Today, the Subcommittee on Technology and Innovation held a hearing to examine the current state of small, innovative startup companies, which are engines of both transformative innovations and job creation. Witnesses testified on obstacles limiting those with the ideas and desire to either start a new company, or take a fledgling company to a place of rapid growth. Several witnesses highlighted obstacles including burdensome regulatory hurdles or uncertainty resulting from federal policies.
In his opening statement, Subcommittee Chairman Ben Quayle (R-AZ) stated, "As this Subcommittee sits at the intersection of technology and innovation, we are uniquely positioned to address topics affecting competitiveness of emerging high-growth industries." He continued, "In these difficult times, it is important that we continue to empower our nation's innovators to maintain our economic competitiveness."
New businesses have historically played a major role in advancing both job creation and innovation in the U.S. economy. According to research conducted by the Kauffman Foundation and the U.S. Census Bureau's Business Dynamics Statistics, startup companies (those in their first year of existence) added an average of 3 million jobs per year between 1977 and 2005, whereas existing companies (those aged one year and older) experienced net job losses over the same period.
Mr. Brink Lindsey, Senior Scholar in Research and Policy at the Kauffman Foundation, stated that "the ultimate answer to restoring both innovation and vigorous job growth lies in policy reforms that create a more favorable environment for the creation and growth of new businesses. Barriers to entrepreneurship need to be identified and systematically dismantled."
Highlighting such a barrier, Mr. Ray Rothrock, Partner at a venture capital firm, argued that financial regulations imposed in the early 2000s "have had an unintended negative impact by increasing the friction for small emerging growth private companies seeking access to public capital." Mr. Rothrock continued, "In short, it now costs more and takes twice as long for young companies to go public. This has produced negative impacts on U.S. job creation -- given that 92 percent of a company's job growth occurs after its initial public offering -- and on the health of our entire capital markets system."
Mr. Julian Mann, Vice President of Product Development and Research at Skybox Imaging Inc. said that the Federal Government often lags behind the free market."Existing government acquisition models have not kept up with the pace of technological innovation," Mann said. "Many innovative technology companies do not even consider doing business with the federal government because it is simply too costly to do so. Entrepreneurs are successful in the private sector because they find ways of delivering capabilities that do more with less; this is the same challenge that we face as a nation today."
The following witnesses testified at today's hearing:
Mr. Brink Lindsey, Senior Scholar in Research and Policy, Ewing Marion Kauffman Foundation
Mr. Julian Mann, Co-Founder and Vice President, Product Development and Research, Skybox Imaging
Mr. Ray Rothrock, Partner, Venrock
Mr. Steve Dubin, Former CEO, Martek Biosciences; Senior Advisor to DSM Nutritional Products