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Governments and Startups Just Don’t Mix

The White House effort to boost U.S. innovation and entrepreneurship faces a divide: government agenda vs. venture capitalism’s highly developed profit motive

By Stacey Higginbotham

 The White House on Monday, Jan. 31, announced The Startup America Partnership, an effort to boost innovation and entrepreneurship in the U.S. through a program that encourages private companies to offer mentorship and possibly funding for entrepreneurs—but it mostly looks like an opportunity to get a lot of press, with low returns for actual startups. The goal of the program is to “continue to marshal private-sector resources to spur entrepreneurship in the U.S., ” something I’d argue is already happening at most of the levels the program plans to concern itself with. It will focus on replicating successful accelerator programs such as Denver’s TechStars, expanding entrepreneurship education, and boosting the commercialization of new technologies out of colleges.

The program has $200 million in funding from Intel (INTC), $150 million from IBM (IBM), and at least $4 million from Hewlett-Packard (HPQ), as well as partnerships with organizations such as The Kaufmann Foundation and existing accelerators such as TechStars. Facebook plans to help too, by launching Startup Days: a series of 12 to 15 events around the country to provide entrepreneurs with access to expertise, resources, and engineers to build their businesses. Steve Case, co-founder of AOL (AOL), chief executive officer of Revolution LLC, and chairman of the Case Foundation will chair the initiative.

When done well, the things the program will focus on can help boost the number of startups in a region, but building a startup-centric culture is like cultivating a healthy garden: There are a lot of different things to get right, and those things will vary based on where you live and what you have to work with. It’s not enough to try to build a TechStars program in San Antonio, because the potential employee base there might not have the skills or the interest in that type of program. With commercialization, there are already plenty of universities that have spent years boosting their success rates for commercializing technology by streamlining IP licensing documents, changing the incentives for professors from a focus on publishing to a focus on entrepreneurial endeavors, and even partnering with some of the same companies participating in this program that help fund technologies through the valley of death from lab to product. In some places these attempts work, and in others they don’t. Another effort (and one where government can help) highlighted Monday is a faster patent application process, limiting it to one year for companies that have received venture funding and want to eliminate patent-related uncertainty quickly.

Education Component

One area where such a partnership might help, however, is education. Entrepreneurs may be born rather than made, but many of them have much of their entrepreneurial spirit pummeled out of them by the U.S. education system, which can reward keeping your head down and sticking with the tried and true—not exactly what entrepreneurs are good at. I’m curious to see how the education component of this works, especially at the early grade levels, as opposed to starting in colleges or high schools.

Any government-encouraged startup program also has to deal with a fundamental divide: Governments have very different agendas than the typical startup generators, which are made up of entrepreneurs and venture capitalists. At their best, governments want to boost the overall economies of their constituent base and want to spread diversity and other warm and fuzzy ideals. For example, the program will offer roundtable discussions in cities to teach people about building businesses and there will be an incubator created to help veterans build companies. At their worst, governments can be a source of patronage, and have a tendency to fund people or businesses that aren’t the best. On the flip side, both entrepreneurs and VCs are pretty Darwinian and ruthless when it comes to allocating their time and resources; their goal is to make money.

So other than some good publicity and a friendly program that will point back to everything President Barack Obama is doing for entrepreneurs, I’m not sure this effort will make that big a dent. Sure, it helps get a bunch of names together to push entrepreneurship, but most forward-thinking regions and universities are already working on building programs for better commercialization and many incubators are providing mentorship where there’s interest. Perhaps we’re beginning to see the creation and solidification of an “innovation” lobby that will push for issues close to startups’ hearts such as more H-1B visas, a faster patent application process, or opening up monopoly markets.