What's Government's Role in Building Entrepreneurial Ecosystems?

Do you owe your company’s success to a business-friendly climate in your state or region? Has support from a network of business owners, or community bankers, or local government policies helped you grow?

Creating a more entrepreneur-friendly environment in the U.S. was the topic of a roundtable discussion hosted this week by the U.S. Senate Committee on Small Business and Entrepreneurship. The session was the third in a series that Committee Chairman Mary Landrieu has hosted to gather input that will inform entrepreneurship legislation she is expected to introduce this summer.

Wednesday’s session, titled “Perspectives from the Entrepreneurial Ecosystem: Creating Jobs and Growing Businesses through Entrepreneurship,” asked panelists to comment on what role the government can play to nurture entrepreneurship in the U.S.

Landrieu said her goal is to develop policies that will transform the U.S. into the most dynamic, finely tuned entrepreneurial ecosystem in the world. She cited a list of six features of an entrepreneurial ecosystem that have been identified by Babson College:

1.    A culture that rewards innovation, creativity, and experimentation.
2.    Policies and leadership that provide regulatory and capital support.
3.    Availability of appropriate finance including microloans, private equity, and public capital.
4.    Quality human capital that includes both skilled and unskilled workers from home and abroad.
5.    Venture friendly markets for products, distribution channels, and entrepreneur networks.
6.    A range of institutional infrastructure supports including incubation centers, legal, and accounting advisors.
Landrieu asked 13 panelists—including Rent the Runway CEO Jennifer Hyman, Young Entrepreneur Council founder Scott Gerber, and George Mason University economic policy research fellow Matthew Mitchell, as well other government, academic, nonprofit, and business experts—to share their views on what factors create a climate in which startup companies can flourish, and what role the government can play in creating it.

Hyman, a 31-year-old Harvard Business School graduate whose two-year-old company employs 125 people and maintains a warehouse to rent designer dresses and accessories to women, credited an initiative of New York Mayor Michael Bloomberg with helping her handle such fast growth. As a fellow of the Mayor’s young entrepreneurs program, Hyman was matched up with two very experienced business mentors: the CEO of NBC Universal and the former chairman of Bloomingdale's. “There’s no other city I’d rather be in because of what the government is doing for entrepreneurs," Hyman said.

Acknowledging the success of existing mentorship efforts such as SCORE and women and minority business development centers, Landrieu said, “Mentorship will be one of the pieces of a bill that we’re putting together. I am searching for way to strengthen government’s role in that.”

Mitchell told the committee that governments play an important role in supporting entrepreneurs by protecting property rights, policing fraud, and ensuring that contracts are enforced. But he warned against government involvement in choosing particular industries or groups to be nurtured.

Studies show a strong correlation between entrepreneurship and economic freedom, Mitchell said. Well-protected property rights, low and stable nondiscriminatory tax regimes, and few, limited regulations that are reasonable and thoughtful are the ingredients of the most successful economies. “It gets back to creating an environment that is nurturing but not trying to push buttons from top down saying, 'we’re going to redistribute growth',” he said.

Representing young entrepreneurs and recent college graduates, Gerber told the committee that the government could play a role in encouraging new business growth by promoting programs that encourage schools to put entrepreneurship in as high regard as traditional employment. “We want to provide to Americans under age 35 and recent graduates the opportunity to be entrepreneurs in an economy where the traditional job is losing value,” he said.

Evan Burfield, an entrepreneur on the panel who runs an organization called StartupDC and established an entrepreneurship competition in a Virginia high school, pointed to a disconnect between how the U.S. education system trains students and the characteristics that make a successful entrepreneur. "Learning to be entrepreneurial has to be done by doing. There is no curriculum around entrepreneurship," he said. Not only that, but "the nature of the way we educate our children goes fundamentally counter to the value set that is important to entrepreneurship. We have a system that teaches kids to not challenge the status quo, to regurgitate what they're told, and to not fail," said Burfield. 

Hyman acknowledged that the Harvard brand and a business school education that trained her to pitch her business idea was the biggest reason she was able to obtain funding. Senator Landrieu responded, "I'm thinking about all the smart wonderful kids ... who don't get in the door because they didn't go to Harvard or Stanford. When I hear some of my colleagues say, 'Oh, anybody can get access to capital,' I know that is not the truth. My job is to figure out how to get the smartest people, regardless of where they went to school, whether they're connected or not, connected. The country that figures that out the fastest will get there the soonest."

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