Editor’s Note: Steve Case, co-founder of America Online, is chairman and chief executive of Revolution and author of “The Third Wave: An Entrepreneur’s Vision of the Future.” John K. Delaney, a candidate for the 2020 Democratic presidential nomination, served as a congressman from Maryland from 2013 to 2019. He is a senior advisor at Revolution. The opinions expressed in this commentary are their own.
Economic opportunity in the United States is alarmingly concentrated. Entrepreneurs outside of the coastal tech hubs, like Silicon Valley, have fallen behind as the information economy continues to bring jobs and prosperity to too few people in too few places. Although talent is equally distributed, economic opportunity is not. And without action, the pandemic threatens to further exacerbate this disparity, knocking further back — or even out — entrepreneurs in geographies often overlooked by investors.
Last year, New York, Massachusetts and California together accounted for 84% of total venture capital assets under management in the United States. And the money continues to flow from investors to the same people in the same places, further entrenching the yawning geographic divide in this country.
The opportunity inequity between the coastal tech hubs and cities in the middle of the country, accelerated by globalization and automation, has gone on for far too long. If we — Democrats, Republicans and independents — want America to continue to be a source of radical innovation, we cannot afford to ignore this problem any longer.
So what can President-elect Biden’s administration do about it? He ran on a platform of Build Back Better, but what can “better” be for entrepreneurship? Below are some good places to start:
Revive the Paycheck Protection Program (PPP)
One of the most important things a Biden administration can do is elevate the importance of startups, especially as it pertains to Covid-19 relief.
While we encourage relief for small businesses, we want to ensure that economic support is not only for existing businesses. The reason for this is simple: Startups create jobs. If small businesses are shutting down — something that happens even in the absence of a global pandemic — then we need to make sure we are creating new companies.
We can do so with existing PPP funds — more than $130 billion earmarked for small business relief remains untapped. The federal government should revive that program immediately to help existing small businesses while also prioritizing startups that apply for loans based on their plans to create jobs. The government should then grant forgiveness for those loans based on how many jobs come to fruition.
We are seeing an exceptional rise in new business applications; these new business owners will require tools and capital to grow and create the kind of jobs that change communities — the next relief package should give it to them.
Give more to overlooked regions
Second, Covid relief shouldn’t be the same for all economies. The ability of cities and states to recover from this health and economic crisis will differ based on their ability to sustain and grow innovation ecosystems. Case in point: the Great Recession. The event was a calamity for all in 2009, but San Francisco and New York came back stronger than ever. And while much has been written about the very real success that cities like Columbus, Pittsburgh and Detroit have experienced over the last decade in building new companies and luring talent, it will be harder for them to bounce back from another serious downturn since they’re in the earlier stages of this shift to innovation.
With a still powerful stock market, driven by record profits from companies largely based in the coastal tech hubs, it’s clear that we need action to counter this imbalance.
The administration could do that by driving more capital to companies in regions that do not currently attract substantial venture dollars. Congress should include Sen. Amy Klobuchar’s New Business Preservation Act in any forthcoming stimulus package. If passed, this law would create a program whereby the Treasury Department would partner with states to invest $2 billion in new businesses alongside private investors in regions investors have often overlooked. To help drive jobs to underserved communities, Congress could consider Rep. Ro Khanna’s idea to launch a STEM-focused Federal Institute of Technology with locations across rural America.