Opinion

Startups Need Policymakers to Chart a Roadmap for Recovery

As President-elect Joe Biden calls for policymakers to pass a comprehensive coronavirus relief package, startups are tired of waiting for targeted relief that would keep their doors open into the new year. While Congress took decisive action early on in the pandemic to help struggling workers and business owners through the CARES Act and the Paycheck Protection Program, subsequent relief efforts have done little to ensure the long-term viability of America’s innovators — particularly startups founded by underrepresented entrepreneurs. Now, as Congress revives stimulus negotiations, it’s important for policymakers to prioritize startup relief to ensure the survival of these critical economic drivers.

Startups are a leading source of future paychecks in America. These types of crucial, tech-oriented jobs are sorely needed as the country works to mitigate the persistent effects of the pandemic. They are responsible for the creation of approximately 3 million jobs a year and make critical contributions when it comes to addressing the impacts of the pandemic.

But startups by nature face extraordinary hurdles even in the best of economies. Access to capital and badly needed talent are near-constant struggles, and the pandemic has only compounded these concerns. Though some startups are reporting increases in venture capital funding, other founders — including women founders—are suffering. Founders of color also continue to face significant hurdles to accessing capital — from reduced access to PPP loans to continued limited access to venture capital. And although venture capital is a critical funding stream for many startups, most American startups are launched with limited funds derived primarily from personal or family savings — resources that are depleted for many Americans.

The initial round of relief rightfully focused on ensuring that employees continued to receive their paychecks. But without the job growth generated by American entrepreneurs, economic recovery for the nation will be a long way off. Though PPP loans provided a critical lifeline to a number of small businesses in need, many startups were left behind — with some unsure if they qualified, and others lacking significant payroll expenses to make the loans useful. These startups need help, and they need it now. When Engine conducted an October survey of startups in our network that received COVID-related government assistance, many entrepreneurs told us that the financial relief they received was insufficient and that more targeted relief was desperately needed. Many of these startups indicated that they need this relief to keep their business afloat through the end of the year.

That is why Congress cannot, and should not, sit idly by and wait for the new administration to take action; nor should policymakers content themselves with simply re-upping PPP. Startups need a tailored approach that will enable them to get the capital they need to grow their ventures, continue to serve as our nation’s job creators, and keep America at the forefront of innovation. Efforts should also focus on supporting underrepresented entrepreneurs — including female founders and founders of color — who have historically faced discriminatory obstacles in obtaining startup capital.

Engine, in consultation with policymakers and entrepreneurs, developed a roadmap for recovery that includes a number of targeted relief measures to provide long-term support to startups in future COVID relief packages. This roadmap includes proposals such as a dedicated startup fund that would lessen competition between small and large companies for critical financial assistance, as well as a federal angel investor tax credit to incentivize investments in startups.

Other commonsense measures, such as expanding the research and development tax credit, would support startups during this difficult time without imposing any direct financial burden on the government. And pursuing joint public-private equity investment in startups would incentivize private investments in nascent companies by providing a government match. This type of approach, in turn, would promote greater diversity across the startup community and ensure that investments are being directed to typically overlooked regions of the country.

Congress must take immediate actions to support Americans and businesses impacted by the ongoing pandemic. But policymakers cannot forget the important contributions of the startup community when charting the nation’s long-term economic recovery. It’s time for our leaders to ensure that startups have the support and assistance they need to grow, create jobs and keep the United States at the forefront of global tech innovation for years to come.

 

Jennifer Weinhart is a policy analyst at Engine, a policy, advocacy and research organization supporting startups.

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