Editor’s note: Steve Case is chairman and CEO of Revolution, as well as co-founder of AOL. Follow him on Twitter @stevecase.
For investors, Washington policymakers, casual observers of the stock market, and members of the media, the big story for entrepreneurs over the last few weeks has been the highly anticipated initial public offering of Facebook. While the largest tech IPO in history won the news cycle, there was an equally important, if not overlooked story for entrepreneurs brewing over on Capitol Hill.
A bipartisan group of senators joined together to unveil a bill called the Startup Act 2.0. Democrats Mark Warner and Chris Coons, and Republicans Marco Rubio and Jerry Moran, failed to read the memo stating that Washington can’t come together and pass meaningful legislation in an election year. Startup Act 2.0 builds on the JOBS Act passed a few months ago, to improve the environment for entrepreneurs to create new businesses, expand existing companies, and create jobs across the country. The House of Representatives is taking up the legislation this week.
More than 40 percent of Fortune 500 companies in the U.S. were founded by immigrants or their children, and these firms alone employ over 10 million individuals. Some of our country’s most iconic brands – including IBM, Google, and Apple – were founded by an immigrant or the child of an immigrant. And nearly half of the top 50 venture-backed companies in the U.S. had at least one immigrant founder. Yet, existing and arbitrary caps are forcing almost 20,000 American-educated degree holders to leave the U.S. every year, and in turn, join or set up competitor businesses in competitor countries. Imagine if we trained men and women at our Air Force and Naval Academies, equipped them with the tools they need to lead and succeed in battle, and then kicked them out of our country to join other militaries? In effect, that is what we are doing when we train the world’s most talented immigrants to innovate and start businesses at our great universities, then send them off to start companies in China, India, and South Korea.
The Startup Act 2.0 reforms high-skilled immigration law in three sensible ways. First, the Act creates a new STEM visa so that U.S.-educated students who graduate with a masters or PhD in science, technology, engineering or math can receive a green card to stay in country. Second, the Act creates an entrepreneur’s visa for legal immigrants to stay in the United States so long as they start a business that employs American workers. And third, the Act eliminates the per-country cap for employment-based immigrant visas which currently prevents American CEOs from having the flexibility to recruit the most talented workers.
Beyond addressing high-skilled immigration reform, Startup Act 2.0 provides incentives for investors to put capital into startups on the verge of growing and hiring. Instead of tax policy rewarding flash trades on Wall Street, the Act encourages investors to make a five year or longer financial commitment to a startup by lowering the investors’ effective tax rate. From a policy standpoint, this will allow our nation’s entrepreneurs to have more resources to innovate, expand, and hire. Finally, the Act offers a research and development credit to offset some early taxes for entrepreneurs, helps universities transfer cutting-edge ideas from campus to the marketplace, and makes other sensible policy reforms.
Believe it or not, Washington is listening these days. When Senators Warner and Moran joined together last year to introduce the original Startup Act to help entrepreneurs, and when Senators Coons and Rubio joined together a few weeks earlier to introduce the AGREE Act to support new business formation, most political observers assumed the bipartisan duos were making a thoughtful gesture heading into a presidential election cycle, not offering legislation that had a chance.
Yet many of the proposals in the original Startup and AGREE Acts, along with additional recommendations by President Obama’s Council on Jobs and Competitiveness, helped pave the way for the bipartisan JOBS Act. And in early April of this year, despite partisan gridlock, Majority Leader Eric Cantor stood with President Obama in the Rose Garden of the White House as the JOBS Act – which increases access to capital and removes costly regulatory barriers for startups at every stage of their growth – was signed into law. It was a rare bipartisan victory in Washington and an even bigger victory for entrepreneurs across the country.
The strong headwinds of a high-stakes election season will not make passing the Startup Act 2.0 easy, but its introduction of in the Senate, and now the House, suggests positive momentum on the issue. That’s a good sign, because in the last three decades, new businesses less than five years old created nearly forty million American jobs – all the net new-jobs created during that time period. Big corporations and small businesses on main street support current levels of employment and contribute to the dynamism of the U.S. economy, but new job creation is driven primarily by new businesses starting up. And in recent years, the trends are alarming: startups are down almost a quarter since 2007 and new startups are adding fewer jobs on average than ever before. Initial public offerings for small and middle-sized firms are down considerably, and other countries are rapidly improving their entrepreneurial ecosystems adding fresh competition to our firms. Simply put, the window to act is closing.
Let’s urge our leaders in Washington to defy the odds once again in 2012 so that our entrepreneurs can usher in a new wave of iconic, American companies.