Dashboard: The Right to Start a Business

[Music] welcome to another 21 hats dashboard brought to you by our sponsor the great game of business I'm Lauren felin and I'm here with Victor Wong who is founder and CEO of right to start an advocacy group that works to expand entrepreneurial opportunity welcome back Victor thank you Lauren it's great to see you again great to see you uh remind us what does right to start do we are a national nonpartisan nonprofit organization that fights for the rights of entreprene we believe that everyone has a fundamental right to be able to have a fair shot at building their own version of the American dream so just like you've got a right to speech or a right to worship those are basic rights that we all acknowledge we believe that you actually you everyone actually has a right to start that everyone's got the ability and they deserve the right to be able to have equal access to be able to start and build and grow their own thing uh and so we do this work through uh a variety of mechanisms we do Grassroots organizing we engage with policy makers we helped do media and storytelling and we just launched four years ago and already we're engaged in 28 States we've had 15 state legislators introduced over 40 of our bills we've got three states implementing our ideas right now and and our work continues we are basically trying to build a Grassroots movement to lift up the voices of entrepreneurs and change the way America runs impressive that's a lot to do what do you focusing on at the moment well like any startup organization which we still are it's it's the the the daily slog of building blocking tackling you know screwing loose screws tightening loose bolts everywhere but we are uh we're actively building out full coalitions in in several States uh we're working right now in the State Legislative season we've got a number of states where legislation is currently moving and we support policy makers that are championing that work uh just last week for instance uh we were in West Virginia uh with uh Brad Smith the former CEO of in and the current president of University uh I he invited me as a keynote speaker uh and so we did a fireside chat keynote uh in Huntington West Virginia and then we also a couple days later we briefed Congress the US House entrepreneurship caucus had a gathering that we organized and we briefed uh members of Congress and their staffs uh Steve case joined me along with uh major Republican pollster Whit SS and Inc magazines editor at large Christine Hy de Brian so we did a little briefing about the state of American entrepreneurship uh and and that's just a little little sampling of you know a week in the life we're actively out there lifting up the stories of Entrepreneurship everywhere we go trying to drive Civic change and break down those barriers for entrepreneurs everywhere if I remember correctly the first state that you got your uh legislation uh passed in was Missouri is that correct we introduced it in Missouri we've actually passed both Chambers separately in different Bill versions which means that it doesn't actually go all the way uh but it's we're close again this year we're it's actually on the train is in motion and it's actually uh the train may be in you know in pretty good shape fingers crossed on on Missouri I see and then so we actually passed in Nevada last year fully got passed by both Chambers got signed by the governor into law uh the first ever right to start act fully signed into law last year and it creates an office of Entrepreneurship in the state of Nevada and that that office is in charge of coordinating All State policy around entrepreneur Ur ship tracking data on entrepreneurship opening up government contracts for entrepreneurship and uh providing recommendations to the governor on how to cut red tape for entrepreneurs across the entire state so it's like a it's a full shop there's a director now K Mur who's an amazing leader for that office and uh and now we've had the state of New Mexico is creating their own office of Entrepreneurship and that's through the governor's office and that was inspired by our legislative work in New Mexico as well and now the state of Kansas is appointing a director of Entrepreneurship they're hiring that role right now and that person's job would be to look out across the entire State and be the voice of entrepreneurs in in in the system so if I understand you correctly you're not trying to write new regulations or remove red tape through this process yourself you're trying to create uh an office filled with people who are on the ground in the individual State you're addressing who will perform that function that's what's happened over time of course one of our recommendations is to cut red tape and to open up government contracts and to track data but what we found really seemed most appealing in where we work we work with legislators and give them ideas and we say here's the different things that'll work and they pick and choose what they like and this one really resonates and hits home because it answers a very fundamental question and it goes for almost every city and state in the country which is who looks out for entrepreneurs in your city or state and to this day almost no cities or states can actually say oh there's the person there's the office in charge and entrepreneurs know that because they actually have to go they work with 10 different government agencies they they you know it's it's like a bit like it's like navigating all the spaghetti wire of how how do you how do you get something done and to actually have one place that actually owns it has