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Kauffman Foundation's State of Entrepreneurship: A Hopeful Outlook for 2013

Kauffman Foundation's State of Entrepreneurship: A Hopeful Outlook for 2013
Image credit: Kauffman
min read
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Now is a good time to be an entrepreneur. That's the view from panelists at the Kauffman Foundation's Fourth Annual State of Entrepreneurship Address in Washington D.C. today. Kauffman Foundation is a Kansas City, Mo.-based nonprofit dedicated to supporting entrepreneurship. 

"In my opinion, the entrepreneurial bug has hit the country," said panel member Alan Patricof, founder and managing director of Greycroft Partners, a New York and Los Angeles-based venture capital firm. 

Ramana Nanda, associate professor of business administration at Harvard Business School echoed this sentiment, noting that recent research shows a more than 50 percent increase in the number of Harvard graduates who start businesses right out of college.

But, it's not all a bed of roses for entrepreneurs. New business creation dropped sharply between 2008 and 2010 and hasn't picked up significantly, said Kauffman President and chief executive Tom McDonnell during the luncheon discussion, which was broadcast live online. What's more, entrepreneurs continue to face significant challenges, as they have over the past several years. Banks continue to be on the stingy side when it comes to small business loans and the IPO market hasn't yet made a roaring comeback, meaning a significant portion of venture capital money remains tied up.

Related: Venture Capitalist Investing Might Take a Dip in 2013

Nonetheless, the feeling from speakers and panelists today is that the tide for start-ups is changing.

During his opening remarks, McDonnell highlighted the emergence of a national consensus that encouraging entrepreneurship can help revive the sluggish economy. He also offered several policy recommendations to increase financing of entrepreneurial ventures.

In particular, he addressed the need for the Securities and Exchange Commission (SEC) to quickly adopt rules on crowdfunding, where small firms sell equity stakes without having to go through the expensive registration traditionally required by regulators. The SEC missed a year-end deadline to put the highly anticipated provision of last year's JOBS Act into effect. The JOBS Act was passed to encourage business growth and contains several provisions aimed at making it easier for startups to get established.

McDonnell also said there needs to be improved collection and analysis of data on small-business lending. Specifically, he urged the Federal Reserve to reinstate -- ideally on an annual basis -- the Survey of Small Business Finances, an important data source for firms' demand for lending that was terminated prior to the 2008 financial crisis. 

In addition, he urged venture capital funds to consider a more evergreen fund structure to eliminate the time pressure to produce positive short-term returns ahead of the next fundraising cycle.

Small Business Administrator Karen Mills also gave an overview on what the SBA is doing to promote entrepreneurial growth. One initiative is an attempt to broaden venture capital opportunities for entrepreneurs throughout the country. Currently nearly 70 percent of venture capital goes to businesses in three states, namely California, Massachusetts and New York, she said.

The panel discussion coincided with the release of a new report by Kauffman highlighting several of the foundation's policy recommendations with respect to equity, public markets and debt financing. 

Related: Nervous Optimism About Capital Markets for Small Businesses in 2013

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