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DEVELOPING AND STRENGTHENING HIGHGROWTH 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 
(II) 

COMMITTEE ON SMALL BUSINESS AND ENTREPRENEURSHIP 

ONE HUNDRED TWELFTH CONGRESS 

MARY L. LANDRIEU, Louisiana, Chair 

OLYMPIA J. SNOWE, Maine, Ranking Member 

CARL LEVIN, Michigan 

TOM HARKIN, Iowa 

JOHN F. KERRY, Massachusetts 

JOSEPH I. LIEBERMAN, Connecticut 

MARIA CANTWELL, Washington 

MARK L. PRYOR, Arkansas 

BENJAMIN L. CARDIN, Maryland 

JEANNE SHAHEEN, New Hampshire 

KAY R. HAGAN, North Carolina 

DAVID VITTER, Louisiana 

JAMES E. RISCH, Idaho 

MARCO RUBIO, Florida 

RAND PAUL, Kentucky 

KELLY AYOTTE, New Hampshire 

MICHAEL B. ENZI, Wyoming 

SCOTT P. BROWN, Massachusetts 

JERRY MORAN, Kansas 

DONALD R. CRAVINS, JR., Democratic Staff Director and Chief Counsel 

WALLACE K. HSUEH, Republican Staff Director 
(III) 

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 
Page

IV 

—Continued 

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 
(1) 

DEVELOPING AND STRENGTHENING HIGHGROWTH 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. 
2 

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. 
3 

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 hightech, 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 Massa-
4 

chusetts, 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. 
5 

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 
6 

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:] 
7 
8 
9 

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 
10 

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:] 
11 
12 

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:] 
13 
14 
15 
16 

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 
17 

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. 
18 

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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22 
23 
24 

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 growthminded 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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27 

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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30 
31 

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 
32 

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. 
38 

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. 
39 

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 
40 

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 
41 

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 
42 

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 
43 

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 nonUS-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. 
44 

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 ev- eryday 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 
45 

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? 
46 

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. 

[The slide presentation follows:] 
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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 entre-
65 

preneurs 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. 
66 

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. 
67 

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. 
68 

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 
69 

$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 
70 

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 
71 

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. 
72 

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 
73 

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 
74 

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. 
75 

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. 
76 

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 
77 

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 
78 

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 
79 

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. 
80 

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. Ex-
81 

ports 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 En- ergy, 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. 
82 

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 
83 

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. 
84 

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 highgrowth 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. 
85 

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 
86 

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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