The State of Technology-Based Startups in the U.S. Economy

Technology-based startups are key drivers of America’s economic growth because they make outsized contributions to employment, innovation, and productivity. Unfortunately, policymakers tend to focus indiscriminately on helping small business startups without specifically targeting technology-based startups that have high growth potential. Meanwhile, overall rates of entrepreneurship have been falling and many worry that technology-based startup activity may also be on the decline. On November 28th, 2017, ITIF convened an expert panel who discussed what policymakers can do to support the formation and success of these firms both nationally and locally.

Technology-based start-ups are relatively few, yet they make an outsized contribution to the economy and embody different firm characteristics than typical start-ups.

Robert Atkinson, the President of ITIF, began the panel by laying out the state of tech-based startups in the United States and their overall importance to the economy. Atkinson introduced John Wu, an economic analyst at ITIF, who spoke about his new report titled: “The State of Technology-Based Startups in the U.S. Economy”. Wu described how tech startups, in comparison to other small businesses, are integral to the “innovation ecosystem” due to their higher potential for growth, overall higher salaries, and a larger rate of employment. Atkinson then turned the discussion towards how policymakers can encourage tech startup growth: alterations to the tax code, reviewing federal regulations, and prioritizing STEM education.

David Thomas, a Senior Director at BIO, started his presentation speaking about the global competition for hosting these high growth startups. The United States now faces global competition for courting these tech startups and to keep its advantage the government needs to modify its economic policies. Scott Stern, a professor at MIT, began his discussion on the importance of changing the conversation surrounding small businesses and its interaction with government. Stern says that the United State has a scaling problem which can be ameliorated by the creation of a new agency solely focused on the formation and scaling of innovative companies that drive economic and social progress.

The conversation that followed centered around the importance of government action. A consensus formed that policymakers should promote policies that will help current and future technology-based startups emerge and scale into larger firms that will generate long-lasting, high-paying jobs, increase innovation and productivity, and improve the global competitiveness of the U.S. economy. For more information, you can read about ITIF’s full reporton how technology-based start-ups support the economy.

Follow the discussion on Twitter using the hashtag #ITIFtechstartups.