
    
    Chair Landrieu. Thank you. Sean.
    Mr. Greene. Sean Greene. I run the investment and 
innovation programs at SBA and have responsibility for focusing 
on entrepreneurship. I come to this as a former entrepreneur 
and former investor, having invested in dozens of companies. 
So, I bring a real passion.
    Chair Landrieu. And we hope successful companies, Sean.
    Mr. Greene. I am still standing.
    Chair Landrieu. All right.
    Mr. Greene. So, I think what I would like to talk about 
subsequently is what we have been doing in the Startup America 
effort, obviously talk more to the legislative agenda that the 
President put forward yesterday but also talk about what we 
have accomplished over the past year but in particular access 
to capital, a critical issue.
    We need to be attacking it on all fronts, not just 
crowdfunding, not just the IPO issues but we see real 
opportunities with the SBIC program. So, we can talk more about 
that.
    Secondly, what we have seen in our interacting with 
entrepreneurs across the country is there are many great 
organizations like Idea Village in New Orleans which you 
obviously know well, Senator, which are doing great work on the 
ground, who are accelerating the growth of small businesses.
    So, we think there is a great opportunity to accelerate 
those accelerators.
    Chair Landrieu. Dr. Holtz-Eakin.
    Mr. Holtz-Eakin. Senator, thank you for the chance to be 
here today.
    Chair Landrieu. You are going to have to speak a little bit 
closer. You are going to have to lean into your mic for us to 
pick it up please.
    Mr. Holtz-Eakin. I am Doug Holtz-Eakin. I am President of 
the American Action Forum, also a startup think tank. In my 
career as an academic, I spent a lot of time doing research 
into entrepreneurship.
    I would highlight the very important role that tax policy 
plays toward the success of entrepreneurs and the fact that the 
U.S. tax policy at this point is a jump ball. We have no idea 
what the future is.
    In the end, an ecosystem for entrepreneurs is a philosophy 
and it says that at every point in the policy process when you 
have to break the tie between an objective that might be a 
social goal versus one that is about growth and 
entrepreneurship, break it in favor of entrepreneurship, and 
that includes all of the big tax policy issues that are on the 
table.
    Chair Landrieu. Mr. Farmer.
    Mr. Farmer. Hello. My name is Michael Farmer. I am the 
Founder, CEO of a mobile search startup. We are in the seed 
stage. We are going to be launching our app here in a couple of 
days literally. I think my team is wondering what I am doing 
here when they are out back developing code right now.
    One thing I would offer is I was here in Washington quite a 
few years ago and moved back to Kansas, and one of the things 
we did in Kansas, which I think there are larger implications 
here, is we took to the growth segments of certain sectors of 
our economy and we actually said if you grow that statement, 
and in our case it was biotechnology, we would plow a certain 
percentage of that money back into a fund that would help to 
capture some of this knowledge because startups are going to 
fail all the time, not only that but you start to get 
alignment, geo-clustering and all of these things.
    Chair Landrieu. Is it a state-run fund or private?
    Mr. Farmer. It is, yes.
    Chair Landrieu. A State-run fund. And it is called the 
Kansas?
    Mr. Farmer. Yes. Emerging Investment Act basically.
    Chair Landrieu. The Emerging Investment Act and Kansas 
passed it some years ago.
    Mr. Farmer. About seven years ago. It is a 600--you know, 
people ask where does Kansas find $600 million. Well, what we 
did was we basically said, all right, we have all these 
different sectors asking for support and we said, you grow it 
above a baseline and we will plow that money back. And if you 
think about it, if you could do that on a national basis----
    Chair Landrieu. A great idea, Mike.
    Mr. Farmer [continuing]. For very specific sectors, then it 
is not about, you know, a lot of our states compete against 
each other in bioscience and biotech, but we make strategic 
bets and all of the sudden we are now competing on the world 
stage because we are getting alignment, clustering, and these 
type of things.
    Chair Landrieu. Great idea. Tim.
    Mr. Rowe. I would like to say more things but maybe we 
could hear from the others.
    Chair Landrieu. Thank you. Wayne.
    Mr. Crews. Wayne Crews, Vice President for Policy at the 
Competitive Enterprise Institute in Washington, D.C. Our 
message on issues like this, we are a small ``L'' libertarian, 
you might say, policy and advocacy group is, you know, most of 
the world's wealth has not been created yet.
    And if we have the right policies in place in dealing with 
the future, the sky is the limit. You do not have to tell the 
grass to grow but sometimes you do have to take the rocks off 
of it.
    With respect to some of the things we have already heard 
about with small business financing, with access to capital, 
regulatory policy, even health and safety regulation that 
sometimes can do worse things for health and safety than good 
things, looking at antitrust policy, looking at frontier 
industries, biotech, nano tech, and others, and making sure 
that if we have done bad things in the past in the frontier 
areas, we do not have to do the same things. We can rethink it 
as we go forward, and there are some quick ways to do some of 
that I believe.
    Chair Landrieu. Thank you. Mr. Ezell.
    Mr. Ezell. Hi. I am Stephen Ezell. I am a Senior Analyst 
with the Information Technology and Innovation Foundation. We 
are a startup technology and economic policy think tank.
    I think when you look around the world you see that other 
countries are doing a great job of directly supporting the R&D 
innovation and new product development activities of their 
small businesses, and one way they are doing that is through 
innovative tax policy especially around R&D tax credits.
    So, it is incumbent not just to make the R&D tax credit 
permanent but to make it more generous. We actually have a less 
generous R&D tax credit than Brazil, India, and China. So, we 
need to increase that.
    We also need to bring new innovative approaches with the 
R&D to supporting SMEs. For example, one thing they are doing 
in Canada, France, Norway, and the UK is to provide 
preferential tax treatment to innovative young companies such 
as buy. Since these companies often are not cash positive, 
using immediate cash payments as opposed to carry-forward or 
carry-back provisions.
    So, innovation in tax policy will help our small 
businesses.
    [The statement of Mr. Ezell follows:]
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    Chair Landrieu. Thank you so much.
    You do not have to get all your ideas out on this because 
it is just your best one to stir up some thoughts from the 
others and then we are going to open it up for more discussion 
about this.
    Diane, real quick.
    Ms. Tomb. Thank you, Senator. The National Association of 
Women Business Owners, as you know, represents over 7000 women 
business owners.
    Unlike what we talked about earlier, I would say our number 
one issue is access to capital. And, as you know, women are 
starting businesses at record numbers. There is no shortage of 
growth-minded entrepreneurs, women. It is just access to 
capital from the financial institution.
    SBA has been doing a phenomenal job. I know there is a lot 
more that needs to be done in terms of education. Our research 
shows that lack of knowledge for women on how to grow a 
business from point A to point B, becoming an employer firm, 
and also moving from being a technical firm to the business 
leader are our business challenges.
    So, really for us it is education for women entrepreneurs.
    Chair Landrieu. Thank you. Mr. Evans.
    Mr. Evans. Barry Evans from Austin. I founded Calxeda four 
years ago and attracted $50 million of private capital to get 
that company moving. So, we are four years old and growing 
fast.
    Chair Landrieu. And what does your company do?
    Mr. Evans. We are a hardware company, and we are building 
super low power server technology out of cell phone 
technologies instead of PC-based technologies.
    Chair Landrieu. Great.
    Mr. Evans. So, our biggest challenge was getting launched 
and attracting that initial seed capital early on. So, policies 
that give incentive to get the big piles of private capital off 
of the sidelines and into launching companies through targeted 
capital gains incentives will get companies moving.
    Chair Landrieu. It might be something that would be helpful 
to you.
    Mr. Evans. And as we are growing, our next big milestone 
would be to go public, and so, IPO is a key enabler for a 
company like ours to continue to grow.
    Most of the job creation, some say over 90 percent of a 
company's job creation potential is after the IPO and access 
those public capital markets. But the bar is too high right 
now. Some relief on SOX compliance and regulation would open 
that up for us.
    [The statement of Mr. Evans follows:]
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    Chair Landrieu. Okay. Ms. Sumption.
    Ms. Sumption. Thank you, Senator. I am Madeleine Sumption--
--
    Chair Landrieu. You have to speak directly into your mic.
    Ms. Sumption. I am Madeleine Sumption from the Migration 
Policy Institute here in Washington. I look at the economic 
impact of immigration policies around the world.
    I think for the purposes of this conversation there are two 
immigration policy areas that are worth talking about. The 
first is the visa status of entrepreneurs themselves.
    The current U.S. system provides complicated and relatively 
limited opportunities for entrepreneurs to have a visa status 
that give them the independence to set up a business and to 
stay here and manage it.
    The second area is the immigration policy system and how it 
supports high-growth businesses themselves. The current regime 
that we have creates an enormous amount of uncertainty for 
employers who do not necessarily know when and if they will be 
able to access the talent that they need.
    So, those would be the two areas I will highlight and be 
happy to talk about some of the more specific ideas there.
    [The statement of Ms. Sumption follows:]
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    Chair Landrieu. Thank you. Ridgely.
    Mr. Evers. Ridgely Evers. I do not think I fit into 30 
seconds but I will try.
    Chair Landrieu. Well, try briefly.
    Mr. Evers. I will. Serial entrepreneur. Started eight 
companies. Those companies have created several hundred jobs. I 
was the guy who created QuickBooks. That is sort of the 
foundational----
    Mr. Rowe. How many people here use QuickBooks?
    [Laughter.]
    Mr. Evers. And I do not do tech support.
    [Laughter.]
    I have worked as a VC. I worked with arguably the most 
successful small SBIC in history which was Bill Drapers. I also 
am a farmer. I have a small farm in Northern California. I am 
on the board of SCORE, which is a volunteer organization with 
about 14,000 volunteer executives working with small business 
owners.
    And I am actually here not to represent the high-growth, 
you know, superstar companies because there is a vast ecosystem 
that already exists to serve them. There is $82 billion of dry 
powder sitting in venture funds in the United States 
aggressively looking for places to put it.
    I am interested in what we call the TSBs, the True Small 
Businesses which are owner managed and started to feed a 
family. And those really are the backbone of the economy and 
they need two things. Money and mentoring. I will talk more 
about that.
    Chair Landrieu. Thank you so much. Appreciate it. Michael.
    Mr. Finney. Thank you, Senator. I am Mike Finney. I am the 
President and CEO of the Michigan Economic Development 
Corporation. And it is really my pleasure to be here.
    As most of you probably know, Michigan has been one of the 
more challenged States economically over the past several years 
because of our high dependence on manufacturing and automotive 
in particular.
    Ironically, those companies that allowed Michigan to become 
one of the greatest States in the nation essentially also 
allowed us to move away from being entrepreneurial.
    And so, talent is the thing that we find most challenging 
in our environment, finding access to really good talent that 
can help grow some of the best and brightest potential 
companies that are out there.
    If I mention names of companies like Google and Barracuda 
Networks and Groupon, most folks know those companies. Would 
you believe the founders were Michigan natives? But we did not 
have an ecosystem and they went to Michigan universities, did 
not have the ecosystem to support them and that mentoring and 
coaching that was needed. So, talent is a huge thing.
    But the number one issue that I have is really about 
support for second-stage companies and allowing so many of the 
programs that come through, you know, Federal Government and 
State government to be accessible by second-stage companies 
very similar to what Mr. Evans was talking about.
    It is those companies between 10 and a couple hundred 
employees who are trying to grow and continue growing and 
providing job opportunities. We find that many of the programs 
have very, very specific requirements that make it very 
challenging for companies to get access.
