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Public Statements

Startup Companies

Floor Speech

Location: Washington, DC


Mr. WARNER. Mr. President, I rise to speak on some of the issues that were just addressed by the Republican leader; that is, the legislation we will hopefully turn to next about creating jobs.

There are a lot of occasions when legislation comes to the floor of this Senate where I, similar to many Members, have a view on it, and we kind of weigh in on our positions. But this legislation, as it comes forward, is something for which I have more than just an intellectual or political or philosophical viewpoint. This legislation actually involves the business I was in for nearly 20 years.

I was proud of the fact that starting in the early 1980s--up until the time I was elected Governor of Virginia--I was involved, originally as an angel investor and then as a venture capitalist, in helping start companies across this country. I am proud to have been involved as a venture capitalist in funding almost 70 companies--those companies that grew to now employ tens of thousands of Americans.

As the Acting President pro tempore and some of the folks realize, a lot of those companies I was involved with were involved in telecommunications. I was the cofounder of Nextel, although I cannot seem to turn my cell phone off at the appropriate times. But I think that background gave me some sense of what it means to find a management team to find the capital and get a company started, to allow it to grow, create jobs, create economic prosperity.

This issue around capital formation, encouraging startups, encouraging entrepreneurs, is an issue on which we ought to be able to come together.

I see my good friend, the Senator from Kansas, who I know is going to speak in a few moments after I am finished. He and I have worked together on legislation called the Startup Act that has been endorsed by tech councils across the country, has been endorsed by and builds upon the work of the Kauffman Foundation, has been endorsed by and builds upon the work of the President's Council on Jobs and Competitiveness.

This ought to be an area where we can find common ground. Some of the ideas we are going to be discussing in this legislation are not only ideas Senator Moran and I have worked on but I know Senator Coons and Senator Rubio and Senator Toomey and Senator Schumer have worked on, also Senator Tester, Senator Merkley, and Senator Brown. There is a list, actually, in terms of the sponsors or cosponsors on a number of these bills--a number not in the single digits but literally in the dozens, probably in excess of 20 and, for the most part, almost every one of these pieces of legislation is bipartisan.

Why do we need to do this? Because if we look where the jobs have been created in America over the last 20 years, for the most part we find, unfortunately, the job growth from companies that are in the Fortune 1000 has been flat, if not slightly negative.

So while we applaud and support America's largest businesses because of increased productivity, because of globalization, those are not the companies adding jobs.

While every Member of the Senate, when they stand, stands and applauds small business--and I know my colleagues on the floor support small business, the traditional small businesses--the butcher shop, the retailer, the hardware store--there has not been much job growth amongst those companies as well.

So where have the jobs come from? The jobs have come from startup businesses, the kinds of businesses where an entrepreneur tries to scrape up a little bit of capital and takes an idea to market. Nearly 80 percent, according to the Kauffman Foundation, of all the new jobs created in America in the last 20 years have come from these firms.

We oftentimes think of these firms as technology firms. Many of them are--the Facebooks and Googles. But there are also the companies that span the reach of all kinds of different areas--the Lululemons, in terms of clothing stores, or Under Armour, a company that is in Maryland. These are the kinds of companies we need to do more to support in their growth, particularly right now when our economy is still struggling.

So what are we trying to do in this legislation? To my mind, there are three or four areas these bills need to address.

First of all, we need to make it easier for these startup companies to raise capital. Over the last decade, a lot of the traditional sources of capital raising have actually diminished, particularly since the financial crisis. The number of venture capital firms that exist, that fund companies, has actually decreased.

The ability for a company to go public--for which, perhaps, we got a little too excessive in the late 1990s, when we saw companies rush to go public and then that bubble burst and those companies failed--but that access to the public markets has been seriously constrained, partially because of added regulations, partially because of added reporting requirements, and partially because there has been a recognition that going public may not have been the right route for all these companies.


Mr. WARNER. The result is, many of these startup companies end up having to sell to a larger company, and many of the ideas and many of the job-creation opportunities are then constrained.

We need to make it easier for these companies to access capital. Some of the ideas that are going to be proposed in the legislation will do that. Some of the reforms to reg A, reg D--trying to look at raising the number of investors a startup company can have before they have to report--all are sensible, appropriate incentives to help these startup companies get going.

