By Colin Tomkins-Bergh, Kauffman Foundation
The Madison Mayor’s Summit in May was one of four regional summits that the Kauffman Foundation is organizing this year leading up to the national Mayors Conference of Entrepreneurship in December. These regional summits bring together policymakers and city officials with entrepreneurs, so both parties can learn how to create a stronger entrepreneurial ecosystem in their city.
I attended the Madison summit, hosted by Mayor Paul Soglin, and found four hot topics from the event particularly interesting.
“Scared Lawyer” Policies
During the summit, there were a number of discussions around policies that favor incumbent firms. These act as frictions toward building a prosperous entrepreneurial ecosystem. Some examples of these types of policies present in Wisconsin are:
• Non-compete laws: A thoroughly researched topic by the Kauffman Foundation and other scholars, non-compete laws can be prohibitive to spinoff companies and slow innovation. Wisconsin currently has relatively strong non-compete laws and there is legislation under consideration that could make them stronger. Enacting stronger laws against skilled individuals starting a company in their field will only lead to fewer innovative companies and more skilled workers leaving your state, like the case in Wisconsin’s neighbor, Michigan, in the 1980s.
• Procurement Policy: One revenue source for entrepreneurs that is underutilized is government contracts. When governments issue very specific and detailed requests for products or services, they necessarily shut out young firms that don’t have the flexibility or scale to fulfill these requests. Meanwhile, old firms have an advantage having fulfilled previous contracts and government misses out on potential innovative solutions that startups can imagine. Nationally, state and local government procurement represents $450 billion of spending each year. This can offer young firms a great opportunity for growth if procurement reform lessens the requirements to participate, deemphasizes a prescriptive process, and allows the most innovative and efficient company solve it.
• Tax Incentives: Attendees at the summit were frustrated with government giving tax incentives to companies they don’t consider entrepreneurs. But tax credits and incentives aren’t golden tickets for entrepreneurial communities. Research has shown that tax credits don’t positively affect entrepreneurship, but they can negatively impact it by not dedicating that money directly to young and growing firms.
Human Capital and Connections
Two of the most important factors for improving entrepreneurial ecosystems are the overall level of human capital and network connections. Wisconsin has an excellent asset in the University of Wisconsin System. There are 13 four-year universities, 13 freshman-sophomore UW Colleges campuses spread across the state that enroll 180,000 students each year. Universities are critical in developing the human capital necessary to start innovative companies. Leveraging a strong university system that can facilitate and strengthen connections and expertise will be key to a flourishing entrepreneurial environment in Wisconsin. Read more …