“God bless entrepreneurs! They built our nation and will continue to keep us strong!”

AOL founder Steve Case has not lost confidence in American entrepreneurialism and its ability to access capital and then succeed. Other panelists at Tuesday’s “Fueling American Entrepreneurship” session at the Milken Institute Global Conference were more reserved, but if there were a one-sentence theme, it might have been, “How can we get to where we need to be?”

And where do entrepreneurs need to be? As Rep. Patrick McHenry, R-N.C., said, “What America has to be for entrepreneurs is what Canada is for hockey. … If you’re born in Canada and you’re a gifted hockey player, you will be found.” Similarly, he said, talented entrepreneurs with smart ideas in the U.S. must be able to be found and financed.

Financing has been an uncertain proposition for years now, panelists said, but entrepreneurs and small businesses can have particular trouble finding capital, whether as loans, venture capital or seed and angel funding. Beyond that, the economy, regulations and geography have imposed their own difficulties. And how does the federal Jumpstart Our Business Startups Act affect all this?

Overcoming stereotypes of geography and “the tech startup”

The diverse panel brought up several issues threatening the success of entrepreneurs and venture capital, with Case leading off by discussing the popular notion that innovation and startups only happen in a few places. “[T]here are a lot of great entrepreneurs all across the country, and there’s not enough focus, whether it’s capital or media, on these entrepreneurs.” Fixing this lack of attention, Case said, will boost regional economies, give hope to entrepreneurs and help them put down community roots and not move to, say, Silicon Valley.

Examples Case gave that defy the traditional opinion of tech-focused, Silicon Valley startups include Denver-based Chipotle, Baltimore-based Under Armour and rural Chobani, recently honored as a “disruptor” for its Greek yogurt.

Venture capital fundraising has not recovered from the financial crisis

The venture capital industry “has been in crisis for 4½ years now,” said Laura Roden, managing director of VC Prive. Her company “is on the back end of the venture capital model … we bring investors into venture capital funds.” In the first quarter of 2008, VC fundraising was at a pace of about $40 billion, but it dropped 60% to 80% during the financial crisis. Worse, it has stayed at that nadir from 2009 through the first quarter of 2013.

“Now, imagine yourself in a business where the money coming into your company … is running about 20 to 40% of what you need to sustain yourselves. What do you do?” she asked. This type of sustained crisis has led to a restructuring, including smaller and fewer investments, “capital-efficient companies,” largely in tech. The losers? Entrepreneurs in areas such as life sciences and clean tech that are considered “capital intensive.”

Even if recovery is finally on its way, as Roden said she believes, it has been more than four years that U.S. entrepreneurs have been low on one of its key needs (capital, along with people “and a level playing field”).

Angel investing is in better shape, but …

Women particularly have a hard time attracting venture funding or angel funding, says Peggy Wallace, managing partner of Golden Seeds, a company that supports women entrepreneurs and believes that “gender diversity,” as Wallace described it, leads to more successful companies and therefore should attract more funding. Wallace said Golden Seeds focuses its investment in three areas where women are starting companies: life sciences, consumer products and technology.

How will the JOBS Act affect an angel investor like Golden Seeds? “[W]e will be benefiting from the JOBS Act, not from the standpoint of crowdfunding, necessarily, but we will be bringing technology into our businesses” and improve connections between capital and businesses.

Looking five to 10 years out on the JOBS Act

There are multiple ways for entrepreneurs to access capital and many ways regulatory changes can affect this. In the next five to 10 years, crowdfunding has the most potential, Case said, particularly with bringing capital and success to regions currently starved of capital.

“Mark Zuckerberg happened to be at Harvard, happened to have a rich friend across the hall, and happened to get some money from him and happened to start Facebook,” Case said. But if Zuckerberg had been in many other areas of the U.S., it’s unlikely he would have found capital and Facebook as we know it wouldn’t exist.

The much-talked about provision of the JOBS Act that is intended to facilitate initial public offerings of smaller companies has had a small impact so far, but Case remained optimistic for the law providing entrepreneurs with greater access and an economic boost. The law, he noted, comes amid a shift over the past 20 years away from IPOs of less than $50 million — if such companies even go public before being acquired.

McHenry, who introduced the initial legislation that became the JOBS Act, said the law is, in net, “the further democratization of our capital markets” — giving greater access to more investors through various means and overcoming some of the geographical hurdles to accessing capital that exist today. “The lasting effect” will be an example of how to overcome “outdated regulation” in a bipartisan fashion, McHenry said.

Among the other challenges the panel mentioned:

  • Getting JOBS Act-related rules written and in place to provide investors and entrepreneurs with a roadmap.
  • Making sure that increased capital access filters down to local levels, to what McHenry called “the have-nots” of entrepreneurs.
  • Finding agreement of immigration reform will be crucial.
  • Protection of intellectual property, domestically as well as internationally.

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