What Start-Up Chile and Startup America Can Learn From Each Other

Startup America was inspired by Startup Chile, but the USA has some good ideas that Chile should emulate, too. The best thing governments can do is repeal regulations and laws enacted by previous governments, and the USA may be progressing toward that goal. First, Startup America solicited ideas from private participants during 8 roundtable events and an online suggestion portal. The Startup America Reducing Barriers include:

  • Current immigration policy keeps some budding entrepreneurs from starting businesses and creating jobs in the U.S., and forces highly educated, foreign-born students out of the U.S. after graduation.
  • Current tax policy for entrepreneurs is overly complex, and existing policy does not necessarily incent entrepreneurial behavior. Regulations targeting large businesses are not always appropriate for entrepreneurs and their investors.
  • Patents that are issued but never commercialized or licensed can impede the process of innovation and commercialization. An industry of Patent Assertion Entities (sometimes called Non-Practicing Entities or “patent trolls”) has been created around obtaining IP and filing lawsuits rather than commercializing or licensing their assets.
  • Government contracts are difficult for startups to obtain. Export processes are cumbersome. The complexity of paperwork and proliferation of forms for program applications is cumbersome, confusing, and duplicative. Timelines for decisions on government award programs and regulatory processes are too long for entrepreneurs.
  • There are limited sources of startup capital, which necessitates identifying and scaling alternative platforms. However, these platforms are constrained by the regulatory environment.

The Wall Street Journal discussed the government response to alternative capital platforms, SEC Official Sees Benefits to Easing ‘Crowd-Funding’ Restrictions:

A top Securities and Exchange Commission official said there could be benefits to easing rules limiting entrepreneurs from tapping investors for small amounts of capital, as long as doing so doesn’t create openings for scam artists.

The rise of the Internet has allowed creative artists, nonprofits and entrepreneurs to use “crowd-funding” techniques to raise small amounts of cash from a large number of people. But SEC rules currently bar companies from issuing shares in exchange for the capital without first registering with the agency.

SEC Corporate Finance Division Director Meredith Cross, in a House hearing, said the key to easing restrictions on crowd-funding would be to create an exemption “that wouldn’t present significant concerns of fraud.”

The agency managing Startup America, the Small Business Administration (SBA), includes an Office of Advocacy:

Advocacy attorneys work within the government, educating regulators about their obligation to consider how small entities will be affected by federal regulatory proposals. The Regulatory Flexibility Act (RFA) and Executive Order 13272 require federal agencies to determine the impact of their rules on small entities, consider alternatives that minimize small entity impacts, and make their analyses available for public comment. The Office of Advocacy gives small firm owners and their representatives opportunities to make their voices heard about rules that affect their interests. Annually, the Office of Advocacy helps small businesses save billions in regulatory costs.

Functionaries are constantly proposing new regulations and taxes, so governments must create forces such as the Office of Advocacy to oppose them. Excessive regulation is the biggest impediment to businesses in Chile and the rest of the Spanish and Portuguese world. Chile should create similar advocates for businesses inside government and reduce funding for functionaries that propose new laws.

Businesses in the USA would not be so vexed in calculating and paying taxes if the USA government were as limited as Chile, consuming 19% of the economy, compared to 45% in the USA and Europe. Governments excel at few things, and are arrogant in trying to solve all the real and imagined problems of citizens.

Startup Chile has moved into an office in the Telefonica building and the company has established the Telefonica Wayra accelerator in Chile and 9 other Spanish countries, but Startup America has enticed more private sector participation, including:

Biz2Credit, an online platform of business lenders, is offering Startup America Firms three months of free Premium Membership, free access to its proprietary BizAnalyzer Tool, and 50% discounts on Equifax credit reports, for a total value of nearly $40 million.

BizFilings, a full-service, online incorporation service provider, will provide $1 million in products and services to Startup America Firms.

Dell Inc. listens to customers and delivers innovative technology and services that give them the power to do more. For eligible Startup America participants, Dell is providing special offers with a potential value of up to $120M.

FoundersCard, a membership community for leading entrepreneurs and innovators, is offering over $7.5 million in value to Startup America Firms by providing special access and preferred rates for membership.

IdeaScale, a leading innovation software solution for idea management is offering a free one-year corporate license to all Startup America Firms, for a total value of $20 million.

LeadMaster, a comprehensive online cloud based CRM, is giving up to 10,000 Startup America Firms a fully functional 5 user enterprise level CRM system and helping them set it up. In addition, eliminating the cost for the first quarter and reducing the cost of operation thereafter. The total value of this offer over 3 years is more than $36 million.

QuestionPro, a web-based service for conducting online surveys, is offering a free one-year corporate license to all Startup America Firms, for a total value of over $17 million.

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