We often think of innovation and entrepreneurship as the economy’s long game. Innovation is creation, which often takes time and experimentation, and entrepreneurship is an intensive effort to take an organization from an idea to a business model to a scalable organization. As a result, the recent stories surrounding the federal government’s shutdown don’t focus on innovation and entrepreneurship. But make no mistake, the combination of federal sequestration and the shutdown/budget impasse has the potential to set us back by several years in the areas of innovation and entrepreneurship. Why? Because the combination of the two events has slowed the development and/or implementation of federal regulations, halted important legislation and put important federal programs in jeopardy.
Policy makers can certainly debate the importance of individual programs, but there is general agreement that America’s competitive advantage lies in its innovation infrastructure and the entrepreneurs that utilize it. We are the world leader in innovation research funding, with over $157 billion coming from the federal government alone in FY 2009. Our research universities and startups enclaves remain the envy of the world. And our entrepreneurs, according to the Kauffman Foundation, have created the majority of new jobs in the United States since 2007. This is reflected in the rising number of entrepreneurship programs at universities (over 400 nationally), accelerators in communities, and investment capital going into startups.
Many of these institutions focus on the commercialization of innovation that derives from federal research grants. But the technologies and innovation that spin out of our federally-funded research have slowed down in 2013. Sequestration resulted in an across-the-board cut in research and development grants to researchers and a reduction in programs to increase lending to entrepreneurs and small businesses. During my time in the Obama Administration, I worked with 26 federal agencies that were trying to commercialize a greater amount of the technology, innovation and research that their Departments and agencies supported. The idea was to make government data, technologies and RFP’s available to private sector entrepreneurs. Many of those plans have been tabled until FY 2015 – after the midterm elections next year.
Several promising programs to boost American competitiveness face an uncertain future, including the National Science Foundation’s I Corps program, the NIH Centers for Accelerated Innovation and the Department of Defense’s program to nurture 3D printing in the United States. For entrepreneurs, important sources of investment capital backstopped by the U.S. Small Business Administration have been halted temporarily. On the regulatory side, we have yet to see final rules and regulations around crowd funding, which was legalized in the 2012 JOBS Act, or a reauthorization of the America Competes Act, which has been critical in giving federal agencies the tools to utilize outside innovation and commercialize technologies more efficiently. There is other legislation, such as immigration reform, and the Startup 3.0 Act, that can also be of enormous impact to entrepreneurs if passed.
One example of how we are wasting away a competitive advantage is in 3D printing. Several federal agencies, from the U.S. Department of Health and Human Services to the Pentagon to the U.S. Department of Commerce were planning to utilize this new technology to serve their constituents better. This included research funding for, and procurement of, products and services from 3D printing companies. Those plans moved to the back burner in March, when sequestration began. Now, we have a shutdown and a budget impasse that will last into 2014. So many of these plans will not become reality until 2015 – a whole two years after we committed to embrace the technology. For entrepreneurs in a nascent, but potentially game changing industry like 3D printing, this is a life time. While other nations invest heavily in supporting industries or promoting new technologies, we are unilaterally disarming in an area where we have a clear competitive advantage.
At some point, we will have resolution over the federal budget. And we still have an economy struggling to recover and grow. So the focus of policy makers must be around economic competitiveness and job creation through private enterprise. This means getting our innovation and entrepreneurship agenda back on track. The President already has an incredible group of leaders in the National Advisory Council on Innovation and Entrepreneurship that can provide recommendations for a second term. He also has a new set of Cabinet Secretaries to implement those recommendations and continue some of the great work of the first term. In Congress, innovation and entrepreneurship have strong bi-partisan backing, as exemplified by the passage of the JOBS Act in 2012 and the sponsorship of the Startup 3.0 Act.
While we focus on the short term symbols of the budget impasse, such as furloughed employees and shuttered national parks, let’s not forget what an entire year of uncertainty is doing to our investment climate – for innovators, entrepreneurs and financial investors. If we cripple this group, the government shutdown will have far greater implications for our future than we can measure today.
