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Print Edition StoriesWednesday, October 7, 2009
How I See It
Economic growth through entrepreneurship, sound policy
MHT's Julie Donnelly: Life science startups finding investments
MHT's Galen Moore: Hiring trends and opportunities
Breaking down the MIT $100K
Following a meeting with small-business leaders recently, President Obama said, “My job — and our job as a government — is to do whatever we can to unleash the great generative powers of the American economy by encouraging their efforts.”
Although the president was not speaking about venture-capital-backed companies specifically, he could have been. For decades, technology and life science entrepreneurs and their investors have been creating a powerful engine that can help drive a financial recovery.
But in order for the entrepreneurial sector to have its maximum impact, our government needs to focus on a few high-impact efforts, including sound immigration and tax policies, appropriate investments in scientific research, and prioritization of math and science education.
Venture capital’s track record is compelling. Companies once backed with venture capital generate nearly 21 percent of the U.S. GDP, or $2.9 trillion in annual revenue, according to the latest figures from the National Venture Capital Association. These firms employ about 11 percent of U.S. private-sector employees.
The VC-backed segment of our economy has been successful because it is based on long-term investments and committing the energy needed to transfer ideas into viable, revenue-generating, job-creating businesses. Yet the future of this sector is tied to several public policy matters:
• Establish an efficient employment-based immigration system. Historically, the U.S. was a beacon for scientists and engineers worldwide. They came here to study and stayed to innovate. In the past 15 years, foreign nationals have started one in four U.S. VC-backed public companies, contributing to our country’s technological, scientific and economic leadership. Yet in recent years, we have begun to send these innovators home. That’s a recipe for stimulating foreign innovation, not domestic growth. A market-based cap on the number of H-1B visas available each year will best meet the needs of our fluctuating economy and job market.
• Invest in basic scientific research. President Obama recently stated that federal funding in the physical sciences as a portion of the U.S. GDP had fallen by nearly half over the past 25 years. We support his goal of investing 3 percent or more of U.S. annual GDP in basic and applied scientific research funding. We also support his goal of boosting funding for government agencies with a focus on encouraging high-risk, high-return basic research and supporting researchers at the beginning of their careers. Doubling funding over the next 10 years for the National Science Foundation will keep our universities on the scientific frontier and fuel our academic-entrepreneurial ecosystem. Doubling funding for the Department of Energy’s Office of Science will advance its research in key areas such as renewable energy and nanotechnology.
• Create incentives for entrepreneurs. Innovators need the certainty of a permanent R&D tax credit in order to execute long-term research. We also need to reform sections of Sarbanes-Oxley. This law has unnecessarily driven up the costs of going public. Entrepreneurs and investors look to public markets to fund their companies’ continued growth. This growth, in turn, generates jobs and creates wealth.
• Make education a priority. We applaud the president’s call to raise standards, invest in labs, enhance teacher preparation and training, and forge more partnerships between schools and employers. We must act on these steps to ensure that our schools can develop the next generation of innovators and entrepreneurs who will keep America competitive.
If we come together behind a sound innovation policy agenda, we can create a framework in which innovators and their investors can nurture new companies, drive the country out of recession and put us back on a long-term path of economic growth and innovation.
Ken Wilcox is CEO of SVB Financial Group and Silicon Valley Bank.
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