Today, Engine issued a paper focused on the policy insights needed—and the legislative actions required—to adequately support the expanse of the startup ecosystem, and to grow the innovation economy. We hope this paper can serve as a resource for policymakers considering a wide range of policy issues that impact early-stage companies across the country.
The last two years have been a period of significant uncertainty for all small businesses, including startups. But one certainty has emerged; technology-enabled, high-growth startups in communities across the country serve as a significant source of job creation and are a source of the paychecks of tomorrow. It is critical that policymakers devote energy and resources to ensuring that our nation’s innovators have the infrastructure they need to continue to launch, grow, and create jobs.
In response to the pandemic, policymakers enacted new programs and relief efforts, including the Paycheck Protection Program, to support business owners and their employees. But these solutions were limited and aimed at a wide swath of small businesses. They are not enough to support the long term success of the startup ecosystem. The next necessary step is a reimagining of the policy frameworks and infrastructure that innovators and entrepreneurs rely on to launch and grow their businesses.
Over the past two years, Engine has conducted periodic surveys of startups in our network to assess how they have fared—and importantly, what other policy changes would help startups grow that have yet to be implemented. These startups range in size, but are generally technology or technology-enabled new ventures with high-growth potential. The first survey, conducted in April of 2020, indicated what was true for many businesses—64 percent of startups stated that they needed emergency relief to stay afloat. A majority—65 percent of startups surveyed—intended to apply for Small Business Administration (SBA) emergency loans if they qualified, and 47 percent of startups had either already laid off employees or anticipated laying off employees within three months. Engine conducted another survey in October of 2020 to assess where startups were six months down the line. Again, we found many startups were struggling—a plurality (46 percent) of startups surveyed indicated they were in need of emergency assistance to remain open through the end of the year. And of the startups who indicated they previously received emergency relief in the previous six months (54 percent), 61 percent indicated it was not enough to support their business operations during the pandemic.
In March of 2021 we conducted a third survey to assess the state of startups and identify specific barriers to startup formation and growth, as well as relief proposals that would be most beneficial to the startup community. The results of this survey, the preceding surveys, and the conversations we have with startups as a part of our #StartupsEverywhere profile series have informed many of the policy proposals contained within this report and reflect a startup-forward policy agenda. The third survey critically identified a number of barriers to formation and growth, including difficulty accessing capital (including venture capital), lack of access to affordable, quality healthcare, and student loan debt, that have impacted startup growth, and will continue to impact startup growth as the country emerges from the uncertainty of the last two years. The policy solutions in this report would individually go far to reduce the barriers startup founders identify as holding them back and support innovation, and more broadly, the startup ecosystem.
But most importantly, policymakers need to listen to startups and make sure that federal support is available to founders no matter their location or background. In doing so, government can continue to hear directly from founders and assess their needs, allowing available resources to more effectively be used in support of our nation’s innovation ecosystem.
You can find the full paper here.