responsibility for it to have that voice the central point is critical and you could look at the national government right now within within our federal system now there's actually no one in charge of Entrepreneurship it's a responsibility spread out amongst everybody which means means it kind of gets lost in the shuffle would the folks at the SBA disagree with that I don't think they would because they're also working with treasury uh om DOD NSF NIH uh Commerce and eat all the different components of Commerce from Eda and nist and there's just so many different parts that affect entrepreneurs SBA has very distinct Lanes they operate in from uh running the um the the loan uh back stop guarantee programs to running the B iic Investment Company act to try to Spur new capital formation to running the sbdc network and a number of other pieces but they are just there are one voice in an entire constellation of activities at the federal level there's actually no one Authority in charge of all that work so I'm curious there has been uh a very pronounced rise in business starts over the last couple of years what do you attribute that to well it's really interesting that data uh it and you know some of the researchers involved in tracking that work and and the data that that's gone through in fact the gentleman who does a lot of that tracking uh Professor Fairley at UCLA is the person that when I was at the koffin foundation and running the entrepreneurship Department there he's the one that actually helped the Kaufman Foundation pull together their annual indicators of Entrepreneurship and tracking that data and so it's been a remarkable rise and the what the research shows it's actually a mix of things it's not any one thing as it is for these problems and it's a mix of people that are doing it because they were desperate at the time because they got thrown out of a job or they got dislocated and it's people that saw hey there's a new world there's a whole bunch of different possibilities during covid that I never thought were possible and the way so I have my hunch on this and I've been doing this work for well over two decades now and I think the hunch is the tools of Entrepreneurship now are more widespread than ever that is you could actually roll out of bed in the morning and without even changing out of your bathrobe you can start a company you can design a product you can test that product with customers you can build a supply chain you can get that product launch you can Market it and sell it all from your bathroom like in the matter of a few days um but our uh economic and governance systems and Educational Systems actually are still stuck in last century and so what's happened is people have come to see that oh I have these digital tools now that allow me to do stuff faster and cheaper than ever before from Zoom being an obvious one but there's tons of these platform tools that help entrepreneurs start and build and create and grow but we have systems that actually hold us back so we've got this massive rise in entrepreneurship and which is interesting because a lot of that rise comes from groups that have previously been thought of as marginalized groups in entrepreneurship whether it's Black Or Hispanic groups or women entrepreneurs all those numbers have been on the rise during covid uh so people that have often been left out of the economy that feel like they have means and tools now and ways to engage that perhaps they didn't before and they see a pathway for them yet at the same time a lot of the barriers we have from an economic systems and governmental standpoint those are still there and so the headwinds are still the same headwinds that have always been there but people see the possibilities now in a way they didn't because of the the the tools that are available to them I guess the question that I hear asked most often is sort of how much of this was based on the desperation caused by the pandemic and how much of this is a real sea change that suggests we are becoming more entrepreneurial as a society and these numbers are going to continue to either you know stay where they are or or perhaps even grow do you have a a sense of that Professor Fairley actually calculates what he calls um opportunity entrepreneurship versus um uh basically people that have to do it because they have to do it desperation entrepreneurship it's not that's not the word he uses it's a different word but it's people who have to do it and it's it's it's kind of a mixed bag and it varies from state to state so it's not like there's one answer to it uh but the general numbers seem to indicate the trend is still going now keep in mind for you know for you and and I don't know you know this but the your listeners might not which is this is against the backdrop of half a century of decline in entrepreneurship so from the late 70s and on up until 2019 right before everything went haywire um entrepreneurship had fallen by roughly half in this country as a percentage of all the companies in the economy that is what percentage of economies in the economy are young that had fallen roughly from like like 14% to roughly eight% and I I think you're right very few people understand that or were even aware of that we think of ourselves as being tremendously entrepreneurial but we were not headed in that direction we were not it was not a broad-based phenomenon in fact entrepreneurship was becoming more and more of a privileged activity for fewer places and fewer people and that the numbers showed that there was certain people that could do it certain places that did more of it uh primarily big urban areas