The Big Story: Engine releases report on the role of acquisitions in the startup ecosystem
Engine, in partnership with Startup Genome, released a new report this week examining the role exits play in the startup ecosystem, highlighting the importance of exits via acquisition, and emphasizing the experience of founders that have had their companies acquired. The report—“Exits, Investment, and the Startup Experience: the role of acquisitions in the startup ecosystem”—should equip policymakers with a solid foundation from which they can advance pro-innovative policies that startups need to thrive.
The report finds that exits are critical to the startup ecosystem and enable virtuous cycles of capital and talent—promoting the investment in startups and building of knowledge that powers innovation. But exits via acquisition play an outsize and important role. Acquisition is the most frequent successful startup exit in every ecosystem, and in smaller ecosystems, it is often the only meaningfully available exit for startups. This is because IPOs, the other common exit path, are concentrated in top ecosystems like Silicon Valley.
The report also presents the firsthand experiences of startup founders from all across the country that have had their companies acquired by companies across a range of sizes, types, and sectors. Founders called the acquisitions a “transformational professional opportunity” for them and their teams. They said the decision to be acquired is “strategic,” “desirable,” and “the right fit for most startups.” They said that they hope “policymakers don’t make these sorts of transactions more difficult.” And they raised several policy issues that policymakers can tackle to support startups—like improving capital access and immigration policy solutions to increase the availability of needed talent, for example.
With this report, Engine and Startup Genome expand upon the State of the Startup Ecosystem report released last year, which explores the growth of the startup ecosystem, and the importance of the relationship between exits—acquisitions in particular—and investment for continued innovation. We hope this report helps policymakers to advance pro-innovative, pro-startup policies that will further entrepreneurial activity bolstering the U.S. economy and avoid unintended consequences that may stifle innovation.
Policy Roundup:
Biden student debt relief plan on pause. The 8th Circuit Court of Appeals placed a temporary stay on President Biden’s student loan relief plan last Friday until judges review a request brought to the courts by six Republican-led states to block the plan entirely. Even though the appeal prevents any actual cancellation of student debt, the Biden administration is still urging qualifying borrowers to apply. As we at Engine have long-stated, student debt is a barrier that millions of Americans face and hinders many would-be founders—especially those from underrepresented communities—from innovating.
FCC nominee Sohn still awaits committee confirmation one year later. Wednesday marked one year since President Biden nominated Gigi Sohn as Federal Communications Commission (FCC) Commissioner, and Sohn still awaits a final committee vote—stalling several telecom priorities for the startup ecosystem. As Engine stated in a recent letter to the Senate—alongside hundreds of advocacy organizations—Sohn has been a key advocate for initiatives that support the startup ecosystem, and her confirmation is critical as the agency considers pro-startup policies, including expanding broadband access and restoring net neutrality protections.
America Invents Act’s positive impact on startups. In a new piece for IAM media, Engine and the Public Interest Patent Law Institute explored ways the America Invents Act (AIA) has benefited startups and small businesses and proposed future directions for patent policy. That legislation, passed over 10 years ago, authorized regional patent offices where staff can engage directly with startups, it established the Patent Pro Bono Program which started boosting diversity among inventors, it created micro entity fees—so startups who are new to the patent system pay less—and it set up post-grant patent reviews to improve patent quality and cut wasteful legal spending. Since the AIA went into effect, U.S. small businesses are getting more patents each year while the costs and burdens of abusive litigation and invalid patents are on the decline.
Online speech, platforms could be in danger after healthcare censorship push. A failed attempt to ban online discussion of abortions in South Carolina could open up the door to more states attempting to criminalize the spread of healthcare information, putting companies that host user content in the position of having to censor their users, Chamber of Progress Founder and CEO, Adam Kovacevich, wrote in a recent op-ed. The proposed law—making discussions of abortion options illegal in the state—is based on model legislation that is being pushed in other states, which could create a patchwork of censorship obligations for online platforms.
Startup Roundup:
#StartupsEverywhere: New York, New York. Noula Health is a data-driven virtual care platform offering personalized, accessible healthcare through at-home hormone testing and one-on-one coaching from experts. Noula helps its customers craft reproductive healthcare plans tailored to their individual needs with science-backed recommendations determined from a quick finger prick test and ongoing assessments. Founder & CEO Noelle Acosta, motivated by her own healthcare journey, shared with us her story, her unique experiences raising capital, and the future outlook of her company.