    Instead of having outcomes that you expect, in other words, 
if you want to put money on the table to create jobs make that 
an outcome that is expected and then allow us at the local 
level to then define approaches that will allow that money to 
be invested with companies so they can achieve the outcome.
    So, moving more toward an outcome-based approach with the 
tools that we have as opposed to very prescriptive, you know, 
requirements as is the case with SBA and some of its programs.
    [The statement of Mr. Finney follows:]
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    Chair Landrieu. Okay. That is excellent.
    Brink.
    Mr. Lindsey. I am Brink Lindsey. I am a Senior Scholar at 
the Kauffman Foundation. We have lots of ideas, big and small, 
ranging from incremental to highly ambitious for how to make 
the policy environment more entrepreneur friendly.
    But for now let me just add my voice to that of others and 
say that the single most straightforward concrete step we can 
take to promote entrepreneurship in this country is to import 
more entrepreneurs from abroad or rather stop kicking them out 
because they chose the wrong country of birth.
    Chair Landrieu. Well, I am not sure you choose your 
country. It is maybe by accident but anyway. Go ahead, John.
    Mr. Ortmans. Good morning, Senator. I am Jonathan Ortmans. 
I am a Senior Fellow with the Kauffman Foundation. I have had 
two startups and two exits. I am also President of the Public 
Forum Institute.
    I would say we have so much to say on our proposals that we 
outlined in the startup but let me just perhaps since several 
of you have already mentioned what I would put at the top two 
as mine but I think, Senator, if there is a way, perhaps the 
most important thing that the Senate could do right now is to 
capitalize on the extraordinary goodwill and bipartisan 
atmosphere that surrounds this issue of startups.
    I think, you know, our work at the Kauffman Foundation is 
really deep-seated in the broader question around how do you 
grow an economy. And as we look at this question in economic 
history, it has been somewhat under addressed.
    So, in a way it is one of the first times that we have 
really looked at this through the lens of new firms rather than 
exclusively through the notion of small or large firms and it 
is extraordinary through your leadership, through the 
leadership of Senator Moran and others and through the 
leadership of the President that there has been such great 
attention given to this issue.
    So, we applaud you on that and I think probably the most 
important thing to do is to make sure that we do not allow this 
issue to slow down our momentum in an election year.
    Chair Landrieu. Thank you, and that is exactly why I am 
holding a series of roundtables on entrepreneurship to keep, 
you know, the accelerator down on this, to keep the attention 
on this issue, to build support and momentum and I think our 
Small Business Committee can do that.
    There are other important committees on Capitol Hill but 
they have very broad jurisdictions and they are being pulled in 
many different directions as you can imagine right now with the 
issues that are before the Congress.
    This Committee is going to be singularly focused on this 
issue of an entrepreneurial ecosystem, and pushing out 
everything we can from our Committee in as bipartisan a fashion 
as we can.
    And then also encouraging the other committees, you know, 
to act as well. So, that is our purpose and I thank you for 
much or being supportive and a participant in that effort.
    Let me recognize Senator Moran, who has introduced one of 
the major pieces of legislation, for his comments and then we 
will open it up for some discussion.

  OPENING STATEMENT OF HON. JERRY MORAN, A U.S. SENATOR FROM 
                             KANSAS

    Senator Moran. Chair Landrieu, thank you very much. Thank 
you for convening this roundtable. I appreciate those who are 
participating and I am anxious to hear your comments and 
suggestions.
    I am tardy because I have come from the Brookings Institute 
with Senator Warner where the topic of the morning was the 
Startup Act, a piece of legislation that Senator Warner and I 
introduced as a result of reading the Kauffman Foundation 
analysis and determining that its research had great validity 
and discovering, as you say, that this is an opportunity for 
all of us Republicans, Democrats, those who are interested in 
the economy to come together on something that is critical and 
what Mr. Ortmans just said seemed so compelling to me.
    I think there is a window of opportunity here the next few 
months and there is a lot of cynicism out there that, you know, 
why get involved in an issue. Congress cannot pass anything. It 
is an election year.
    If we take that approach, we will never succeed; and in my 
view we have no ability to delay in trying to get our economy 
jumpstarted.
    I got interested in this topic as a member of the Senate 
who strongly believes that the deficit is the huge, compelling 
issue of my generation's time. I believe that my generation has 
been irresponsible in setting the stage for the financial 
condition our country is in and believe that it is very 
difficult to create a growing economy when the weight of the 
debt, the uncertainty of whether we are the next country to 
have a credit crisis is out there.
    I have been discouraged by the inability for Congress and 
the Administration to address this issue in any significant 
way; and while I am not walking away from that issue, another 
way that we can approach the growing deficit is to grow the 
economy and put people to work. Consequently, increased tax 
revenues will help us meet our country's financial obligations.
    And it is an opportunity that we cannot let pass us by for 
the good of our country. And this concept that because it is an 
election year you cannot see anything happening in Congress, I 
can assure you that other countries and their economies, their 
entrepreneurs, their startup business men and women are not 
saying, well, we will not do anything this year because it is 
an election year in the United States.
    If we do not address these issues now and create the 
environment in which entrepreneurship can flourish, surpassed 
and unfortunately perhaps in more environments that help 
startups will be created elsewhere rather than in the United 
States.
    The Startup Act is a piece of legislation that is certainly 
worthy of strong support. I welcome the input that you all 
provide about ways in which it should be modified or changed.
    Senator Warner and I visited yesterday with the desire to 
look at all the other pieces of legislation that are out there 
to see if we can find the ones that we think belong in a single 
bill and then work with the sponsors of those pieces of 
legislation to put this into one, compelling piece of 
legislation that has broad support in Congress.
    We were seated at the State of the Union address in which 
the President said, ``Introduce a bill.'' We then corresponded 
with the White House saying we have introduced a bill; and as 
we saw this week, the President increased his public support 
for entrepreneurship and for creating an environment in which 
startups can succeed.
    So, I appreciate your leadership and thank you very much 
for allowing me the opportunity to hear what folks have to say.
    Chair Landrieu. Thank you, Senator, and that is exactly 
what we intend to do on this Committee is to pull the best 
ideas together and to shape them into a package that has a very 
strong bipartisan support, and thank you for your leadership.
    Let me begin by saying that when you want to speak or have 
something to say please just put your placards up like this and 
then I will be happy to call on you. We really want this to be 
a very free-flowing, hopefully very effective discussion.
    Just in your openings I have already written down 10 great 
ideas and I am sure I missed a few of them but my staff, every 
time we hear a great idea, we are writing it down. We are going 
to do a little research about it and some of these are already 
out in bill form but others have not been.
    Please keep your placards up, but I would really like the 
Kauffman Foundation, who is probably the institute that has 
done the most work on this subject, to be given the first two 
minutes to amplify some of the one or two or three really 
important things that you think should be a part of this 
discussion.
    I know that you went across this briefly but I am going to 
give you all some time, because you are the major foundation, 
and then we will take a few questions.
    I then want to go to Sean about what the three or four 
things that the Federal Government is really focused on, and 
then we are going to really just open it up.
    Jonathan, go ahead, and explain the Kauffman Foundation and 
how you all came about your work.
    Mr. Ortmans. Certainly. People do not normally give you the 
opportunity to talk your organization but I guess we will.
    The Kauffman Foundation is one of these great American 
institutions, formed by Americans who decide that their wealth 
can be put to good use. It is like every other American 
foundation.
    We are based in Kansas City, founded by Ewing Marion 
Kauffman, who was an entrepreneur. The distinctive difference 
is he left his wealth ostensibly to advance entrepreneurship in 
education and then I think that is what sometimes makes the 
work that we do different to other foundations.
    But as I said earlier, our work is really seated in a 
broader discussion of how do you grow economies, and we have 
taken a very close look over the past five years at trying to 
improve the quality of research that is being done into 
understanding the science of startups, understanding what is 
often determined in the past as being a unique American 
characteristic of our pioneering spirit, birthing the new.
    I think Brink is going to, in just a minute, follow me and 
talk about a couple of the things that we might highlight that 
we have put forward in our Startup Act.
    But let me, if I could, also bring in one I think important 
point at the outset. One of the other hats that I have is I 
chair a global entrepreneurship effort, and I think we cannot 
underestimate, in my writings I have called it, I have done 
some pieces around what I call the race to the top in the 
startup ecosystem world.
    I cannot underscore more the imperative urgency of us 
dealing with these issues because of the global competitiveness 
happening. There is, for example, a gathering which I will be a 
part of in March where there are 3,000 people coming from 120 
nations and the topic of the conversation is how to build a 
stronger startup ecosystem. There are ministers coming. There 
are entrepreneurs coming.
    Chair Landrieu. But do they have a Small Business Committee 
like this with muscle?
    Mr. Ortmans. No, they do not.
    Chair Landrieu. Do they? That is the question.
    Mr. Ortmans. I think time is of the essence with this just 
to emphasize Senator Moran's point.
    Chair Landrieu. Where is that meeting going to be held?
    Mr. Ortmans. It is actually going to be held in Liverpool 
in the United Kingdom; and it is well represented by the United 
States. But I view it as an opportunity to keep an eye on what 
everyone is doing.
    And one of the things that Brink will comment on has to do 
with this issue that we have all brought up in the Startup Act 
was this notion of high-skilled immigration and the need for a 
startup VISA.
    And one of the things that you will find when you look at 
the global environment is that most nations are having hearings 
like this working out how they can increase the funding for 
their programs to recruit more talent into their country rather 
than figuring out how do we actually just take away the 
barriers that stop them staying when they are already here. And 
so, I think this becomes, you know, an important perspective.
    Chair Landrieu. And we obviously have a natural advantage 
that we are not taking advantage of. Let us go to Brink real 
quick, and then we will open it up.
    Mr. Lindsey. So, I think if there is an area where the 
Kauffman Foundation has had just overwhelming success it has 
been in drawing the linkage between new firms and job creation.
    Bottom line, between 1977 and 2005 there were seven years 
in which existing firms created more jobs than they destroyed. 
So, the take away here is without startups there is no net job 
creation in this country.
    What I would like to do now, though, in terms of setting 
the broader context for all of these policy ideas that we are 
going to be talking about is to focus on the relationship 
between startups and innovation, why that is so important, why 
innovation is now so important for economic growth, and why the 
need for policy reforms to spur innovation is so urgent at this 
time.
    First off, existing firms do innovation all the time but 
they tend to innovate at the margins. They do incremental 
stuff. When you are looking at what we call discontinuous or 
disruptive innovation that creates whole new industries and 
totally topples the status quo, it is almost always new firms 
for a very simple reason that no existing firm in its right 
mind is going to nurture an innovation that totally blows up 
its existing business model.
    Chair Landrieu. That would disrupt their business.
    Mr. Lindsey. Right. So, when you think of these real 
disruptive pioneers, FedEx, Wal-Mart, Microsoft, Google, they 
are upstarts.
    Chair Landrieu. Dyson and Hoover.
    Mr. Lindsey. So, when you are thinking about innovation you 
have to think about startups.
    Why is innovation so much more important now than it has 
been at any time in the past? It is because other sources of 
growth in this country are running out; and so, we are facing a 
prospect in the next decade or two of a real slowdown in U.S. 
long-term potential growth rates that is quite alarming. And it 
boils down to demographics.
