President Obama has launched a new initiative to fund small business entrepreneurs known as Startup America, which sounds like something that might better belong on Sand Hill Road in Silicon Valley than on Pennsylvania Avenue in Washington.

Obama talked up the initiative Monday as one of many that the White House is proposing as part of its focus on opening up investment in small companies. Among the president’s proposals is permanently eliminating capital gains taxes on the sale of small business stock held for over five years (see Obama Proposes Extending Small Business Tax Cuts Permanently).

The White House hopes to jumpstart job growth at small businesses this year, as big corporations continue to resist large-scale hiring despite the profits they reaped over the past year, amid continued uncertainty about the economy. Many large companies seem to prefer to buy back their own stock rather than use the money to hire back employees.

Obama has called in corporate titans to the White House to give him advice on tax policy, while Treasury Secretary Timothy Geithner has lent an ear to corporate CFOs. But as the Dow continues to rise, unemployment stubbornly lags at the 9-plus percent level.

One of the main hopes for reversing that trend is to encourage more small businesses to hire, and if they won’t, to create new small businesses that will. That means expanding on the Small Business Jobs Act, which the administration managed to pass last year after great effort, and extending tax breaks like the New Markets Tax Credit, aimed at low-income communities. With many banks still unwilling to extend credit or loans to small businesses, the government is forced to step in to occupy the vacuum.

As part of the initiative, the government is going to get involved like never before in helping fund startup companies, especially those involved in technology, acting as a kind of angel investor. Obama is also enlisting the likes of Intel, IBM, HP, Facebook and Ernst & Young to provide money or encouragement to budding entrepreneurs.

The Small Business Administration will commit $2 billion under the proposed plan, with $1 billion going to “underserved communities,” according to a White House fact sheet on Startup America, and another $1 billion to an “early-stage innovation fund.”

In case a VC or private equity firm like Kleiner Perkins or Elevation Partners is interested in contributing some seed funding to one of these early-stage beneficiaries of White House largesse, the administration is going to host more of its “DC-to-VC” summits to bring together venture capitalists, entrepreneurs and government officials, mainly to promote leading-edge health care technology. That is, assuming that the Republican majority in the House doesn’t manage to “defund” the health care reform law entirely, or another federal judge rule that the whole shebang is unconstitutional.

If that happens, the White House may need to call upon some of those same VCs to help finance federal government operations. Or else the next State of the Union address could turn into a keynote address at next January’s Consumer Electronics Show in Las Vegas.

Register or login for access to this item and much more

All Accounting Today content is archived after seven days.

Community members receive:
  • All recent and archived articles
  • Conference offers and updates
  • A full menu of enewsletter options
  • Web seminars, white papers, ebooks

Don't have an account? Register for Free Unlimited Access