Angel Insights Blog

By: Marianne Hudson, ACA Executive Director

Recently two articles caught my attention for calling attention to the importance of startups to national economies, with one particularly pointing out how key angel investors are.  Both writings point to how startups create jobs and innovations to our economy and they are the kinds of articles that Members of Congress and other policy makers read.  (That helps ACA make progress on Capitol Hill, trust me!)

Below are both articles with some excerpts so you get the general idea.  Check out the full articles too.

Martin Feldstein in Harvard Business Review – Why the U.S. is Still Richer Than Every Other Large Country

I can think of 10 features that distinguish America from other industrial economies, which I outline in a recent essay for the National Bureau of Economic Research, from which this article is adapted.

An entrepreneurial culture. Individuals in the U.S. demonstrate a desire to start businesses and grow them, as well as a willingness to take risks. There is less penalty in U.S. culture for failing and starting again. Even students who have gone to college or a business school show this entrepreneurial desire, and it is self-reinforcing: Silicon Valley successes like Facebook inspire further entrepreneurship.

A financial system that supports entrepreneurship. The U.S. has a more developed system of equity finance than the countries of Europe, including angel investors willing to finance startups and a very active venture capital market that helps finance the growth of those firms. We also have a decentralized banking system, including more than 7,000 small banks, that provides loans to entrepreneurs.

Ben Casselman, New York Times – A Start-Up Slump is a Drag on the Economy…

The start-up slump has far-reaching implications. Small businesses in general are often cited as an exemplar of economic dynamism. But it is start-ups — and particularly the small subset of companies that grow quickly — that are key drivers of job creation and innovation, and have historically been a ladder into the middle class for less-educated workers and immigrants.

Perhaps most significant, start-ups play a critical role in making the economy as a whole more productive, as they invent new products and approaches, forcing existing businesses to compete or fall by the wayside.

“Across the decades, young companies are really the heavy hitters and the consistent hitters in terms of job creation,” said Arnobio Morelix, an economist at the Kauffman Foundation, a nonprofit in Kansas City, Mo., that studies and promotes entrepreneurship.

The start-up decline might defy expectations in the age of Uber and “Shark Tank.” But however counterintuitive, the trend is backed by multiple data sources and numerous economic studies.