    What is the easiest way to pump up GDP per capita? It is to 
get more and more people, a higher and higher percentage of 
people in the population making GDP which we did over the whole 
course of the 20th century with women going into the work force 
and an overall increase in labor force participation rates.
    Women's labor force participation rates peaked in the 
1990s. They have started falling since then. Men's labor force 
participation rates have been falling gently for decades now 
because of later entry into the workforce and early retirement. 
So, we have lost that tailwind.
    So, if you do not have as many people going into the GDP 
gain, what is another way to boost things? Develop their 
skills. Make them smarter. We have run out of gas on that too. 
Human capital development has stalled in this country.
    Our high school graduation rate peaked in the early 1970s. 
It is lower now than it was then. Our college graduation rate 
plateaued in 1980. It has not risen since then. Those are 
incredibly important problems, and we need to address them.
    But right now in the current context, the issue is doing 
that is really hard. And so, if we are going to keep economic 
growth going, we have to rely more than ever on innovation, on 
new industries, and new ways of doing things; and that means we 
have to rely on entrepreneurs.
    So, why is helping entrepreneurs more important now than 
ever? Because the state of entrepreneurship in this country is 
not in the peak of health, and this started the slump in 
entrepreneurial job creation and entrepreneurial activity began 
before the recession of 2008.
    The number of new employer businesses created annually 
began falling after 2006 while the expansion was still going 
on, dropping 27 percent by 2009. The average number of 
employees per new form has been trending gradually downward 
since 1998, and the pace of job growth at new firms during 
their first five years has been slowing down since 1994. This 
is all from Kauffman's research.
    Let me mention just in closing other research funded by 
Kauffman by a University of Maryland economist John Haltiwanger 
that average annual job creation by startups has been as a 
percentage of overall or expresses a percentage of overall 
employment has been falling for quite some time now.
    It came to 3.5 percent of total employment in the 1980s, 
fell to 3 percent in the 1990s, and 2.6 percent since 2000. So, 
a 25 percent cumulative drop.
    It is hard to see in this haystack of new businesses the 
needles we are looking for, those high-growth firms; but if 
overall business creation is slowing down, there is reason to 
be worried that the process of creating the new giants of the 
future is slowing down too; and so, we need, in the face of 
this structural problem, not just a cyclical problem but a 
structural problem, we need structural solutions which means we 
need to identify barriers to entrepreneurship and 
systematically dismantle them.
    Chair Landrieu. Thank you, Brink. That was excellent.
    Tim, do you want to comment about that or something else? 
Go ahead on this and then we will get to Sean in a minute.
    Mr. Rowe. First of all, I wanted to say that the Kauffman 
Foundation is the cat's pajamas. You guys are great. No, I am 
serious.
    Chair Landrieu. Thank you. I was looking for a word. I do 
not know if I would have come up with that but I agree.
    Mr. Rowe. Those of us who do not have the luxury to study 
this stuff all day they are actually working in it.
    Chair Landrieu. Great to know it.
    Mr. Rowe. The material you guys present changes our lives 
because we go out and talk about this stuff that you have got 
the hard data. This is where the jobs come from. This kind of 
stuff so thank you.
    Kauffman also has a bias towards action which is really 
helpful. Kauffman has underwritten probably every major 
interesting new entrepreneurial activity in Massachusetts, 
which is not your state, in the last three or four years. 
Kauffman has been there each time. So, thank you.
    I want to underscore what Brink and Jonathan are saying. We 
see where we are today as kind of the calm before the storm in 
terms of how the United States fits into the global competition 
in innovation and creating new high-tech companies.
    You said earlier, Senator Landrieu, that many of us believe 
that we are still ahead, and the numbers would say that. I 
think roughly 80 percent of the world's venture capital is 
invested in the United States, and that is more than our fair 
share, and that is great.
    But what is happening is on all these growth drivers that 
the Kauffman Foundation talks about, the other countries have 
been working hard on this stuff. They are getting their 
education levels up. They are understanding more about 
innovation.
    I speak all around the world as a number of us in the room 
probably do on this stuff, and every country I go to we have 
the country's leaders, the head of state talking about this 
stuff, focused on this stuff, creating new foundations, 
modeling them on Kauffman, trying to figure out how to do this.
    So, we are in a point where we are still ahead but we 
cannot rest on our laurels and I guess that is the main point 
that I wanted to make.
    The second piece that I am just going to ask you for, your 
staff asked me to bring some kind of circles and arrows and 
charts and things for your fancy new TV system.
    Chair Landrieu. Oh, great.
    Mr. Rowe. And since my aide spent several days doing that, 
could I have like a minute just to go through some of this to 
spark conversation?
    Chair Landrieu. Absolutely. You can have more than a 
minute. Go ahead.
    Mr. Rowe. None of this is my research. This is highlighting 
other people's research that I think is helpful.
    Chair Landrieu. You all in the audience cannot see this.
    Voices. Yes, we can.
    Chair Landrieu. Oh, I am sorry. Great.
    Mr. Rowe. They should. So, I think you are kind of in the 
middle but if you go to the front very briefly, the next page. 
I will go through this very quickly.
    So, note on the pie chart. This is what I was talking about 
in terms of the percentage of startups that have a non-US-born 
founder. This is research from Duke School of Engineering and 
UC Berkeley. AnnaLee Saxenian, who you guys worked with I am 
sure.
    And she did do, just focusing on engineering startups, 
looking at the whole country, and found that that was about 25 
percent non-US-born.
    So, as you go into the Silicon Valleys, you go into these 
hotbeds of entrepreneurship, and anecdotally I would say it is 
very similar in the Massachusetts area, it gets even higher. 
So, that is just some concrete data around that. We will share 
this with the group afterwards.
    The next slide. This is where those foreign born startup 
CEOs are coming from, just to put a point on it. It is what you 
think: India, China, Japan, Taiwan, Germany, places like that. 
Surprisingly Iraq is right after that.
    They are coming from a small set of countries, and these 
people tend to poke up against caps, the numbers of people who 
can come from their countries which is one of our specific 
issues that I am sure Madeleine knows all about.
    Next slide. So, this is a map of where foreign students, 
all foreign students who come to the United States where they 
come from in the world. It is the same places largely that the 
startup CEOs are coming from. So, China, India, South Korea, 
Germany, and Japan, the biggest sources of foreign students.
    Next slide. This is the degrees they have or they are 
working on when they come to the United States. So, I was 
saying earlier that it is mostly doctoral students. It is 
mostly doctoral students. These are the kinds of people that we 
really want to be starting businesses here. Masters students 
the next biggest group. The rest is almost noise in comparison.
    Next slide. So, next slide. We have been talking about 
crowdfunding. These are just some estimates. This is from 
Gartner Research about how this can grow. They think that it is 
around $1.6 billion now including such quasi crowdfunding 
mechanisms as kick starter where you do not really invest. You 
get like a thing. You give some money to the small business and 
they have to send you a thing and you do not get any stock but 
it is crowdfunding.
    They think it will grow to 6.2 billion which is not the 80 
billion that Ridgely mentioned but it is a significant amount 
of funding. And a lot of this will go to the, what is it, the 
true small businesses, the TSBs, because if you are a big, hot 
startup, yes, you can get Kleiner Perkins or somebody to 
invest.
    But if you are starting a small business, you are starting 
a new winery in, you know, California, this is exactly a great 
place to get your funding, friends, family, the wider circle.
    The next slide please. So, this is that Wefunder website as 
of this morning. I am sorry. This is when they opened. Two more 
slides. That was two days ago. This is yesterday and this is 
today.
    So, they are now up to 1299 funders promising to invest $4 
million in startups if you pass this legislation.
    Chair Landrieu. Fabulous.
    Mr. Rowe. This is literally just the last two, three days 
they have been out there and their tag line is it is illegal to 
invest on your dollars in startup.
    What they really mean is that there is no mechanism for an 
everyday person to put $100 into a startup which a lot of 
people would like to do.
    If you want to invest in a startup, you really have to go 
through a lot of paperwork. You are never going to invest as 
little amount of money to make it work. Let us change that. 
Micro-finance.
    The next slide. The next slide. This one did not make it 
into the President's State of the Union. It is not in anybody 
else's platform, but we in Massachusetts think this is big.
    So, this is the new idea, if you will. It does not come up 
a lot from the Californians because they ban noncompetes. But 
in Massachusetts and many states, we have a problem where we 
have something akin to indentured servitude.
    If you are a game developer, let us say a video game 
developer which is a strong area in Massachusetts, and you go 
to work for a particular video game development company, you 
will sign a noncompete. Everyone requires it.
    You are not allowed to stay in Massachusetts and work for a 
game developer ever again. If you leave that company until you 
are what, one, two, three years runs out, most people cannot 
afford to not work for a year, and so they have to switch 
industries.
    And in fact, that is just what they do. One third of 
workers who have signed noncompete agreements, this is 
according to research at MIT that the Sloan school just 
published in October 2011, actually drop their industry 
entirely. They often drop the thing they got their degree in; 
go to some other industry because when they leave their 
company, they cannot continue in their industry.
    Seventy percent of employees discover they have to sign a 
noncompete after they have accepted the offer. They cut the 
offer. They have told everyone. Now they hear, oh, by the way, 
you cannot ever work in your industry again or not for years. 
So, we want to see this changed.
    This is typically thought of as a state-level legal issue, 
and what I am proposing is that it be explored as a federal 
question. You could argue that this is a restraint of trade, 
that essentially you are saying, no, these people cannot go and 
work in some other field. So, that is noncompete.
    The next slide please. Next slide. This is just Dice, which 
is one of many jobs websites that are all over the country, a 
hiring website. This is just the Boston area.
    And what you can see here is that there are 3647 tech jobs 
that are standing open right now just in Boston. And if you 
look at the tags, you know, what are these jobs in, .NET which 
is a Microsoft technology, C sharp, HTML which is a web 
technology. HTML has 372 open jobs. SQL, which is a database 
technology, 1115 open jobs just in Boston.
    When I was talking about holding back new startups, this is 
actually one of the things that we see is holding, that we hear 
from people who want to start new companies. If you are coming 
out of one of the schools in the area and you are getting a new 
company started, not being able to find qualified tech people 
that you can hire is one of the biggest issues.
    And interestingly, it is a big issue not just for the small 
companies but the big companies. If you look at what Google has 
done, Google has loaded on the benefits for new employees to a 
wonderful and sometimes absurd degree where you have, if you go 
into the cafeteria in Cambridge, you will have a full rock band 
set up so at lunch if you want to jam with your friends, you 
can.
    They have competing chefs who offer the sushi and they 
offer every kind of imaginable food. It is wonderful. They had 
an oompa loompa band at lunch recently.
    They do this stuff because this is what they have to do to 
keep hiring. And that is great but the startups cannot compete 
with that. It is very hard to do that. And so, what we would 
like to do is see some adjustment in the number of people 
trained in these areas.
    I talked to, I will not name it, the head of the 
entrepreneurial initiative at a local community college in 
Massachusetts about this problem in the last few days. And they 
said do not quote me but there really is not much of a link 
between what we are teaching and what industry needs. We really 
need to somehow figure out how to make a link in our 
educational system.
    The next slide, and I think I am just about done. This is 
across the other metro areas, unfilled tech jobs. It is true 
all across the country, not just in Boston.
    The next slide. These are the states and their unemployment 
rates, and the colored ones here are the high-tech states that 
I just mentioned that have the biggest problems with tech jobs.
    So that the states that have the highest unemployment are 
also the states where ironically they are having the hardest 
time finding people.
