Economic Development Now

At IEDC’s 2022 Leadership Summit, Right to Start CEO Victor Hwang spoke about how to encourage entrepreneurship and increase startup growth in cities across the United States. He presented startling facts about U.S. startups, barriers entrepreneurs face, and actions to end the “startup slump”.

Hwang pointed out several aspects of startups and entrepreneurship that policymakers often miss. For one, startups and young businesses are not just clustered in the tech sector, but can be found in nearly every business area. These businesses account for a large portion of U.S. net job growth and are major contributors to real GDP and wage growth. Hwang also emphasized that the number of U.S. startups has dropped significantly in the past four decades, forming a period he calls the “startup slump”.

The barriers that entrepreneurs face to start their businesses have grown tremendously, according to Hwang. There are small but significant legal barriers for many industries, and while some are in place for safety reasons, he argues that policymakers need to ensure there is a balance between entrepreneurship and safety. There are also systemic biases that affect access to capital and business growth for women and minority entrepreneurs.

While these barriers significantly disincentivize entrepreneurship, Hwang pointed out numerous policy actions that can be taken to address them. Lowering business registration or certification fees can help in this area, along with providing increased access to capital and better banking for women- and minority-owned startups. One major barrier that will be a challenge to overcome is finding young talent. Since startups usually offer more growth opportunities but lower total compensation compared to larger companies, they are at a disadvantage unless they are willing to take risks. To get out of the startup slump, Hwang also advocates for active entrepreneurial outreach networks and state and federal interagency collaboration to boost startup creation.

Lastly, Hwang noted that 81 percent of entrepreneurs say governments at all levels favor big businesses over small businesses and entrepreneurs. It is up to policymakers to ensure entrepreneurs can effectively create, operate, and grow these startups that drive the economy forward.