During the Presidential race, then candidate Barack Obama promised to support entrepreneurs and innovation. The Obama Administration is now coming up on the end of the first 100 days. It is of course too early to be definitive about any new administration, but it is a popular milestone worthy of marking with a longer than normal post at some early indicators as to how entrepreneurs and job creators will fare under this President and Congress.
President Obama clearly understands the importance of science and technology in an innovation economy. During his campaign, he promised incentives for the information technology sector, $150 billion to fund energy R&D and technology implementation, and $50 billion for an energy venture fund, among other initiatives to foster innovation.
In his speeches, he also talked up entrepreneurship. At the Democratic Convention, Obama said “We measure the strength of our economy not by the number of billionaires we have or the profits of the Fortune 500, but by whether someone with a good idea can take a risk and start a new business.” And on February 24, during the state of the nation address, he expressed his confidence in entrepreneurs getting us out the crisis when he said: “The weight of this crisis will not determine the destiny of this nation. The answers to our problems don’t lie beyond our reach. They exist in our laboratories and our universities, in our fields and our factories, in the imaginations of our entrepreneurs and the pride of the hardest-working people on Earth.”
Once in office, the new Administration of course faced a major distraction – the economic crisis. While the distraction of putting out fires might excuse the absence of many proposals and actions around stimulating new entrepreneurship, the Administration has been able to take some steps. The $800 billion stimulus includes large investments in innovation in areas such as energy technology and broadband. The $22.5 billion for R&D funding in the American Recovery & Reinvestment Act (ARRA) is biggest increase in science funding since Sputnik. This funding will support projects and programs under the supervision of the NASA (1 billion), the National Science Foundation (3 billion), the Department of Energy (5.5 billion), the National Institutes of Health (10 billion), among other government agencies. It hopes to ensure we benefit from more low-carbon coal technologies (DOE), cancer research (NIH), global climate change monitoring (NASA), and from beneficiary programs in other high-priority areas.
Of note though is that most of this funding is expected to benefit shovel-ready projects. This means that the innovations these funds will support are already in the innovation pipeline. This is largely because funds must be obligated quickly (approximately 1 to 2 years) in order to jumpstart our economy in the short-term. While this might be of concern to traditional basic research, it is clearly an opportunity for savvy entrepreneurs who can take these innovations to the market. Entrepreneurs are the ones who can help ensure that this new shovel ready “R&D” funding thrust has a positive long-term impact on the economy and the labor market by ferreting out opportunities. Clearly the test will be whether there are policies and programs that adequately support start-ups and early-stage financing to help entrepreneurs make this happen.
Even though much of the Stimulus money impacts innovation already in the pipeline, basic science under the Obama Administration will fare well. This year’s budget allocations for DOE, NSF, and other agencies responsible for R&D already saw a boost. NSF received a 7% budget increase from last year and is expected to receive funding in FY2010 that is 16% over that in FY08. This helps break the trend of declining federal funding for R&D. For example, federal spending on energy R&D is about half what it was in 1980. This is good for future science-based entrepreneurship.
We have not seen signs though of any emphasis on science education. I would hope that support for the STEM fields (Science, Technology, Engineering and Math) in higher education will receive a more attention. Only through a boost in these areas, can we hope to push for a great science advance. With high-technology sectors such as energy technology being increasingly seen as areas for “jobs of the future,” we need to ensure that we nurture the talent these areas are attracting.
Beyond science, there are some signs that entrepreneurship and the “job creation” it fosters is emerging as potentially a higher priority than initially thought. A pressing challenge these days is of course financing for start-ups. The Obama administration announced in March that the 21 largest banks receiving government money must report monthly on how much lending they do to small businesses. Even banks that are not receiving government funds have been told by the Administration to make an extra effort to increase small business lending. President Barack Obama and Treasury Secretary Timothy Geithner also unveiled last month a package aimed at small businesses, which includes reduced small-business lending fees and an increase on the guarantee to some Small Business Administration loans.
Congress is also looking to small firms, particularly to small high-tech firms to develop the new products and technologies that can rejuvenate our economy. The House Committee on Science and Technology has been examining programs that encourage innovation at small high-tech firms. Just last Thursday (04/23/2009), its Subcommittee on Technology and Innovation held a hearing on the Small Business Innovation Research (SBIR) and the Small Business Technology Transfer (STTR) programs. Both of these programs were created over 25 years ago to support and encourage small high-tech entrepreneurial firms. The authorization for SBIR and STTR expires at the end of July. The Committee is working toward a reauthorization that will structure these programs to reflect the current environment and the international competitive market American high-tech firms face.
Congress and the new Administration clearly understand that investments in science and technology foster economic growth, create millions of high-wage jobs, increase our competitiveness, and improve the quality of life for Americans. The innovations that we need can fix old problems, like the growing environmental pressures, as well as create new productivity-enhancing technologies that we do not even know we need yet. The challenge ahead for the new Administration now is coupling sustained investments in innovation with entrepreneurship.
The appointment of Karen Mills as SBA Administrator is clearly an indication that the President intends to include high growth entrepreneurs in his Administration’s job creation strategy. We are likely, I hope, to see an SBA that embraces the needs of these job creators in addition to its traditional small business constituency. I only hope that the creativity of exploring new ways to support our growth entrepreneurs does not get distracted by smaller debates around such issues as whether to allow equity backed start-ups access to SBIR programs. We have yet to see what Mills will propose, but the time is ripe for statesmanlike leadership in presenting initiatives that look beyond the venture capital focused views as to how to enable great American pioneers to create jobs and help recover our economy.
After the inauguration, President Obama made clear that “the entrepreneurial spirit that is the key to our competitiveness” needs to be nurtured (2/12/2009 Address on Lincoln’s 200th Birthday). As the Administration catches it breath, we offer a few ideas here on Entrepreneurship.org that can help create that enabling environment for tomorrow’s job creators.
Comments are welcome as always.