    Chair Landrieu. Because of the mismatch between the 
population that has not been trained for the skills that their 
companies are desperate for?
    Mr. Rowe. Right. Exactly.
    Chair Landrieu. It is really quite shocking and shameful.
    Mr. Rowe. Next slide.
    Chair Landrieu. We will do one more slide.
    Mr. Rowe. That is it.
    Chair Landrieu. Thank you.
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    Dr. Holtz-Eakin.
    Mr. Holtz-Eakin. Let me just make three brief points. 
First, Brink is right. Listen to Brink. He is all right.
    Chair Landrieu. I am so glad that you all agree that 
Kauffman is putting out some good data. I think it is 
extraordinary myself.
    Mr. Holtz-Eakin. I am a big fan and have been for decades. 
Second is that Senator Moran is right that the debt is an 
important part of this conversation. It does not make sense for 
an entrepreneur to bring his or her skills to the U.S. and 
scarce financial capital when its current plan is to have a 
sovereign debt crisis, and that needs to get fixed.
    The important part for this Committee is that how you fix 
it matters; and there is, in fact, research that suggests the 
right fix is keep taxes low and reform them to be more pro-
growth, encourage the entrepreneurs, and cut spending but not 
all spending is created equal.
    You want to preserve core functions of government, basic 
research which will feed into innovation, infrastructure which 
will permit entrepreneurs to compete successfully. Those kinds 
of things, and cut transfer programs and government employment. 
The latter is not a big deal in the U.S.
    We are currently on a course to do exactly the wrong thing. 
Sequesters gut the discretionary spending which is the core 
functions of the government and we are not touching the 
transfer programs. The small business and entrepreneurial 
community has to care about this because we are getting it all 
wrong
    Chair Landrieu. I am sorry. And I would like my staff to 
provide to the whole Committee the actual data on reductions in 
spending. If you take the core of government which would be 
described as everything besides defense, Social Security, 
Medicare, Medicaid, the core discretionary spending has 
literally been flat.
    It has not been the driver of spending. It has been flat 
over the last 10 years. The spending has been in defense, in 
Medicaid, Medicare, and Social Security.
    And part of that is driven by the changing demographics. 
So, we have got to be very, very careful moving toward a 
balanced budget what we are cutting and how we are cutting 
because it gets exactly to your point.
    You do not want to cut research and development. You do not 
want to cut education if it is having outcomes that you want. 
You want to cut it if it is wasteful and not meeting the 
outcomes; but you want to invest in some of these, you know, 
opportunities I think to, you know, to enhance or modify some 
of the spending to enhance the development of the right kind of 
training we need to fill the jobs that are right now available. 
But thank you.
    Mr. Holtz-Eakin. The discretionary programs are our future. 
The entitlement programs are legacies of our past and federal 
dollars to the past. We are letting our past crush our future, 
and it has got to be fixed right.
    My last point is the openness issue goes more broadly than 
just capital and entrepreneurs. It is in competition as well. 
The places we have seen great innovation, semiconductors and 
others, those where we have been open to international 
competition, the entrepreneurs will rise to that competition 
and succeed. We have to keep an eye on that.
    Chair Landrieu. Jim.
    Mr. Kessler. Thank you, Senator. I am going to pounce a 
little bit also on that last point about our budget. If you 
look at 1990, $0.44 of every dollar that the Federal Government 
spent was Medicare, Medicaid, Social Security and interest on 
the debt.
    In 2030, it will be $0.68 of every dollar. And there is a 
reason for it. I mean, it is the demographics that were talked 
about. Over the next several decades the number of elderly 
people in this country will double, and their average lifetime 
benefit for both Medicare and Social Security in real dollars 
will also double and the number of working age people in this 
country will increase by one third.
    So, you have got double, double, and one third and the 
numbers do not add up. We have to figure out a way to--the past 
is crushing us but we have to, you know, we have to take care 
of people at the same time but we have to have a much stronger 
investment budget.
    And the way to think of an investment budget is, what are 
the things that we are spending on that creates a future 
revenue stream, and a lot of those things they have really 
just--it has declined.
    And in past American budgets, we were doing a lot of 
things, whether it was on the research end, on the 
infrastructure end, it was creating future revenue for this 
country.
    Chair Landrieu. Very excellent question. Excellent.
    Michael.
    Mr. Finney. Thank you, Senator. I just wanted to endorse 
some of the points that Tim made, in particular around 
crowdfunding. I am actually a member of an organization known 
as Kiva, and Kiva is probably as close as it gets to an actual 
crowdfunding tool that is out there.
    One day I decided to put 100 bucks into it and make a few 
investments because Kiva came to Detroit. So, I have invested 
100 bucks in $25 increments. I view it a little bit as 
philanthropy but also as a way to help entrepreneurs get to 
where they go, and there are some pretty interesting startups 
that have come out of that.
    So, it is out there and it is one of the things that we can 
touch in the crowdfunding space as a tool to help us better 
understand how to get the legislation right so that it will 
work.
    Chair Landrieu. And describe a little bit more about Kiva. 
Those of you who are familiar with it, I would like you to 
describe it because it is operating in New Orleans right now as 
well.
    Mr. Finney. Yes, I was going to say Kiva-Detroit and Kiva-
New Orleans are the two locations that are set up in the United 
States. We are actually in discussions right now to create a 
Kiva-Michigan because we see an opportunity to extend it across 
the entire state, not just the city of Detroit.
    Essentially it allows the average individual who has a 
limited amount of resources but wants to assist entrepreneurs 
to make very small investments, as little as $25.
    And you simply set up an account and you review the 
business plans that are on that Kiva website both in the U.S. 
as well as throughout the world.
    It started as a Third World resource, funding small 
startups that wanted to make bread or buy an animal so they 
could have a dairy or produce milk and so on. And literally, it 
is microlending at its finest.
    Chair Landrieu. Using the Internet to connect the investors 
with the projects worth investing in.
    Mr. Finney. That is correct. I mean, the challenge of it 
was the back end, and there is an organization out of New York 
City, I think, called ACCION that really manages the back end 
of it; and essentially they are the lender but Kiva is the face 
of it.
    So, it is a wonderful tool. Detroit and New Orleans are the 
two locations in the states that have managed to get under the 
umbrella right now, and it appears to be having some early 
impact.
    The point of bringing up Kiva is that this is a wonderful 
opportunity for, I think, information exchange; and it is 
probably one of the things that does not happen as effectively 
as it could; and maybe there are some ways that we could 
develop better opportunities for information exchange.
    The last point that I want to make is that somehow we have 
got to figure out how to get some of the great ideas that are 
actually working in some of our states to become models for how 
to do things on a national basis.
    What Tim is doing we all know about. If you are at all 
involved in what is happening in the entrepreneurial world you 
know what he is doing. You have some good ideas and you are 
snooping around trying to get a better understanding.
    How do we create that with some of the other programs? The 
State of Michigan, through my organization, we set up a small 
business collateral support initiative and loan participation 
initiative with support from the Department of Treasury.
    It is called the SSBCI, the State Small Business Collateral 
Support Initiative. It allows us small and medium-size 
companies, for the most part, to get access to capital in 
situations where they would otherwise never get it. I mean we 
have done 138 deals in Michigan in the last 9 plus months.
    Chair Landrieu. Are you using state general funds or a 
combination of state and federal?
    Mr. Finney. It started off with about $5 million of state 
funds. We pitched the program to U.S. Treasury. They liked it 
so much they created a federal program with one and a half 
billion dollars of funding. It is available to all 50 States 
and, I think, three U.S. territories.
    And so, Michigan was the first state to actually draw down 
the funds, about $80 million. That was intended to be a two-
year commitment. We will have all of it invested in less than 
11 months. So, that is how robust a program it is.
    Chair Landrieu. We did that in our bill, in our last small 
business bill; and you can thank you Senator Carl Levin, who 
promoted that idea; and we wrapped that up in our last small 
business bill.
    So, there is a billion, and that is an excellent model and 
we used Michigan as the model for the nation. If some of you 
are not familiar with what some of the states are doing that is 
an excellent and we are very happy that it is working.
    Mr. Finney. It is a great example of how some initiatives 
that start relatively small at the state level are really 
scalable at the federal level with quick action. In this case 
Treasury acted very quick, launched the program. It is now 
available to all 50 States.
    We are actually providing consultancy to seven different 
States on how to get the program up and running. It is really 
working great to help small businesses get access to debt 
capital because the other thing in the startup world, access to 
debt capital is almost non-existent because there is typically 
not assets that would support debt. This program actually 
allows for that through some of the approaches that we use.
    Senator Moran. Michael, what is the Treasury program 
called?
    Mr. Finney. The State Small Business Collateral Support 
Initiative. SSBCI.
    Senator Moran. And on Kiva, are those such small amounts of 
investments that there is no securities law issues?
    Mr. Rowe. It is loans not invested.
    Senator Moran. It is loans not investments.
    Mr. Finney. It is loans. That is correct. It is loans.
    Senator Moran. And therefore, you do not have to worry 
about being sued for fraud----
    Mr. Finney. That is correct.
    Senator Moran [continuing]. The statutory or common law 
kind of fraud.
    Mr. Finney. That is correct. In fact, the investors 
actually do not receive any kind of a return other than return 
of capital. So, they do not gain a return on the dollar. It is 
social entrepreneurship at its best, in my opinion.
    Chair Landrieu. Ridgely.
    Mr. Evers. That is actually a great hand off. Thank you. I 
think that one of the biggest issues we face is return on 
investment. And the reason that there is--and by the way, Tim, 
I just looked at the PQUA numbers. The amount of dry powder off 
shore is now equal to the amount of dry powder on shore.
    Mr. Rowe. Really?
    Mr. Evers. Yeah. So there is about 60 billion----
    Chair Landrieu. What does dry powder mean?
    Mr. Evers. It is on invested venture capital.
    Mr. Rowe. That is growing faster than we thought.
    Mr. Evers. Yeah. It is the amount of money that venture 
capital funds have raised but not invested.
    Chair Landrieu. You are saying it is equal now in the 
United States and offshore.
    Mr. Evers. It is maybe 80 and 70. 80 here and 70 offshore. 
But it, I mean, that is clearly diverging.
    Senator Moran. But what is the significance of that point?
    Mr. Rowe. Eighty percent of the investments, what has been 
invested last I checked was in the United States, and you guys 
probably have better data than I do. But what this means is 
that what is being prepared to invest, what has not been 
invested yet, what is being amassed in funds is rapidly growing 
overseas.
    Mr. Evers. Yeah.
    Mr. Rowe. And we would expect that, as that money gets 
invested, then it would get closer to 50-50, what is invested 
in the United States and what is invested overseas.
    Mr. Evers. That is sort of a side point. But what that 
underscores is that capital is mobile and labor and small 
business is not. And so, the question is, we have an 
extraordinarily entrepreneurial country unlike any other in the 
world although that may change over time.
    But at the moment we clearly are hands-down the most 
entrepreneurial. There are 10,000 Americans who start their own 
business every day, weekends and holidays included. It is an 
extraordinary number, and it varies a little bit with the 
economy, and it varies a little bit with the availability of 
equity in your home and that kind of thing.
    But it is just day in and day out, and 40 percent of them 
end up creating jobs, a third of them fail within the first six 
quarters, mostly because they should have kept their day job 
but oftentimes because they make preventable mistakes.
    What is interesting is not that number, and we cannot make 
more entrepreneurs. We can do great things to help people who 
have entrepreneurial drive be more successful, whether that is 
incubators or the kind of mentoring that SCORE does.