by certain people who are not the folks that doing that now I think the difference now is more people are trying but just because they're trying and they're starting doesn't mean they're having an easier time of it and in fact the data also shows that it's still really really hard to do it in fact we took a bipartisan voter poll uh about a year ago on this and we asked American voters about entrepreneurship and uh first of all almost everybody says this is important to America's future that everyone's got a fair chance to be able to start and so that's like 92% but when we ask people is it difficult uh 94% of them said it was difficult of course but half of them said it's very difficult and so there's a sense that this is it's a lot harder than it needs to be um to be able to start something and and there's we've we've also asked people like what's keeping them from starting what are the barriers in their way and it's a mixed bag of everything essentially the system as a whole is just array against them people feel like the headwinds are very very strong when you're starting and building something give me a couple examples what what are you what are the barriers you referring to well we asked people uh yeah what if you're thinking of starting a business and didn't for example what got in your way and uh in fact I can read off some of the numbers here insufficient Capital 76% not a surprise people don't have money half the country lives paycheck to paycheck roughly depending on the study you look at so it's a lot of people that don't have money to even make a paycheck much less start a business 53% couldn't afford government fees so the US charges on average about it costs about $800 to start a business in the US on average Which is far far higher than in China and Brazil and Switzerland and Sweden and Canada so it's actually a lot um so 53% of people couldn't afford that 49% couldn't figure out the government requirements and forms so red tape just kept them so almost half of the people that didn't start 48% feared losing healthare uh so they were just they're afraid they you know would get sick or they had pre pre-existing conditions and then a third of people couldn't get the right in training or information they just didn't know how to do it a third so the government services were too poor a third a third said government approvals were too slow that was highly regulated areas and then 15% were held back by non-compete agreement so the answer is there's no one thing right like it's the the one dominating theme is the system kind of just makes it really hard like we don't have again who's the voice of the entrepreneur in the system if the system uh if you don't have a voice in the system which entrepreneurs generally don't they generally don't have time and money to speak up for themselves then the system's going to work against you and that's what we have right now we have a system that actually creates a lot of friction for people trying to start something one of the first barriers you mentioned was access to Capital is there an answer to that problem yeah I mean that's a that's probably a whole dissert that's several dissertations right there Lauren and then people have written you have 30 seconds Victor go for it short answer our Capital markets are are dis are disconnected today from the what entrepreneurs actually are doing so uh if you look at the way Capital markets are and people talk about about entrepreneurship it's primarily Banking and Venture Capital that's like going to an ice cream store with two flavors of ice cream uh and banking requires you to have multiple years of financial statements you need assets that they can secure and get a loan against Venture Capital requires you to be on a rapid growth curve where your plan is to exit the company within a certain amount of time so the investors can get their money back well 83% of the businesses actually don't fit either model 83% of businesses now are people grinding it out they don't have a lot of assets because we're in a knowledge economy they're they're not a rocket ship company because most people don't have that ability to build that's less than 1% of the companies are rocket ship companies that uh are Venture Capital eligible so that leaves a fundamental Capital markets dysfunction which is the types of money available don't fit the needs of the businesses being started today that explains the problem um are you working on a solution sure well one of the things uh that needs to happen is there needs to be a diversity of new types of Capital products for the entrepreneurs today and you've seen a lot of companies Step Up Now for instance a lot of the sales platforms from PayPal to Shopify to stripe actually will do um Entre business financing like so they'll actually do percentage Revenue based percentages of sales to payb companies that's a form of capital that uh is actually very flexible and dynamic um there's been a movement around building out a whole new class of funds Revenue based funds or profit sharing funds and that work has grown and so when I was at the coffin Foundation we seated that work through a project called the Capital Access lab and now there are lots of funds now that do some version of Revenue based financing whether from the debt side or the equity side where it's a percent you get paid back based on a percentage of what you earn and that's pretty cool and what that means it's more Nimble it fits a lot more businesses today and the key now is how do you make that into a defined asset class that Wall Street can look at and say oh yeah we the money money from Wall Street goes into those