RESEARCH TRIANGLE PARK – Steve Case, the founder of AOL and now the leader of Revolution, which focuses on emerging companies, says Congress should provide more relief to startups in order for them to deal with the ongoing pandemic.

“First: Make it easier for the earliest-stage start-ups to receive PPP dollars and for all start-ups to access the Main Street Relief Fund,” Case writes in an article published by The Washington Post.

“PPP loans go to existing businesses to maintain jobs but not to new businesses that want to create them. Main Street loans go only to companies that are already profitable; most start-ups are not. That approach is backward: Studies show that nearly all net new job creation comes from start-ups, not established businesses.

“A PPP revision should allow start-ups to obtain loans based on their plans to create jobs — with loan forgiveness granted only if those jobs materialize. If they don’t, the start-ups should be required to repay the loans before any other obligations. And the barrier in the Main Street lending program that makes businesses ineligible for aid if they were not profitable in 2019 should be removed.

“Second, the government needs to be a counterweight to private capital that exacerbates geographic disparities in opportunity as the country responds to the crisis. The pandemic is a devastating tragedy, but adversity tends to be met by the creation of new industries and new businesses. This crisis will stir innovations in medicine, goods and services delivered at home, remote work and learning, and more. Where will these new firms grow? If the decision is left to the private sector alone, almost all of them will be in three states: New York, California and Massachusetts, which attract 75 percent of all venture capital.

“Great ideas to respond to this crisis are spread widely across the country — but capital is not. Business assistance programs created by Congress should have a special focus on getting start-ups off the ground in places that have lacked venture capital backing in the past. Sen. Amy Klobuchar (D-Minn.) and others have already proposed such legislation; members of Congress from these neglected areas should insist it is part of any Phase 4 bill.

“Finally, lawmakers should step in to address unintended inequalities of opportunity for female and minority entrepreneurs caused by the earlier relief bills. Because these programs fund only existing businesses, they reinforce opportunity gaps. Communities with thriving businesses get more PPP and Main Street aid; those that have lacked capital to get businesses off the ground in the past see little help now.
The solution would be for Congress to direct unused PPP funds to start-ups led by female entrepreneurs and entrepreneurs of color, creating opportunities where they have not existed before.

“The Main Street Lending program could be modified to extend special debt options to community development groups and minority-focused accelerators to back a new wave of start-ups founded by historically underrepresented entrepreneurs.”

Read the full post online.