    What is interesting to me is not the failure rate which is 
fairly easy to measure, binary, are you alive or dead but 
rather did you meet your potential.
    And I think that the story that is missing at this table is 
the underperformance of the smaller small businesses, the true 
small businesses who cannot grow to the size that they have the 
potential to become because they cannot get capital; and the 
reason that they cannot get capital is they cannot secure it. 
They do not have the assets to borrow against, and there is no 
return for their investors because these are not companies that 
are designed to be sold.
    So, capital gains treatment does not help those 
entrepreneurs. There are other ways that we can go about it and 
we have talked about some of these in the past. There are other 
things that we can do.
    Tax policy is a very powerful tool here. But if you only 
approach it from the perspective of capital gain, then you are 
only going to be solving one particular kind of problem and 
that is not the problem that the investor in a relatively 
stable ``designed to be to feed a family'' business is going to 
be attracted to because they cannot get their money out.
    Huge opportunity. And unambiguously, you know, the Joint 
Committee on Taxation aside, Congressional Budget Office aside, 
moneymakers for the Federal Government. And yet we cannot do it 
and it is incredibly frustrating to me.
    The last point that I want to make is, is a cautionary one. 
Be aware of the bright shiny object. You know, Facebook is 
going to file sometime in the next, I think they may have 
announced that they were going to file yesterday or today or 
tomorrow.
    They are going to go public at a valuation of about $100 
billion. They are going to raise $10 billion. They have 3,000 
employees. The average American business has revenues--I think 
it is about $135,000 per employee. Facebook which is hiring 
like a drunken sailor has revenues of about $500,000 per 
employee.
    They are massively profitable because they just do not have 
that much to spend money on. They cannot create that many jobs. 
They are not the answer to the job problem. You know, bringing 
manufacturing back on-shore, doing a whole lot of things like 
that which are not sexy businesses.
    They are three yards and a cloud of dust businesses. That 
is incredibly important for us to pay attention to and not get 
distracted by things that are, you know, they are big successes 
but they do not actually necessarily create a lot of jobs.
    So, I encourage you as you look at ways to approach the 
problems here and figure out how do we really create jobs and 
how do we create a systemic environment that grows jobs, 
recognize that what entrepreneurs need is not entrepreneurial 
spirit. They cannot help themselves. What they need is money 
and mentoring.
    Chair Landrieu. Excellent comments. Excellent. Excellent.
    Wayne. And if you want to comment on what Ridgely said or 
take us in a different direction that is fine. I would really 
like some comments from some of you about this difference 
between an ecosystem that supports an entrepreneurship for 
entrepreneurs that just want to feed their family and a few 
more. It is a very good thing.
    Mr. Crews. Yes.
    Chair Landrieu. We should not underestimate the importance 
of that or the significance of that. Not everybody wants to be 
the head of Facebook. They just want to run their farm, hire 12 
or 15 people, feed their family, turn their business over to 
their son or their daughter and feel like they lived an 
extraordinarily successful life, and they did, or whatever 
business.
    So, I do not want to under estimate that power and that 
dream or dishonor it in any way. But go ahead.
    Mr. Crews. Just quickly. It seems like the moral of the dry 
powder story is that there is always going to be an America, 
just if we are not careful it is going to be somewhere else 
because there is a lot of money to invest, there is a lot of 
hunger to create in the U.S. and around this room there is 
tremendous agreement on the tech immigration issues, the 
skilled immigration issues, on the access to capital like 
crowdfunding. It is the easy stuff that is agreed on that we 
can do.
    Spending issues that got mentioned are much more difficult 
and this is not the forum to address it. I would certainly love 
to, after the CBO report of yesterday of 1.1 trillion deficit. 
But it is the case that it is only 2012 and America has a long 
way to go and the economy is dynamic and we can grow much more.
    There was just a Wall Street Journal piece two days ago 
saying if the Internet was the last era or the beginnings of 
the Internet was the last era, next it is big data, customized 
manufacturing, big manufacturing, and Mr. Evers just mentioned 
bringing manufacturing back into the U.S., and the wireless 
revolution that have changed things.
    So, if we cannot cut spending right now, we can rely on 
that dynamism and I would suggest and recommend that--think 
about the things that can be done with respect to regulation. 
If we cannot manage the budget too well just yet, think about 
kind of the regulatory budget that affects small business, the 
ones that may stay small, they may be handed over to a family 
heir and that type of thing.
    I would consider just a couple of things quickly.
    Chair Landrieu. Real quick.
    Mr. Crews. The Reg Flex Act that has been talked about, the 
good bits, I would suggest looking at that notion and the 
impact of new rules that are coming along on small businesses.
    And then finally I would suggest that in the same way that 
we look at the federal budget once a year do the same thing 
with regulations. It used to be the case that when the federal 
budget came out, there was an accompanying document called the 
Regulatory Program of the U.S. Government, and it examined 
Executive Order 12.291 and all the rules that are coming out 
from the various departments, agencies, and commissions.
    And if you could do that but then tweak it so that you do 
the small business focus, look at startup rates and things like 
that, but also look at how regulations stack up as a small 
business grows. That sort of thing. So kind of a regulatory 
report card to accompany the federal budget and enhancements to 
regulatory flexibility.
    There are a lot of other things like that that you can do 
like you were talking about a meeting this morning with Senator 
Warner. He had a proposal for one in one out with respect to 
new regulations that come down the pipeline.
    So think about things like that that are low hanging fruit 
that bipartisan agreement can be had on not the difficult stuff 
like cost benefit analysis and things like that. Do the report 
cards. Do a one in one out if you can enhance Reg Flex.
    Chair Landrieu. Well, one of the things the Roundtable is 
hoping to do is not only get some of the best and most exciting 
ideas on the table that can be fashioned into legislation but 
also to rank them as the most important, you know, in terms of 
the urgency of meeting some of the goals that I think we all 
share and ranking them, what is the most important thing the 
Federal Government can do.
    Some of this we can do all right away. Some of it will take 
some phase-in. So, I would like to throw out at some point 
whether it is regulations or capital or technical assistance or 
crowdfunding or the immigration piece, how do you all, what are 
you hearing from your networks of entrepreneurs if they had to 
rank what is the most important thing for them to get first, 
second, third, fourth, et cetera?
    But let me get Diane and then Barry. Go ahead, and then I 
will come back to Madeleine and I will get you, Sean.
    Ms. Tomb. Thank you, Senator. I wanted to echo Ridgely's 
comments that, you know, for our membership, women business 
owners, it really is the true small businesses, and many of 
them are feeding their families as well, most of them are.
    And I think in this effort to raise this issue, all of 
these issues are really important, not forgetting those as we 
look at these public policies, making sure that those 
businesses are taken into account because often, again, I come 
back to our primary issue, the access to capital, and think 
about the barriers for them to access it, the money that is 
there is----
    Chair Landrieu. How many women businesses do we have, 7 
million? Approximately. Or what do you think?
    Ms. Tomb. I actually do not have that with me.
    Chair Landrieu. Somebody has it.
    Ms. Tomb. I know. I have it right here.
    Chair Landrieu. We are going to get the number but my point 
is, and the staff will get it in one second. But the point is 
that whatever it is, and I think it is seven to eight million, 
if half of those businesses hired one more employee, I mean, 
let us just say it is 3.5 million, if they added one more 
employee, I mean, we would have almost solved the job issue in 
America.
    So, I think this is an important understanding that while 
the Kauffman Foundation is really giving us great data to help 
us understand what are the companies that are really creating 
the most number of jobs, we cannot lose sight of what makes 
America, I think, essentially a really extraordinary country 
which are these entrepreneur, small businesses.
    Like I said, they do not want to have 100, they do not want 
to have 1,000 employees. That is not why they started their 
business. They want to feed a family, support a community, and 
that is what they do.
    How many? 7.8 million. I thought that that was what it was. 
So, you know, this is an interesting point that I do not want 
us to lose sight of and I would like the Kauffman's to comment. 
But before you do, Diane, did you finish?
    Ms. Tomb. The second point that I think both Ridge and Tim 
were talking about earlier about the private equity piece of 
it, you now, to me that is astounding that there is not much 
money out there. You know, women owned businesses have zero 
access to that. It is astounding.
    So, I just throw that out there. I know there are a lot of 
smart people in this room. Maybe we could figure out how to 
change that.
    Chair Landrieu. I think it gets back to what Ridgely said. 
These investors, you know, I mean, we might, some of us might 
be more philanthropic in our giving. But investors do not want 
to make a 2 percent return on their money or 3 percent return 
on their money.
    And people have gotten kind of crazy about this idea; but 
if they cannot make 15 percent in a year, they are not 
interested because, in their mind, they are being driven not 
what is in the benefit of the whole country but what is in 
their own personal economic interest.
    If they can invest and make a gazillion dollars in one 
year, that is what they want to do. It does not matter if they 
just enrage 10 people and leave a gazillion people 
impoverished.
    Now, I am exaggerating, not to say it, but it is not a, the 
person investing it is not their job to worry about the whole 
world. They are worried about their bottom line.
    So, it is a disconnect and some countries do not spend 
enough time figuring this out. But for me who believes in 
capitalism and believes in democracy, this is a very important 
issue to me as a policy maker.
    I am not a venture capitalist but I am a policymaker and 
what I want is a country that is exceedingly wealthy but that 
everyone shares in it according to their merit and their 
ability.
    That is not what was happening today. There is a very big 
disconnect.
    Mr. Evers. Just one thing I want to add.
    Chair Landrieu. Go ahead, Ridgely.
    Mr. Evers. And that is I think it is really important to 
understand that almost all of the capital that is in venture 
capital is tax exempt.
    Chair Landrieu. But capital that would go to other people 
is not tax exempt.
    Mr. Evers. Right.
    Chair Landrieu. And how is that venture capital tax-exempt?
    Mr. Evers. Pension funds, endowments, and so forth. They 
are actually not concerned with tax policy as much.
    Chair Landrieu. Okay. Go ahead.
    Ms. Tomb. I was just going to say one more thing, Senator. 
Perhaps incentives for them to invest in the types of 
businesses we are talking about may be some policies we can 
look at.
    Chair Landrieu. Okay. Let me get Sean. I am sorry. Sean, go 
ahead.
    Mr. Greene. Thank you, Senator, and I know the point is to 
look forward, but I want to look back for one second which is 
to thank you for your efforts to get the SBRI re-authorization 
done.
    I mean, when we are talking about programs that impact the 
innovative technology companies in this country, two and a half 
billion dollars, that matters.
    And so you know, you have given us an aggressive set of 
deadlines to implement in terms of the reg changes and the 
policy directive. The last re-authorization took two years in 
terms of the implementation. That is unacceptable. We will hit 
the aggressive deadlines that you have given us.
    Chair Landrieu. Tell everybody real quickly what the SBIR 
is in case you all do not know.
    Mr. Greene. The SBIR is a set aside from federal R&D 
funding to go to innovative technology companies across 11 
different federal agencies, again two and a half billion 
dollars went out last year. The entire venture industry only at 
$1.6 billion into seed stage technology companies. So, this 
program matters.
    I just want to step back for a second. The Administration 
launched last year the Startup America effort, literally a year 
ago yesterday. And the explicit objective of Startup America 
was now more than ever we need to be doing everything that we 
can to help entrepreneurs and particularly the ones with high 
growth potential.
