Summary

We have described a “Manhattan Project” level initiative to not only jumpstart the economy, but to transform it to the new economy based on the true market forces that would influence it. The Investment in American Ingenuity Act is a direct injection into the economy by investing in the American people. This investment is far from a hand-out or entitlement. It is rooted in a belief that the next great industries are waiting to be born, and the people out there to help them come to life are in need of resources to do it.

The IAIA program is not an on-going government bureaucracy, but a temporary program, much like CARS, but with a much broader scope. The $200B price tag is a steep one, but benefits are direct. The majority of this funding will be invested in the private sector. Fiscal conservatives will not be friends of this program, but those who believe in the free market and business investment will recognize that every aspect of the economy will be the beneficiary. Jobs will be created, new industries will be born, current industries see new revenue, banks will see direct insertions of revenue, venture capital firms will see the explosion of new investment opportunities, and the list goes on and on.

The excitement that this program would generate would be overwhelming. Instead of wildly unpopular bailouts of separate industries, this would be seen as a direct investment in the lives of American people. This will allow them to make the decisions while realizing life-long dreams. There would only need to be a few major success stories in order to make the program work. The media would continue to track the progress of the program and report on its success or failure. The network of global business-to-business that could be established because of it would be staggering, and the program would probably become a model for many other countries as they also attempt to navigate in the economic maelstrom they find themselves in.

Finally, this is a program that can be implemented as easily and as apparently successful as the CARS program was. The risk is great with regards to the debt incurred, but the potential reward is much greater. A rejuvenated economy would treat a multitude of ailments.

(c) 2009 Chance M. Glenn, Sr.

Implementation

How will this program work? Simplicity is better. The goal is to create as broad participation as possible. We want people from every walk of life, from every corner of the market to feel compelled to submit a proposal and have an opportunity to win one.

Submitting Proposals

Potential participants will be asked to prepare a comprehensive business plan that details the business concept, the business model, the marketing plan, the revenue stream, and the potential for growth, among other components. The business plan itself will act as the proposal. That, along with an application should be sufficient for evaluation.

It is understood that not everyone with an idea can prepare a successful business plan. However, there is a great deal of expertise out there that can be sources of guidance for those who lack the skills to do it. This will grow an already active cottage industry in business plan development. In addition, some resources can be provided to the infrastructure already in place at the federal, state, and local levels to support this activity. Workshops can be established and run all over the country to educate potential entrepreneurs. The connectivity we enjoy now through our various networks will make the submission process relatively simple.

Evaluating Proposals

Just as the submission process should not be overly cumbersome, the evaluation process should be efficient, effective, and expedient. A team of evaluators can be both cultivated from the personnel already within the federal, state, and local governments and from qualified professionals within the communities across the country. Evaluators will rate proposals in terms of business plan quality, business and market viability, business personnel expertise, and potential business success rate. While some of these evaluation criteria are both subjective and speculative, the qualifications of the evaluators should allow them to make such judgments. If a single evaluator is only asked to evaluate a few proposals, then fair assessments can be made.

If we target a 33% success rate for submissions, then that would call for just over three million submitted proposals in order to have one million awarded. If an army of 100,000 reviewers were mobilized they would be required to only review thirty proposals each. If the average compensation for the evaluators work was $2,500, then only $250M of the infrastructure costs would need to be used. Obviously these numbers can be adjusted. The turnover time from submission to notification of award or decline should be weeks, not months.

Awarding Grants

Once a notice of award goes out to the awardees they would have a fixed amount of time to establish a properly registered business entity, establish a bank account, obtain an EIN, as well as all other necessary components of the business as described in their application and plan. After this has been verified awards are made.

The awards can be tranched in a method in accordance to the business plan or awarded all at once. A tranching method will call for an oversight infrastructure that is aware of the specific businesses and their goals. The evaluators mentioned in the section above can be retained as counselors to monitor and track companies from award to operation. If there are only ten or so businesses in a counselor’s portfolio, this becomes possible. Additional resources from the infrastructure budget can be used to compensate them for their work.

Tracking Progress

A 2006 study by Well Fargo reported that the average start up cost for a new business was only $10,000 (How Much Money Does it Take to Start as Small Business?). This does not account for the success or failure of the business. Over the lifetime of the award the progress of each company should be tracked while guidance and support should be given along the way. A support structure made up of the business counselor and their support staff, as well as any additional support from local, state, and private groups should be able to manage this process. This support is not only for evaluation the scheduled award process, but to provide connections for future funding efforts, networking with partners and clients, marketing and business support. The IAIA process will create a new network of businesses that could support each other’s efforts. One new business could provide support for another. For example, a new restaurant could retain the services of a new marketing firm for advertisement, and a new accounting firm for its finances and accounting needs. The network created to keep track of the progress of each new venture can also be used as a resource for the benefit of the whole. This is a self-sustaining philosophy that can increase the likelihood of success for ventures involved. The resource aspect of the network can be made available to all businesses across the country, and around the world, for that matter.

