With all the talk lately about how small businesses are vital to job creation, turns out it’s a relatively small number of high-growth entrepreneurial firms creating much of that employment. And, now, there’s pending legislation, pushed heavily by venture capitalists, that could encourage the growth of such companies.
First, about those high-flying startups. According to recent research from the Ewing Marion Kauffman Foundation, fast-growing relatively young firms generate about 10 percent of all new jobs in any given year. That includes what the study calls “gazelle” firms–enterprises three to five years old. And, these ventures create all those jobs even though they’re less than 1 percent of all companies. The average firm in the top 1 percent contributes 88 jobs per year; most end up producing between 20 and 249 employees. The average firm in the economy as a whole adds two or three net new jobs each year.
Of course, these findings have important implications for government policy and what types of small business it should focus on. Among other recommendations, the study urges the passage of legislation just introduced in the Senate, informally known as the “Startup Visa Act.” Sponsored by Senators John Kerry and Richard Lugar, the bill would address the problem facing many foreign entrepreneurial wannabes who can’t get a visa to come here and start a company.
To that end, it would create a new visa for such entrepreneurs who are sponsored by a US venture capital firm or angel making an investment of at least $100,000 in an equity financing of no less than $250,000. The legislation would modify the EB-5 visa program; that requires recipients to invest at least $500,000 in a US company and create no fewer than 10 jobs.
The bill is the product of heavy lobbying by such investors as Brad Feld, who is with the venture capital firm the Foundry Group. Of course, they have their own business reasons to push this legislation but there seems to be sound research to back it up.