    We need to mobilize the public sector. We need to mobilize 
the private sector. And one of the first things we did in that 
effort was to get out and listen to our customers, the small 
businesses.
    So, we had roundtable conversations around the country. We 
built online platforms to ask those entrepreneurs what barriers 
they are facing and what concrete ideas could move the needle.
    What we heard are the kinds of ideas that you are hearing 
about today and the approach we took was to say, some of those 
are best done by the private sector. So, the Startup America 
Partnership will meet efforts there.
    Some of them require legislative change and so the 
recommendations that the President put out yesterday are 
focused on the kinds of legislative change.
    Importantly there are a lot of things we can do 
administratively as well. And to your earlier definition of a 
entrepreneur, the best definition I have ever heard is someone 
who does more than anyone thought possible with less than 
everyone thought was necessary.
    [Laughter.]
    Chair Landrieu. That is the best definition of the day.
    Mr. Greene. And so, we have said that we need to be more 
entrepreneurial in the Federal Government to say how do we do 
everything that we can.
    But what we have heard, and if I had to synthesize many of 
the great ideas of today is, we need an ``all of the above'' 
approach. We are hearing tremendous needs on access to capital 
but it is not just about bank lending. It is at that seed stage 
crowdfunding. They are accessing the public markets.
    Mobilizing private equity, you know, whether it is venture 
or growth capital like in the SBIC program because not only is 
there not enough of it but it is disproportionally concentrated 
in small pockets around the country.
    But all the data shows that these entrepreneurs are all 
across the country and not just in the technology industry. So, 
we need to do more there.
    We feel good that we have, in things like the SBIC program, 
got more capital out in that program than at any point in the 
50-year history of the program. There is more we need to do.
    We have heard over and over again the importance of the 
human capital piece of it and that includes the immigration 
issues but also issues like mentoring. So, how can we do more?
    And what we have also heard, while there has been a lot of 
talk about regulations and clearly regulations are important, 
what we heard from entrepreneurs, it is also how the government 
does business, how can we streamline things, how can we make 
things simpler, how can we make the Federal Government easier 
to navigate.
    And so, as the example of the kind of thing we have done in 
response, again picking on SBIR, was until a year ago 
entrepreneurs would have to go to 11 different agency websites 
to see what solicitations were relevant for them.
    So, we built a platform with simple search technology to 
say go to one place and let an entrepreneur who has sensor 
technology understand that NIH cares about that technology for 
breast cancer detection while DOD cares about it for landmine 
detection.
    So, there are many things that we can do but we need to be 
attacking this on all fronts. We need to do our part, the 
legislative part, and then the private sector as well.
    Chair Landrieu. Thank you so much.
    Barry.
    Mr. Evans. The STEM talent immigration reforms have to 
comprehend Masters, not just PhDs, especially for engineering 
and computer science. That is what we need and that is what we 
are hiring.
    And as we grow and create jobs, we have to hire where the 
talent pools are and would like to do that in Austin and then 
in the U.S. and lastly open up centers overseas to tap those 
areas.
    More concerning to me is, as we keep the talent overseas 
and create talent pools in other countries, you see capital 
flow to those talent pools.
    So, you are talking about U.S. dry powder (liquid assets) 
flowing overseas. Anecdotally, I know of VCs from Silicon 
Valley that are opening offices in China, and so, you are 
seeing some of that capital be directed to create companies and 
train talent that I will have to compete with rather than 
having an opportunity to have that talent be in the U.S. and be 
hired and funded here. So, when hiring overseas, it is to the 
benefit of foreign economies and not ours.
    And just in terms of capital, I see declining capital going 
into launching companies because of the risk return equation 
and the return potential that you were talking about. So in our 
space with an IPO being out of reach for most companies, that 
just turns off the capital spigot for capital going in to 
launch those companies because the return potential is just 
down.
    Chair Landrieu. And I want to talk about this issue because 
it is right before the Congress now about how to reduce the 
regulations for a company to take itself public, et cetera, et 
cetera. I want to come back to that.
    But, Madeleine, you had something I think on the 
immigration piece that you wanted to add.
    Ms. Sumption. Yes. Thank you. Two points, if I may. The 
first, since you brought up the question of smaller scale 
entrepreneurship is an issue that I think might be interesting 
to raise when thinking about how small-scale entrepreneurship 
would relate to something like the startup or the entrepreneur 
visa proposals.
    The startup entrepreneur visa is a very interesting idea 
because it uses venture capital or other funders as a kind of 
screening mechanism to decide who the most likely successful 
entrepreneurs are.
    That is an extremely important principle. It mirrors in 
some ways the idea in the rest of the employment-based 
immigration system of using employers to screen people and 
decide who has the talent and the most potential.
    The reason that we do this is in part because we need 
someone to tell us who the potentially successful entrepreneurs 
are going to be. So, once you know, at least with some 
probability who the potential entrepreneurs are, we wait and we 
see if they successfully create a business and then at a 
certain point we know whether that has happened and so they are 
granted a longer-term visa.
    Now, there is another population of people in the United 
States, mainly smaller scale entrepreneurs who are here on E-2 
visas which allow people to come in to start a business. It is 
called a treaty investor visa. It is not open to nationals of 
all countries and in particular China and India are excluded.
    But there are a number of people who have been on these 
visas which are renewable indefinitely but make it very 
difficult to get to permanent residence.
    So, I wonder whether, in the interest of fairness, it would 
make sense to provide a mechanism for some of the smaller scale 
entrepreneurs who have already demonstrated their ability to 
set up and run a successful company and who in many cases have 
been here for years and have become part of their communities, 
also to have access to an entrepreneur visa.
    Chair Landrieu. Do we know how many people this is 
approximately?
    Ms. Sumption. There is no data on the number of people who 
are in the country now but there are between 20- and 30,000 
people who are granted visas under this category every year and 
that includes both entrepreneurs and small-scale investors.
    Chair Landrieu. Kauffman do you have any data on that?
    Mr. Ortmans. On the visas?
    Ms. Sumption. On the E-2.
    Mr. Ortmans. On E-2, no.
    Chair Landrieu. No. But go ahead. You wanted to say?
    Mr. Ortmans. Yes. I think the important thing about a lot 
of these ideas is the reason when we put out this Startup Act 
document last fall that we called it that, and that is, I think 
we have got to be quite precise in our thinking.
    You do put to gather a slightly different set of 
prescriptions as government being the institution that sets the 
rules and the incentives if you are looking to foster what I 
might describe the path of potential new entrepreneurs and 
those early one to five-year entrepreneurs. You do look at a 
different set up prescriptions if your focus is on high-growth 
entrepreneurship.
    And Sean and I have discussed this in the past. But one of 
the things that we think is really important that this 
community says do is that we do not think that that puts 
necessarily a dispute between whether we should be supporting 
small businesses that, as you indicated, are not necessarily 
there to grow but are there to make a living and high-growth 
firms.
    I just think there is a different set of prescriptions that 
should be focused on; and, of course, our data, as you 
indicated, brings us to conclude that if you are really looking 
at growing the economy or rapid expansion of job growth, the 
high-growth firms are obviously there to focus.
    And one piece of data that has not come up that I want to 
make sure that we have all looked at is that one of the studies 
done by our chief economist Bob Lighton showed that if the 
number of billion-dollar companies rose from the current 15 or 
so average today to between 40 and 70, we would be able to 
increase GDP by a full percentage point.
    So, that looks at, for example, growth and why we focus on 
creating those next big iconic brands. And as we have talked 
about, and you mentioned in your opening remarks, if our focus 
is on job creation, yes, there is no incentive for large 
companies not to have pressure from their boards to do it with 
less employees. Their job is to maximize profits.
    So once again, if the focus is on job creation, the 
emphasis comes down to those early years. But I think the 
critical thing here is that we can have a different 
conversation, Senator, if it is around nascent entrepreneurs 
and new firms rather than if we are around how do I take a 5- 
to 10-year-old firm and make it easier for it to be able to 
scale to growth, and I think it is important that we understand 
that we are quite precise in that thinking because it is a 
different set of ideas that need to be addressed.
    Chair Landrieu. No. I think you have hit the nail on the 
head but it is good to get this out right away. It is important 
to think carefully through what the goals are.
    If it is just GDP or GPA growth is one thing. If it is 
growth and job creation, if it is growth, job creation, and 
expanding the middle class and opening up opportunities, it is 
something even broader.
    And that is what Senators have to decide, and that is why 
we are having this discussion because we have to decide whether 
our bill is going to be focused on just growth so that a small 
number of people just continue to get wealthier or if it is 
going to be growth and other things so that we strengthen the 
middle class.
    If we put our emphasis and efforts and treasure on one or 
equally, et cetera, I mean, this is the discussion of the 
moment and this is what this debate is going to boil down to 
and that is why we are having these discussions.
    Steve, I want to get to you.
    Mr. Ezell. So, we absolutely agree about making it easier 
for entrepreneurs around the world to enter the United States 
but we also can do a better job in our educational system to 
spur more entrepreneurship at home.
    In particular, we really need to transform our colleges 
into entrepreneurial factories. There is a great university 
called the Olin College of Engineering in Massachusetts, 
started 10 years ago. Completely re-thinks the education 
curriculum around engineering. Their graduates produce more 
startups businesses than MIT, just after 10 years of being in 
existence.
    Chair Landrieu. Tell me the name of this university because 
I am searching for them now. What is the name of it?
    Mr. Ezell. The Olin College of Engineering.
    Chair Landrieu. The Olin College of Engineering in 
Massachusetts.
    Mr. Ezell. Just outside of Boston.
    So we need more Olins around the country. One thing 
Congress can do is use the power of information to spur 
competition among universities around entrepreneurship.
    So, one thing you can do is direct the National Science 
Foundation to collect data on university business startups and 
spinoffs and put out university entrepreneurship and 
commercialization rankings to inculcate competition and to show 
budding entrepreneurs----
    Chair Landrieu. That is a great idea. Please write that 
down twice because we really do need that--I want to get back 
to what Ridgely said is that you cannot maybe make an 
entrepreneur but you can mentor them.
    And if we identify the colleges that are best at mentoring 
our entrepreneurs, they will naturally, without us telling them 
to go, they will naturally go to those places where the kids 
have an idea that they really want to be an entrepreneur and 
they might be encouraged, they will naturally go to these 
colleges that are really doing a good job, just not living off 
of old reputations, but are really, you know, living up to that 
and getting some kind of ranking.
    Does anybody know anybody that is doing those rankings 
right now, either government or private sector rankings like 
U.S. News and World Report I think does the rankings of the top 
colleges and then they do the most affordable colleges and then 
they do this. But does anybody, of colleges that are good at 
entrepreneurship, training?
    Go ahead, Tim.
    Mr. Rowe. There is one. I will try to look it up on the 
telephone since we cannot get WiFi in here.
    Chair Landrieu. Oh, I cannot get WiFi in here. Where is my 
clerk? Thank you, sir.
    Mr. Finney. Senator, if you are trying to tie in the 
federal funding that comes through NIH, NSF, et cetera, the 
Association of University Technology Transfer Managers or UTTM 
actually has some pretty good data about research universities 
but that does not include institutions like the one that 
Stephen just mentioned that would not likely be a research 
institution.
    Chair Landrieu. I will tell you. I am learning a lot about 
this since I am funding it, is there a lot of universities that 
get a lot of research money but that research, and maybe I am 
being a little bit critical here, I am really trying to 
understand of the federal money that gets invested in these 
universities for research how much of it is actually coming out 
the other end creating the kind of jobs we need or how much of 
that research is sitting on shelves?