types of things because those they're still emergent they're still kind of experimental um there you don't have the rigor and the depth That Wall Street looks for when they can move multiple billions into an asset class so that's the work that's happening now is the experimentation and I would say the government has played a role in that um ssbci which is this treasury program that Congress funded during covid for creating new forms of capital across the 50 states that's the one with like 10 billion dollars right it's $10 billion spread out amongst the states to Spur Capital formation and this year this time around this is the second time theyve done ssbci the last time was the last financial crisis um there's a huge amount of experimentation that's good that's happening at the state level our Laboratories of democracy as we used to call state level work uh where they're doing more Funda funds which is States funding funds whose job it is not to just invest in one company or two or a small portfolio but to spur in the development of an entire Capital ecosystem by building lots of funds there are more States now doing that than ever before which is really exciting and you have now treasury giving some kind of indication that they are open to other forms of capital investing like Revenue based investing profit sharing models Etc through that money so that that money now in ssbci is being spent in much more diverse Nimble and flexible ways than ever before and fingers crossed that's going to lead to uh more and more funds getting developed over time now none the stuff is fast this is all this is all decade long you know ecosystem building work but it's happening now and people are trying got time for one last question I'm curious you you're out there around the country meeting with a lot of business owners I'm wondering what are you seeing in terms of artificial intelligence and I I'm not asking about you know open Ai and chat GPT I'm just C I'm curious about use cases and whether you're starting to see it have an impact at the Grassroots level on entrepreneurs and and smaller businesses we certainly are seeing people using it more and more in fact just last week in West Virginia there was a whole panel session on AI and how companies can use it and so this is permeated far and wide uh even into the even into the mountain regions of this country that you know a generation ago wouldn't have been involved in this conversation but they're very much up to speed and are in it right now with some of the top thinkers and doers anywhere I think you're already seeing companies use it it's mostly at the employee level where people are using it to think faster to write better to explore creative ideas better I use it when I'm working through problems just to bounce ideas around where I'm stuck somewhere just ask AI like what what do you think of this what would you do in this situation I've been in business meetings where people pull up pull up chat gbt or another AI platform and just say well let's let's see what other ideas we've got out there that maybe we're not thinking of and so that happens quite a bit um so and you're seeing um I met someone uh just one actually one of someone I worked with last week who uses AI as their automated email response system and B there's there's tools now that let that actually will take your tone and your your writing style and emails and actually com draft email responses for you and it syncs up with your uh your Gmail and actually does it automatically for you the emails don't go out without your approval I assume well there's probably a toggle on there that I I I have not played with this yet but you probably at some point when have enough confidence in it you can just let it go out on its own so we may all be just our avatars may be speaking to avatars we may be doing podcast Lauren where I'm just an avatar talking to your avatar for this podcast I'm not looking forward to that Victor sounds really sad doesn't it it does it sounds very much out of very much like out of Brave New World in a bad sense but uh we're deal we're dealing with it I think people are finding ways to make use and create value out of this tool right now so you're uh optimistic that it's a going to be a force for good well every technology I mean you I'm not saying anything profound here every technological wave brings both hope and fear and you know you can just look back to uh what was that great that great movie Charlie Chaplan made Modern Times about a century ago uh in the age of industrialization and he that whole scene with the the clock and the gears and how we got stuck in that like people were scared of machines back then and it worked its way out into popular movies and uh and I think it's the same thing I mean we're going to have to learn to deal with these tools because that is where we are now and they certainly are going to add value and speed things up in our lives and there's going to be at the same time there'll be people disrupted and we'll have to find new ways to to make a living and you know we'll have to find new ways to run our society as all out of all that so it's a magical time for that for sure both good and bad Victor it's great catching up with you Victor Wong is founder and CEO of right to start thanks for taking the time and I I hope you'll come back again soon well thank you I encourage everybody to go to WR to start.org and sign up for our newsletter and we've also got a take action button where you can sign the cause and our statement of principles and join the movement glad you mentioned that thank you Victor have a great week everybody [Music]