Support Infrastructure

Again, the goal of the IAIA is not to create a perpetual bureaucracy, but to create a temporary system that can be constructed and deconstructed efficiently. If the average award came in at $96,500, then that would leave $3.5B for infrastructure support. There are a number of places to pull people from in order to create a support structure. A few of them are:

· Retired business professionals – they can act as advisors in the establishment and organization of the program, then as proposal evaluators and as venture counselors. These would be retained on a contract basis to the IAIA program.

· Business schools – there are a multitude of high level business schools that can have both faculty and students acting as support for ventures and as advisors. Business plan development falls within the prevue of MBA programs. Faculty members can also act as proposal evaluators and venture counselors.

· Small business administration – the SBA is already established and has an infrastructure in place to support the government’s role in program such as this. Their own infrastructure can be enhanced as needed to take on the additional role to support the large number of ventures created. They can also act provide guidance (online, workshops, one-on-one counseling) to potential proposal submitters.

· Venture capital firms – many venture capital firms have built-in mechanisms to aid start-ups in preparing for second rounds of funding. This expertise can be brought to bear on the program to help them cultivate strong candidates for investment.

A majority of the activity of the support structure should be for the proposal evaluators and venture counselors. Beyond that, there is the need to organize, market, and administer the program at the government level.

The Concept

The current economic crisis has a great deal to do with the changing face of industry across the United States and the world, for that matter. Regions of the country that were built upon the success of certain industries are now seeing entire communities destroyed because of the diminishing or loss of those industries. How do we determine what new industries should arise to replenish the market? How do you predict the rise of the computer industry, the Internet, and the mobile communications industry? How do you know where the next Microsoft, Walmart, or Starbucks lies? The answer is that you don’t. You let the market determine it, but you seed the process.

The Investment in American Ingenuity Act (IAIA) is a program that would seed 1,000,000 new start-up businesses across the United States by directly awarding seed grants of up to $100,000 to qualifying ventures. This program is targeted specifically for brand new start-up ventures. This is not to prop up current companies, but to create new ones. In essence, this is equivalent of angel investment for start-up ventures. A recent study of a cohort of 648 companies started in 1999 and tracked through 2005 showed that 34% of business start-ups were successful after 10 years (Curtin). Even if we can get only 20% to survive and succeed we would have 200,000 new businesses operating across the country. If only 10% of those became very successful, then we would have 20,000 major ventures created. If, in turn, these successful new businesses hired an average of 100 people, then 2,000,000 jobs would be created.

These new business will come from every conceivable corner of the market. They will hire people, they will purchase goods and services from other business entities, and they will pay taxes at local, state, and federal levels. There would be no need for the government to hold equity positions in any of the new enterprises, because the direct and indirect benefits would add the gross national product. The revenue from the grants will go into banks immediately thus providing a boost to that sector indirectly. Most importantly, this will establish a sense of creation in the country while affirming America’s commitment to its people and its industry. This is not an investment in “big business” nor unchecked government bloat. This is investment of “America into Americans” and the belief that the innovative spirit is what can truly shape our future.

Here are some examples of start-up companies that could be formed from this action:

1. Someone could start a daycare by obtaining proper licenses, leasing appropriate space, hiring three workers, purchasing necessary equipment, and operate for over a year and a half with $100,000. This is not factoring in the revenue generated by actually operating the business.

2. A research and development firm could hire technical talent, design, simulate, prototype, and analyze a new communications technology over six months to one year while researching the market in preparation for raising major investment capital.

3. A viable fast-food franchise could be purchased and staffed over the first year.

4. A real estate venture could be launched to purchase, renovate and re-sell or rent foreclosed homes.

5. A business could use the IAIA grant to obtain matching funds from state or local government, or be used as collateral for a larger funding source.

6. Series of IAIA awardees in similar market spaces could pool their resources together to form larger, stronger business enterprises.

The point is that innovative Americans will find a way to be successful if we let them.


(c) 2009 Chance M. Glenn, Sr. (next Implementation)

Bibliography

Curtin, Paul D. Reynolds and Richard T. "Business Creation in the United States: Entry, Startup Activities, and the Launch of New Ventures." The Small Business Economy. Washington, DC: Small Business Administration, 2008. 165-240.

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"How Much Money Does it Take to Start as Small Business?" 15 August 2006. News Release. 3 November 2009 .

Knittel, Christopher R. The Implied Cost of Carbon Dioxide Under the Cash for Clunkers Program. CSEM Working Paper. Berkeley, CA: Unversity of California Energy Institute, 2009.

Vlasic, Bill. "Brief Relief, but No Cure for Carmakers from Clunker Plan." 21 August 2009. The New York Times Online. The New York Times. 3 November 2009 .

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Welch, David. "Ford Reports Nearly $1 Billion Profit." 2 November 2009. Business Week. 3 November 2009 .

Wessner, Charles W. An Assessment of the SBIR Program. Washington, DC: The National Academies Press, 2008.

(c) 2009 Chance M. Glenn, Sr.