    I am having a hard time really understanding the measures 
of where these federal research dollars are going, and people 
say, oh, it is important for the Federal Government to invest 
and for universities to do research. Yes.
    And some research is not meant to be going immediately into 
commercialization of ideas and creating jobs, some of it is 
just the basic research that is important for the advancement 
of a society or civilization. But I do think having better 
measures on that would be helpful.
    And I am going to get to you, Jim, in a minute. But, Brink, 
do you want to say something about the idea that we were 
talking about about the kinds of businesses that grow the jobs 
the fastest? Is that what you wanted to say?
    Mr. Lindsey. Actually that was not what I was going to talk 
about.
    Chair Landrieu. Okay. Go ahead.
    Mr. Lindsey. I wanted to weigh in with Wayne on the issue 
of regulatory reform because I think that is a hugely important 
issue.
    Chair Landrieu. Go ahead.
    Mr. Lindsey. It is so hard to get a grasp of because there 
are so many different dimensions of it, there are so many 
different kinds of policies, and it is not that any one 
regulatory rule makes the difference.
    Mike Mandel at the Progressive Policy Institute has a nice 
metaphor that each regulation is like a pebble in the stream. 
One is fine but when they just start adding up they can block 
the stream and it is a curative difference between cost and 
benefits that makes the difference.
    What I wanted to highlight because it is something that is 
in the Startup Act that complements what Wayne was talking 
about. Wayne was talking about federal regulations which are 
very important but from an entrepreneurial perspective it is 
State and local rules that often are really----
    Chair Landrieu. Are the barriers.
    Mr. Lindsey [continuing]. Causing people to pull their hair 
out or causing them to never even think about opening a new 
business because things like restrictive land-use regulations 
jack up rents and keep people out of our most dynamic and 
productive cities in the first place.
    We have had just a huge explosion in occupational licensing 
restrictions. About 10 percent of jobs in the United States 
were subject to occupational licensing in 1970. It is about 30 
percent today. And that price is a lot of people out of 
entering, particularly smaller scale enterprises.
    Now, these are state and local regulations so what can 
federal legislation do about it, harkening back to Wayne's 
regulatory report card idea, one of the proposals in our 
Startup Act is that we create either through the government or 
the government working together with private institutions 
create a kind of regulatory report card for states and 
localities along the lines of what the World Bank does 
internationally with the Doing Business Reports.
    Chair Landrieu. An excellent idea. So where are the cities 
and counties that are most friendly to entrepreneurs and 
startups?
    Mr. Lindsey. A catalog of the kind of regulations that 
matter the entry restrictions, the restrictions on competition 
that can gum up the works of entrepreneurial dynamism and rate 
States and localities by how well they are doing and start 
pitting them against each other and start shaming them for 
having lousy record that nobody knows about.
    Chair Landrieu. Shame works sometimes as a motivator.
    Jim, you have something.
    Mr. Kessler. They love it from a competitive event too. To 
some degree, you know, the Doing Business Study is a fabulous 
analogy because it has been a major factor in getting nations 
to focus their attention on this.
    Chair Landrieu. Right. And it is not mandating. It is just 
disclosing what your situation is and then the entrepreneurs 
will be driven to those areas or will be enticed to those 
areas. Jim.
    Mr. Kessler. A couple of ideas and thoughts. Some may be 
relevant to the true small businesses that you talked about. 
You know, 401(k) or Roth IRA-type thing for startups in which 
you can put money aside and earn it tax free and use it for a 
start up, a way to raise small amounts of capital.
    Standard home office deduction. One third of businesses 
that are eligible for the home office deduction use it. It is 
too complicated. You have to answer a dozen questions. It is 
like an interrogation and often you get audited when you use 
it.
    The R&D tax credit for when you get to a larger size 
company. We have an idea that make it tradable. If you are 
eligible, if you are doing research in development but you do 
not have a positive revenue stream at that point, you know, 
make this a liquid asset that you are able to sell to another 
company. And that is another way in which you can raise some 
capital.
    Have a better R&D tax credit if you both do research in the 
country and you manufacture in the country because a lot of 
startups occur when you are going through, this is one of Andy 
Grove's big arguments at Intel, you go through the supply 
chain. You do the manufacturing, a whole series of startups 
occur because you have to solve problems as you are going from 
prototype to actual production.
    And the last thing I want to say is, that we have not 
touched on, is of all these successful nations in the world 
America is last in the amount of our economy that is derived by 
exports.
    It is only 13 percent of our economy and a lot of other 
successful countries it is a higher amount. And Brookings did a 
study. Only 1 percent of U.S. companies export, half of those 
only export to one country.
    And if you look at some other countries, they have been 
very successful not only at exporting but getting their small 
businesses and medium businesses that export too.
    So, it is not just breaking down barriers but, you know, 
Mr. Evers talked about the mentoring side. Part of the 
mentoring is how do you navigate the maze and sell your product 
in another place, in another country and, you know, Germany has 
done a magnificent job on that. They really are trying to get, 
you know, their small businesses to sell in other places and it 
is a huge part of their economy.
    Chair Landrieu. And, Jim, thank you for raising that. We 
just passed a very significant export bill for small business. 
It was part of our really extraordinary small business bill we 
passed last year.
    Amy Klobuchar, and who were the other Senators that focused 
on that? Senator Shaheen and Senator Klobuchar and Senator 
Snowe really focused on that and helped us to draft that.
    I would really like you to review what we did and give me 
some other ideas about, you know, how we could strengthen that 
because we recognize this. I mean, think about it.
    As the world starts creating a broader middle class, I 
mean, America can, small businesses, begin selling our 
products; and with the ability of the Internet, it really makes 
it possible.
    You know, 50 years ago this just was not possible really. I 
mean, you had to have a big ship or had to, you know. But with 
the Internet you can make a product in any small place in 
America and, with the Internet, connect to a supplier or a 
buyer and trade back and forth; and with UPS and FedEx and many 
of these companies that can deliver a package from doorstep to 
door step, and the U.S. Post Office at least in the near 
future, can do some of that delivery.
    I guess they do not deliver, well, they deliver overseas, 
U.S. Post Office, you know. So, it is very interesting that 
this could happen. So, will you look at that and let us know.
    Mr. Kessler. Certainly.
    Chair Landrieu. We have got so many. Ridgely, you had and 
then Michael and then we are going to go around because we have 
to finish up in the next 10 minutes.
    Mr. Evers. You asked a question a while ago and I want to 
touch on three areas. One of the things when you talk to small 
businesses that they cite as being the issues, and to the 
extent that they cite regulation, it is state and local.
    And regulation, in general none of us likes to be 
regulated. We are Americans. We like to do our own thing. So, 
that is true; but if I had to allocate 100 points across the 
problem, I would not put any substantive number of them at that 
level relative to the others.
    Number one, with a bullet, when you talk to, you know at 
SCORE we deal with hundreds and hundreds of thousands of small 
businesses every year and we have increasingly good data about 
what matters and we have postmortem data and we have lots of 
good stuff.
    Money. Money. They have a capital problem and figuring out 
how do you make investing in small business, true small 
businesses, how do you make that attractive to capital is 
really important.
    And the kind of capital to which small businesses are 
interesting is not big capital. It is small capital. You are 
paring small capital was small businesses. There are ways to do 
that and I think it is really, really, really essential to 
tackle that. Number one.
    Number two, mentoring. It is great to have schools that 
teach people how to do stuff. My alma mater, Stanford Business 
School, every single student in Stanford Business School is 
paired with someone from the law school, someone from the 
engineering school, and someone from the medical school and 
they create a startup as part of getting their MBA.
    That is important. But what you have to recognize is that 
almost every person who is an entrepreneur running a business 
in America grabbed a hold of a silk worm and jumped out the 
door of an airplane. The stuff that they are going to 
encounter, they are going to encounter for the first time and 
you do not teach that.
    That is where you need people around you as advisors, as 
helpers; and that is where, I think, the entrepreneurial 
development programs to the SBA are so incredibly important 
because they deliver----
    Chair Landrieu. Strengthen the mentorship network.
    Mr. Evers. But they deliver just-in-time mentoring. The 
idea that for example at SCORE that we cannot get an increase 
in budget out of the SBA or not out of the SBA but out of the 
Federal Government for a program that actually demonstrably 
makes money for the Federal Government is just astounding to 
me.
    Two other things. At the regulatory level something the 
Federal Government can do. Does anybody here know how many 
sales tax jurisdictions there are in the United States? Over 
10,000.
    If you are going to do business, I happened to run a 
winery, I happen to write software that helps other wineries 
sell online, you have to track your sales in 10,000 
jurisdictions and report out on it. Boy, is that a bad idea.
    So, nobody does it, by the way. So, you have non-
compliance. By the way, the number one reaction to regulation 
is I do not worry about it.
    Finally, and I recognize there is a sacred cow here that I 
am just going to stick a blade in, and I apologize in advance, 
Senator. Exports are important. You know what a small business 
should be focusing on? So, first of all, if you are in business 
and you want to try to expand your business, you go to the 
easiest next place. You do not say well, Gee, we did this in 
San Francisco that----
    Chair Landrieu. San Francisco.
    Mr. Evers [continuing]. Now let us go do it in Mumbai.
    Chair Landrieu. Right.
    Mr. Evers. You say, well, maybe we can should go to San 
Jose.
    The place that we should be focusing on helping small 
businesses is on import displacement. How can we work with 
companies in Detroit to get them to start buying from American 
manufacturers, small businesses, rather than from suppliers in 
other countries? How do we teach the entrepreneurs in America 
how to sell to the enterprise?
    These are huge, low-hanging fruit areas where the Federal 
Government actually can have a role. How can we give American 
businesses, large businesses, incentives for buying from 
American small businesses? There are all kinds of interesting 
things like that. Asking a small business person to take on 
currency risk, language risk, time zone risk, and a metric 
because we still measure in inches risk in order to do business 
off shore is imposing an awful, a huge risk tax on their growth 
which they do not need to take.
    Chair Landrieu. Interesting observation.
    Michael, and then we are going to go down this row from Tim 
backwards. Go ahead.
    Mr. Finney. Ridgely set up my comments.
    Mr. Evers. We worked together.
    Mr. Finney. This is amazing.
    So, we have set up a program we call Pure Michigan Business 
Connect, and the idea behind Pure Michigan Business Connect is 
that we have some hundred thousand plus, you know, small 
businesses in our State who no longer pay a business tax, by 
the way.
    We had tax relief to the tune of about $1.8 billion for 
small businesses. So essentially, if you are not a C Corp., you 
do not pay a business tax in the State of Michigan. It is a 
pretty cool idea.
    But behind that idea is that if these hundred thousand 
businesses could create one job, we cut our unemployment rate 
by 2 percentage points or some number relatively close to that. 
But more than just cutting taxes, you had to do other things. 
And so, we have started that process of connecting the small 
companies with large established companies. One example and 
then I will move on.
    One of our major utility companies in the State, Consumers 
Energy, has committed to spend at least $250 million more with 
small and medium-sized Michigan-based businesses.
    So, they are keeping us up-to-date on how they are doing. 
They have already crossed the $70 million mark in terms of new 
spin. But the beauty of it is is they are contracting with 
small companies.
    One example, a small company that makes a variety of 
different products was able to bring back five workers that 
they had laid off and then they hired another 35 as a result of 
this new business they received from this large company.
