MoreLIP: Boulevard of Broken Dreams
10/12/2009 — George Lipper, Development Capital Networks
Just late last week we received our much-anticipated copy of Josh Lerner's Boulevard of Broken Dreams: Why Public Efforts to Boost Entrepreneurship and Venture Capital Have Failed--and What to Do About It.
As such, I can share little more than my first impression. Yet I do acknowledge upfront that the book is standard top-drawer research. Analysis of Dr. Lerner's research should (but probably won’t) be of great assistance to governmental policymakers at all levels.
Lerner's primary argument is featured right on the book's jacket: "for every public intervention that spurs entrepreneurial activity, there are many failed efforts that waste untold billions of taxpayer dollars."
Lerner examines the multiplicity of factors behind the missteps and pitfalls of governement programs and -- step by step -- the reasons for the failures. It's not a pretty story for those of us who have spent years in the public sector developing systems for funding entrepreneurs, particularly those of us who have toiled in the "fly-over" states.
In fact, Lerner's first chapter asks, “Can bureaucrats help entrepreneurs?” His answer is not particularly encouraging. According to Lerner, there are simply so many hurdles that can sink such programs -- from design to execution, conceptualization to legislative enactment, patient outlook to premature expectation.
Touching on strategies, Lerner observes that "often, in their eagerness to get to the 'fun stuff' of handing out money, public leaders neglect the importance of setting the table, or creating a favorable environment."
It's not, however, a publication without hope. Though Lerner cautions that "it is easy for government to overstep its bounds and squander its investments," he concludes with a nuanced message: "to be sure government has a role in stimulating a vibrant entrepreneurial sector."
And Lerner offers guidelines for those who plan to get involved anyway:
- Build an environment where new ventures can thrive.
- Leverage local academic, scientific and research bases effectively.
- Be sure to let the market provide direction when providing subsidies.
- Resist the temptation to "overengineer" public venture initiatives.
- Recognize the long lead times these initiative require.
- Avoid programs that are too small to make a difference or too big for the market.
- Understand that entrepreneurial activity has become global, not just domestic.
- Institutionalize careful evaluations of initiatives.
- Realize that entrepreneurship programs need creativity and flexibility; unwieldy programs sometimes must be refined or killed off.
- Recognize when individuals or organizations act to benefit themselves, rather than the broader social good. Take steps to minimize that danger.
- Make education part of the initiative, including investors, entrepreneurs and the public sector.
- Avoid substantial upfront investment tax incentives, reliance on financial intermediaries, and trying to match ill-considered incentives offered by other governments.
While I've yet to digest all that Lerner has to offer in
Boulevard, I wish he would have gone a step further to address the disadvantaged position of the "fly-over" states -- which so often lose their promising entrepreneurs to areas of higher venture capital concentration -- and offer some suggestions on how they might meaningfully compete in the current climate.
Because unfortunately for many states, the challenges go beyond effective programs that boost entrepreneurship -- they must also succeed in retaining and attracting entrepreneurs and investors.