Three Things for Government to Do to Create Jobs and Help startups

New York Times has a great article today “To Create Jobs, Nurture Startups”. The article points out some important facts and also problems related to the government policy:

Start-ups are where the job-creation action really occurs.

Research published last month by three economists has found that once the age of the businesses is taken into account, “size plays virtually no role,” says John C. Haltiwanger, a co-author of the study and an economist at the University of Maryland. “start-ups are where the job-creation action really occurs.”

A few weeks ago, I wrote about job creation, the importance of startups and how the government policy has been failing a few weeks ago at Yottaa’s blog site. In the article, I pointed out a few examples that the “extra hardship” government policy is bringing to the startup community. Further, I asked: What is the role of government and where should their priority be? Should they be helping jobs creation and drive economic recovery or should they be creating laws that limit that growth?

In an economy where official unemployment rate at 9.5% (the real unemployment rate is probably much higher), all politicians talk about job creation. The government is spending hundreds of billions of dollars to “stimulate” the economy. -However, the main job creation engine, startups, has never received proper attention.

With only a small portion of the almost trillion dollar designed for “stimulus” and wall street, the government could make a real difference in the startup community and a real sustainable job creation engine to transform the economy for years to come. Here is the list of things that the government can do:

1. Make it possible for early stage startups to get bank loans and line of credit – both are impossible for early stage startups right now.

   While it was important for the government to step in helping consumer mortgage, it is equally important for the government to step in creating incentives for banks to change their attitude about startups. While innovation-minded countries such as Singapore and China have implemented policies to provide many forms of financial support to startups, US startups are very much left on their own (and maybe their venture investors) – these are the things that government policy can make a real difference.

   (A side note: I highly recommend you read the Zappos story and Tony Hsieh’s book “Delivering Happiness”. The difference between success and failure can be awfully small. A few month’s cash flow can make the difference between a $1.2B exit and bankruptcy).

2. Make it easier and more economical for early stage startups to provide benefits to employees.

   I went through this process at Yottaa recently and at Nexaweb a few years ago. -Boy, let me just say that the smaller the newer a company is, the worse deals you get.

3. Make patent less “deterring” to startups.

   The patent system deter startup innovations? Sound strange but it is true. there are lots of issues with the current patent system in general. The big issues for startups in particular are that It takes hundreds of hours and tens of thousands of dollars to apply for a patent and tt take 4 to 7 years to get a patent granted – during this eternity, startups don’t get any patent protection.

 

I am aware of some other initiatives (such as the Startup Visa Act). I personally think the above would be my top three. What do you think?