I understand the very important requirements put in place by the so-called Sarbanes-Oxley legislation a few years back, but the cost of going public for startup companies now, on average, is $3 million to $4 million. Those costs are not costs that many of these startup companies can absorb. So some of the sensible reforms that have been proposed by Senator Toomey and Senator Schumer that I have been a proud cosponsor on, on a so-called on-ramp for startup companies, I think make sense as well.

There are also other tools we can use to help startup companies as they try to access capital.

We have seen a dramatic transformation of the Internet over the last 20 years. Every business, every part of our life has been changed. There is now the ability to use the Internet as a way for small investors to get the same kind of deals that up to this point only select investors have gotten that have been customers of some of the best known investment banking firms, where we can now use the power of the Internet, through a term called crowdfunding. There has to be appropriate investor restraints under this and investor protections, but crowdfunding using the Internet is another source of capital.

I hope that will be included in the legislation we are looking at, and I wish to commend Senator Bennet and Senator Merkley and Senator Brown for working hard on that.

But there are other pieces of this legislation we have to take on if we are going to compete and win in this global competition for talent and ideas and have these jobs created in America. That is why I was so proud to work with Senator Moran in our startup legislation that says attracting capital is one part of making a company successful. Another part of making a company successful is winning the worldwide competition for talent. Unfortunately, time and again what we are doing in this country is losing that competition for the best talent. There are literally tens of thousands of jobs that are going unfilled right now because we do not have enough American-born scientists, engineers, and mathematicians with graduate degrees.

Because we have the world's best system of higher education, we train many of the world's best and brightest. But with our current immigration policies, we train those folks at the Virginia Techs, the University of New Mexicos, get them that Ph.D. in engineering, and then we send them home when they have an opportunity to get a job in this country. We cannot talk to a tech company anywhere in America that says we are losing the competition for talent.

So what does our legislation do? We actually do what tech firms have called for for years, which is, in effect, to staple that green card to those individuals who get not a bachelor's degree but a master's or Ph.D. in the science, technology, engineering or math field, the so-called STEM fields, if they have a job opportunity in America.

We allow that intellectual capital and talent to actually reside and help create jobs. What we do as well is create a new category--in effect, an entrepreneur's visa. We have a very narrow category within our immigration policies right now that allows certain immigrants who want to come, invest in other companies in this country, and hire Americans, to get access to a visa. We would expand that category.

So if an individual can demonstrate that they have raised capital and are willing to hire a number of Americans, why do we not allow them to start that job in America rather than going somewhere else to do it? So I believe we put in place small changes to our immigration policies that will, again, allow us to compete.

Our startup legislation looks at how we can encourage our universities because we need capital, we need talent, but we also need the intellectual capital, and that comes from ideas. Our universities across this country do a good job of doing basic research. Our universities do not do as good a job as they could and should in moving those ideas from the laboratory into the marketplace.

I know my time is about to expire so I will wrap up. What we do in our legislation as well is we do not add additional funding, but we take a small sliver, fifteenth-tenths of 1 percent of our existing research and development dollars, and actually use that as incentive funds to get ideas out of the laboratory into commercialization.

So I know we are going to move to this legislation shortly. I do believe there were a number of Members, particularly newer Members, who have been working on this legislation across the aisle. That was an attempt to put together a broad bipartisan bill. I am not sure that is going to come to pass on the Senate floor, unfortunately, because on this issue I do agree with the Republican leader. This should not be Republican or Democratic legislation. This should be a bipartisan piece of legislation that would actually encourage startups to get the capital, to get the talent, to get the ideas, so we can actually make sure we move forward on job creation.

The data is clear. The jobs over the last 20 years have come from these kinds of startup companies, the kind I was proud to help fund in my 20 years of identifying funding and working on these startup ventures. We need to do all we can to support them. We need to move this legislation as quickly as possible. My hope is that we can move beyond the rather narrowly drawn capital formation legislation that we are going to look at and look at these other areas around crowdfunding, around appropriate visa policies, around commercialization of intellectual capital to move these forward.

I am going to yield the floor for my friend and colleague, someone who has been a leader on this issue as well, someone whom I know has been criss-crossing the country--over the last couple of days, recently, he came back from Austin, TX, where he was celebrated as a startup guru--and that is my friend, the Senator from Kansas. Let me also acknowledge the Senator from South Dakota who has been a leader, particularly on the regulation D reform.

I yield the floor.


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