Senator Klobuchar Proposes Bill to Boost Entrepreneurship with Government Investment Fund

The New Business Preservation Act.

Senator Amy Klobuchar, fresh off the Presidential campaign trail, has introduced legislation to help boost entrepreneurship and SMEs during a time when the economy is being pummeled by the Coronavirus pandemic (COVID-19).

Senators Chris Coons and Tim Kaine have co-sponsored the bill.

Klobuchar is also part of a relatively new Senate Entrepreneurial Caucus, a bipartisan group seeking to help foster entrepreneurial innovation.

The legislation will create a new program managed by the US Department of Treasury and in partnership with US states. The federal government, alongside participating states and private capital, will invest in promising early-stage firms.

The bill will focus on geographies and segments of the population that traditionally have not received the best access to early-stage funding.

Senator Klobuchar issued the following statement on the legislative proposal:

“New businesses are critically important – they create jobs and drive innovation in this country. They also need help weathering the economic turmoil caused by the coronavirus pandemic. This legislation will allow the Treasury Department to partner with states to ensure that the most promising new businesses across the country are given a lifeline in the form of an equity investment that will allow them to maintain operations and continue innovating. Congress must continue to work with small business owners, especially women and those who face barriers, to stimulate innovation and create jobs to move our country forward.”

The New Business Preservation Act (embedded below) would establish the Innovation and Startups Equity Investment Program within the Department of Treasury. The legislation establishes a detailed criteria for participation in the program as well as reporting requirements on performance. Equity investments would be made by the government fund with the possibility of follow on rounds.

The expectation is the program will be self-sustaining, with any returns on investment being reinvested in new businesses in future years.

Other jurisdictions international jurisdictions have long sought to boost entrepreneurship with similar policy approaches that help to mitigate overall risk while encouraging private investment. Innovation entails risk and early-stage firms typically have a higher failure rate – yet it is from these same young firms where the next Apple, Google or Facebook will emerge.

Tyler Gray, Chief Operating Officer of MicroVentures, a broker-dealer and FINRA approved funding portal that provides investor access to early-stage firms, complemented the Senator’s proposal:

“Senator Klobuchar’s proposal to incentivize entrepreneurship and small business formation is an interesting policy approach to aiding the economy – especially during a challenging moment in our history. Other international jurisdictions like the UK, already incentivize entrepreneurship with the Seed Enterprise Investment Scheme (SEIS) and Enterprise Investment Scheme (EIS) tax relief benefits to investors, recognizing the long term benefits for job creation and prosperity,” said Gray. “The United States has struggled to encourage broad based entrepreneurship outside of the innovation centers like Silicon Valley or New York City. Klobuchar’s bill or a similar bill may improve the environment for SMEs and innovation. As we all know, small businesses are the life-blood of our economy. Encouraging startups with a government funding match could help fuel a resurgence of early stage firms, economic growth and a boom in innovation. The New Business Preservation Act may be just what the doctor has ordered.”

The UK has long punched above its weight class when it comes to innovation and some industry followers credit, in part, the SEIS and EIS programs that mitigate investor risk while allowing competition at the issuer level. These programs have provided empirical data quantifying the actual job creation fomented by supported firms.

Steve Case, Chairman and CEO of Revolution, someone who has long advocated on behalf of flyover country, said Klobuchar’s bill comes at a critical time:

“As we look at how to cope with the challenges presented by the Coronavirus, we should not lose sight of the critical role new businesses play in creating jobs.  The New Business Preservation Act will help level the playing field, by backing entrepreneurs in every state and every zip code, and lead to a more inclusive economy.”

The New Business Preservation Act Klobuchar March 2020
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