    Well, that is still not enough either. We need to identify 
new markets. So if you are a company that makes injection 
molded parts for the auto industry, could you make those for 
the medical device industry, the aerospace industry, and so on?
    And we are finding that there are numerous opportunities 
for that kind of business connectedness as well. And it is a 
pretty comprehensive program. It includes exports. It includes 
a variety of different pieces including business services.
    But finding ways for those small and medium-sized companies 
to grow by one job is a big part of what we decided to do with 
Pure Michigan Business Connect, and that really is doing 
precisely what Ridgely just described.
    I will close with really the thought that I wanted to touch 
on. More important than anything else in my opinion is get the 
outcomes right. If, through this process, we get the outcomes 
right, we have a chance to be wildly successful in this 
entrepreneurial space.
    Is it about creating jobs? Is it about creating wealth? Is 
it about immigration? I mean, all these things are really 
important; but if we get the outcomes right, we have got a 
chance to be wildly successful with this.
    Chair Landrieu. Excellent. Okay Tim, and then Mike, Sean 
and then we will wrap up.
    Mr. Rowe. First of all, I just wanted to thank the 
Committee. This has been great to have this conversation and it 
is very timely. I want to convey a sense of urgency that we 
really do need to get going on this stuff but also underscore, 
I mean, we are very fortunate here. We have probably the best 
schools in the world. I do not think anyone disagrees with 
that.
    We have tremendously creative people. We are creating many 
of the world's coolest, most interesting businesses when you 
look at the Apples and the Googles and the companies we have 
been producing.
    So, let us not lose sight of the fact it is awesome. We 
have got some things we need to work on and let us work on it. 
But it is awesome.
    As we look at what we are all talking about doing, let us 
take crowdfunding as an example. It is a little bit risky. It 
is a little scary. Right. Well, what if people, you know, use 
this to defraud investors or something like that? But we have 
the creativity to solve that too.
    If you look at eBay, for instance. You know, I spent $1000 
to buy some piece of art on eBay from somebody across the 
country I have never met and I probably never will meet, and I 
trust them because----
    Chair Landrieu. And it worked.
    Mr. Rowe. And it works and I trust them because they built 
a system that tracks our reputations. We can bring these kinds 
of ideas, these creative American ideas to these problems and 
we can make this work, and so let us get to gather, experiment 
a bit, and make it work.
    Chair Landrieu. Thank you, Tim. Mike.
    Mr. Farmer. Yes. I just wanted to say two quick things. 
First of all, I introduced what we had done on the Emerging 
Industry Investment Fund that we created in the State. And I 
was sitting here listening to all of this thinking to myself, 
you know the order of the day today is everybody is asking how 
do we pull those Apple manufacturing jobs to the United States.
    I think this Small Business Committee and I think this 
looking at the emerging sectors of industries such as 
manufacturing, I will bet you 15 years ago there was an 
emerging small business that could have been serving that today 
had we had the right ecosystem, the right people around to look 
at that.
    I agree with Ridgely. You know, you cannot focus on the 
Facebooks of the world, the big shiny things. We have to look 
at the emerging segments of all parts of our economy. In the 
State of Kansas, for example, we found some growth segments in 
animal health, for example.
    I want to make one final comment. In my current company, it 
is a true startup, Leap2, we have one employee but we also have 
15 contractors.
    This talent issue is definitely a big issue, and I am 
wondering, these 15 people believe so much, I call them the 
believers, in what we are doing they leave their day job and 
then at eight o'clock they login and they start working until 
about three o'clock in the morning.
    Well, some of them are actually doing it for equity, and 
what you are doing with the Startup Act on the capital gains 
portion, you know, you should change the language. It is not 
just about investors because there are a lot of people who 
believe in things who are, you know, in this case my 
contractors that actually have an upside with that as well.
    Chair Landrieu. Stephen and then, Sean, you are going to be 
the wrap up Stephen, Barry.
    Mr. Ezell. I just wanted to reaffirm the role of the 
manufacturing extension partnership in the U.S. small business 
entrepreneurship innovation ecosystem.
    We fund the MEP 25 percent less than we do as a shared GDP 
when we initially started in 1998. Other countries like Japan 
fund their similar MEP-like agency 40 times more than we do as 
a share of GDP.
    This is a key part of our innovation ecosystem and it is 
just important that Congress recognizes that and helps its as 
it moves into supporting small businesses as they move into 
innovative and new kinds of all activities.
    Chair Landrieu. Thank you so much.
    Barry.
    Mr. Evans. Just a quick comment on ecosystem. I would 
encourage your staff to explore some of the public-private 
partnership work that is happening in Austin.
    For instance, there is a capital-intensive wet lab that is 
being put in with some subsidy from the government side to 
foster small business and startups in the life sciences area.
    There is some partnership with some of the federal agencies 
and some large companies and university and small companies as 
well in the Pecan Street project that is looking at how to 
deliver energy. There are other examples like that that I would 
be happy to go into detail with your staff and explain how we 
do that.
    Chair Landrieu. Wonderful.
    Mr. Ortmans. Senator, I am just going to add to Sean's 
definition of the entrepreneur. You know, one of the things in 
the global context as people are viewing it is is a little more 
profound one which says that it is really about the possibility 
of human endeavor for the benefit of all.
    And I think we should not under estimate what is going on 
here. It is these young startups that are breathing the 
dynamism into our existing industries, and that most of these 
people that get involved in this, to come back to your point, 
you know, you have to get in and see the culture of these 
startup communities, the cacophony of the networks of people 
who are just in this organic, exciting, fun process of creating 
new firms.
    And that is why we have to remove the barriers to allow 
them, and almost all of them are in it not to make money. They 
are in it because they want to do good and do well at the same 
time.
    So, I also want to end on an optimistic note because I 
think it is an enormously exciting time----
    Chair Landrieu. Let me be clear. I agree with you about the 
people creating businesses. I mean, even the guy who started 
Facebook said he never did it to make money. It is not the 
entrepreneurs that their goal is making money. It is the 
investors who have stood back who do not create a thing, who 
want to use the benefit of this extraordinary capital to 
enrich. And that is fine. I mean, that is the American way. We 
have got to make sure that we are starting out getting to the 
end. It is not just making a few investors wealthy. That is not 
the goal of this Committee.
    It is trying to honor that spirit that you just described 
in the best way possible, expanding the middle class which is 
being horribly hollowed out in the United States and giving the 
talent that is in the United States the opportunity to 
participate in some way and doing it in a way like Ridgely said 
where you are matching the capital to big ideas, small capital 
to smaller ideas but not disrespecting just that entrepreneur 
that just wants to feed his family and the family next door or 
run his farm or her farm and give it to their grandchildren.
    You know, I mean.
    Mr. Ortmans. Right.
    Chair Landrieu. So, I do not disagree with you about 
entrepreneurs but I do think that there is if we are not 
careful, and do not make these rules right that what you end up 
doing is giving the entrepreneurs a great opportunity to create 
businesses and the only thing that happens is a few people in 
the world get wealthy. And that is not my goal.
    Mr. Ortmans. I think Brink and I would probably be remiss 
if we did not mention that on this question of capital we agree 
that we have got to be cautious about the attention that is 
given to venture capital, for example.
    I mean, more than half of businesses in the United States 
start without any debt or any equity and less than 20 percent 
of high-growth businesses ever take any venture capital.
    So, this is why we think it is really important that we 
remember if your interest here is enabling the entrepreneurs to 
create new firms, you have got to do that.
    I just want to answer two quick questions and then I will 
wrap up. One was you asked about measures for performances on 
campus. We did a more than $100 million investment into 
Kauffman campuses at the Kauffman Foundation.
    It is not a ranking, but we have lots of lessons learned 
from that. I mean we can tell you why we would send you to go 
visit ASU University, for example, over some others.
    And then also in the research space you will notice that in 
the Startup Act similar to almost, actually 80 percent of the 
proposals in there are budget neutral but there are also ideas 
in there as to how you can easily accelerate the movement of 
those innovations into the marketplace, the R&D, to use your 
words, sitting on the shelf.
    The last thing I would mention just on the state part of 
this is that at the Kauffman Foundation we are actually having 
a State of Entrepreneurship address. We do it every year. We 
are doing it next week and we are focusing on state policies 
around this.
    Everybody is welcome to come. It is next week but we will 
be delivering our new address on this with new research and 
thoughts on it.
    Chair Landrieu. And again, thank the Kauffman Foundation 
for getting the data that helps us to try to make the best 
decisions that we can, and we really thank you.
    And Jonathan, if it is public record, how much do you all 
invest in your foundation every year on research? What are you 
all doing? What is your rough budget for research?
    Mr. Lindsey. We may be the largest private foundation 
funder of economics research in the country, and it is millions 
of dollars a year.
    Chair Landrieu. Millions, okay. Sean.
    Mr. Greene. Thank you again, Senator, for organizing this 
and inviting everyone here on my birthday, I may add.
    Chair Landrieu. Great.
    Mr. Greene. So, two final points. One is to tie together 
the mentoring piece which again we think it hugely important 
and the commercialization piece, the universities.
    What we have seen, I have cited Idea Village but in 
Cambridge many other places there are great models of 
organizations on the ground mobilizing mentors.
    In our view, every university in the country should be 
organizing a single kind of thing and how can we mobilize that 
is a big opportunity.
    But secondly, and where I would like to conclude is on this 
issue we have been talking about of the high-growth businesses 
versus the mom and pop, sort of the main street, and obviously 
at SBA this is something that we evaluate and look at all the 
time.
    And I would encourage you and your staff to think that this 
does not have to be an either/or. It can be a both/and. And I 
am going to pick on the Facebook example because it shows how 
it can be a both/and.
    Facebook has less than 3,000 employees. But studies have 
shown that jobs that Facebook has helped created as a result of 
its app developers is close to 200,000. And if you look at 
something like eBay or a Etsy, what those companies, yes, those 
are big technology companies but----
    Chair Landrieu. They have created many opportunities.
    Mr. Greene. For businesses large, medium, and small to 
distribute and reach new customers. So, I think that is where 
the opportunities are is to say how can we foster disruptive 
innovation that will serve consumers directly but also help 
mobilize other businesses as well.
    Chair Landrieu. Excellent point.
    Listen, this has been terrific. Thank you all. The record 
will stay open until February 15. So, any reports, summaries, 
additional thoughts or comments, you can e-mail them in, you 
know send them in.
    And we really are going to try to gather all of the very 
best ideas through these three roundtables. We are not going to 
wait to put a perfect bill together. There have been some very 
good bills dropped. We have not figured out all of the politics 
of all of that yet but we are not going to wait until there is 
the perfect bill.
    We will try to pass as quickly as we can some things that 
have received broad enough bipartisan support and clarity. Then 
we will work on.
    So, it is going to be a series of things but let us go 
ahead and get started, you know, as soon as we can.
    I think the President did a very good job of focusing our 
attention at the State of the Union. I think some of the 
members have already stepped up and introduced different 
pieces. So that is the intention.
    It would not surprise me at all if we had 12 different 
pieces of legislation, you know, the Startup Act, and then this 
and then this then that pass over the next year or two.
    I mean, I think this is going to be going on hopefully 
after the next election as well regardless of who wins, you 
know, the election. I think our country is very focused broadly 
on this and they understand the potential that is out there if 
we get some of this stuff right. Okay.
    Thank you so much. Meeting adjourned.
    [Whereupon, at 12:10 p.m., the Committee was adjourned.]
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