United States & Entrepreneurship : a few myths and realities

Strength and weaknesses of US While Facebook, Airbnb, Zipcar, Tumblr, Instagram and many others are shining light over US entrepreneurship ecosystems, only a few concrete studies actually dig deep enough into the various characteristics of the whole country to measure how it compares to other places in the world, economically-wise. Of course the Silicon Valley, the Triangle Research Park or Boston are fantastic places to create and grow your business, but what about the US ? Beyond great companies, how do the United States measure to other countries in term of business friendliness ? Is it still the perfect place to start a company ?

The last study of the World Bank, named “Doing Business 2012“, explores economic, regulatory and structural characteristics of more 183 countries, in order to determine which one facilitate most the pursuing of business activities. Based on a series of more than 20 criteria, the study is thorough enough to be trusted.

And the report reveals that the US are doing pretty well, as hey retain an honorable 4th sport, only beaten by Singapour, Hong Kong and New Zealand. For a country that is often presented as loosing edge on competitiveness, that’s a first response to its critics !

When we actually dig deeper into the report and break down the various criteria, US show some important weaknesses when it comes to factors that influence entrepreneurship :

  • The regulations and tax systems are too complicated (US ranks 77/183 on this one) It makes it especially complex for a foreign entrepreneur to get uses to it, especially regarding the various companies status.
  • The discrepancies among the quality of infrastructures throughout the country puts a brake on its ability to develop new businesses evenly.
  • It is not easy to conduct international exchanges, whether export or import. Multiple red tape problem can occur, delaying the development of companies abroad. A new law envisioning to cut down these procedures din’t make the cut at the US congress in 2011.

Beyond what the report shows, a couple of other problems hinder the US attractiveness for entrepreneurs:

  • An unfriendly immigration policy. 50% of VC-backed companies have been founded by immigrants in the US, highlighting the importance of a high level foreign workforce in the country. Still, the US are unable to adopt a significant reform on immigration policy that would integrate this need. In the past 2 years, 3 bills proposals have been rejected by the congress. At the same time, countries such as Canada are going on the opposite direction, and attract a lot of foreign entrepreneurs.
  • The lack of a clear innovation policy, compared to countries such as Brasil, India or China. The latter have made clear choices on strategic industries that they want to focus on, and funded and promoted them accordingly. The absence of such policy in the US is a clear disadvantage when it come to attract talents and investments in the country. The federal and state governments are aware of these holes and try to implement small programs or tax reforms to foster the economic development of the country. Unfortunately theses initiatives have a rather limited impact due to restrictions regarding funding.

But let’s stop on the negative edge ! The United States still have unrivaled assets when it comes to entrepreneurship, such as :

  • A unique level of private funding for startups. With more than $43 Billions invested in 2011 by Venture Capitalists and Business Angels in new companies, the best new projects have access to the biggest pool of dedicated capital in the world. And the ability to transform startups into multinational firms has been mastered in the country for decades.
  • The most dynamics ecosystems on the planet. It’s no secret that the SV, NYC or Boston gather an amazing pool of research, universities, great companies, startups, investors and high level workforce in concentrated areas. These ecosystems are magnets for new companies and have a unique ability to boost the development of the most promising ideas into great companies.
  • The presence of supporting structures for entrepreneurs, such as incubators, accelerators, mentoring programs, that are blooming all over the place, and have an impact on startups. As an example, the Masschallenge competition, in Boston, support 125 companies per year since 2010, and these companies have raised over $250M in funding and created more than 500 jobs. What’s that for an impact ?

All of this pros and cons debate allows us to show that judging of the overall attractiveness of a country is really a matter of balancing the right criteria. The US have the most attractive ecosystems in the world, but struggle when it comes to creating a legal and tax frame easily decipherable for foreigners, and also when it comes to branding its unique asset as a country. The US still rank well in the reports, but have not progressed withing the last year. That probably won’t be enough in the next years, buts let’s maintain hope !

Read a french version of this article

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