Startup America—Dead on Arrival

For its first few decades Silicon Valley was content flying under the radar of Washington politics. It wasn’t until Fairchild and Intel were almost bankrupted by Japanese semiconductor manufacturers in the early 1980’s that they formed Silicon Valley’s first lobbying group. Microsoft did not open a Washington office until 1995.

Fast forward to today. The words “startup,” “entrepreneur,” and “innovation” are used fast, loose and furious by both parties in Washington. Last week the White House announced Startup America, a public/private initiative to accelerate accelerate high-growth entrepreneurship in the U.S. by expanding startups access to capital (with two $1 billion programs); creating a national network of entrepreneurship education, commercializing federally-funded research and development programs and getting rid of tax and paperwork barriers for startups.

What’s not to like?

My observation. Startup America is a mashup of very smart programs by very smart people but not a strategy. It made for a great photo op, press announcement and impassioned speeches. (Heck, who wouldn’t go to the White House if the President called.) It engaged the best and the brightest who all bring enormous energy and talent to offer the country. The technorati were effusive in their praise.

I hope it succeeds. But I predict despite all of Washingtons’ good intentions, it’s dead on arrival.

Dead On Arrival
I got a call from a recruiter looking for a CEO for the Startup America Partnership. Looking at the job spec reminded me what it would be like to lead the official rules committee for the Union of Anarchists.

There are three problems. First, an entrepreneurship initiative needs to be an integral part of both a coherent economic policy and a national innovation policy – one that creates jobs for Main Street versus Wall Street. It should address not only the creation of new jobs, but also the continued hemorrhaging of jobs and entire strategic industries offshore.

Second, trying to create Startup America without understanding and articulating the distinctions among the four types of entrepreneurship (described later) means we have no roadmap of where to place the bets on job growth, innovation, legislation and incentives.

Third, the notion of a public/private partnership without giving entrepreneurs a seat at the policy table inside the White House is like telling the passengers they can fly the plane from their seats. It has zero authority, budget or influence. It’s the national cheerleader for startups.

The Four Types of Entrepreneurship
“Startup,” “entrepreneur,” and “innovation” now means everything to everyone. Which means in the end they mean nothing. There doesn’t seem to be a coherent policy distinction between small business startups, scalable startups, corporations dealing with disruptive innovation and social entrepreneurs. The words “startup,” “entrepreneur,” and “innovation” mean different things in Silicon Valley, Main Street, Corporate America and Non Profits. Unless the people who actually make policy (rather than the great people who advise them) understand the difference, and can communicate them clearly, the chance of any of the Startup America policies having a substantive effect on innovation, jobs or the gross domestic product is low.

1. Small Business Entrepreneurship
Today, the overwhelming number of entrepreneurs and startups in the United States are still small businesses. There are 5.7 million small businesses in the U.S. They make up 99.7% of all companies and employ 50% of all non-governmental workers.

Small businesses are grocery stores, hairdressers, consultants,

Author: Steve Blank

A prolific educator, thought leader and writer on Customer Development for Startups, Steve Blank is a retired serial entrepreneur who teaches, refines, writes and blogs on “Customer Development,” a rigorous methodology he developed to bring the “scientific method” to the typically chaotic, seemingly disorganized startup process. Now teaching entrepreneurship at three major universities, Blank co-founded his first of eight startups after several years repairing fighter plane electronics in Thailand during the Vietnam War, followed by several years of defense electronics work for U.S. intelligence agencies in “undisclosed locations.” Four Steps to the Epiphany, Blank’s fast-selling book, details the Customer Development process and is increasingly a “must read” among entrepreneurs, investors, and established companies alike, when the focus is optimizing a startup’s chances for scalability and success. After 21 years driving 8 high technology startups, today Steve teaches entrepreneurship to both undergraduate and graduate students at U.C. Berkeley’s Haas School of Business, Stanford University’s School of Engineering and the Columbia/Berkeley Joint Executive MBA program. His “Customer Development” teaching and writing coalesce and codify his experiences and observations of entrepreneurs in action, including his own and those he advises. “Once removed from the day-to-day intensity of founding a startup, I was able to observe a pattern that distinguishes successful startups from failures,” Blank says. In 2009, he earned the Stanford University Undergraduate Teaching Award in Management Science and Engineering. The San Jose Mercury News listed him as one of the 10 Influencers in Silicon Valley. In 2010, he was earned the Earl F. Cheit Outstanding Teaching Award at U.C. Berkeley Haas School of Business. Despite these accolades, Steve says he might well have been voted “least likely to succeed” in his New York City high school class. Steve Blank arrived in Silicon Valley in 1978, as boom times began. His early startups include two semiconductor companies, Zilog and MIPS Computers; Convergent Technologies; a consulting stint for Pixar; a supercomputer firm, Ardent; peripheral supplier, SuperMac; a military intelligence systems supplier, ESL; Rocket Science Games. Steve co-founded startup number eight, E.piphany, in his living room in 1996. In sum: two significant implosions, one massive “dot-com bubble” home run, several “base hits,” and immense learning leading to The Four Steps. An avid reader in history, technology, and entrepreneurship who seldom cracks a novel, Steve has followed his curiosity about why entrepreneurship blossomed in Silicon Valley while stillborn elsewhere. It has made him an unofficial expert and frequent speaker on “The Secret History of Silicon Valley.” Steve’s interest in combining conservation with best business practices had Governor Arnold Schwarzenegger appoint him a Commissioner of the California Coastal Commission, the public body which regulates land use and public access on the California coast. He also serves on the Expert Advisory Panel for the California Ocean Protection Council. Steve serves on the board of Audubon California, was its past chair, and spent several years on the Audubon National Board. A board member of Peninsula Open Space Land Trust (POST), Blank recently became a trustee of U.C. Santa Cruz and a Director of the California League of Conservation Voters (CLCV). Steve’s proudest startups are daughters Katie and Sara, co-developed with wife Alison Elliott. The Blanks live in Silicon Valley.