From Immigration to Taxes, Execs Talk Trump Effect on Innovation

When it comes to developing and promoting innovation, external factors beyond the control of company founders, investors, and other business leaders can also determine whether a startup succeeds or fails.

In 2018, geopolitical events—in particular, President Donald Trump’s hard-line stances on trade and immigration, and the repeal of net neutrality rules—were top of mind for several business executives we interviewed recently. They shared their thoughts via e-mail with me, Xconomy’s national correspondent David Holley, and Sarah de Crescenzo, editor of Xconomy San Diego.

Xconomy: Has the Trump era been good or bad for your company?

Manoj Saxena, CognitiveScale chairman and managing director of The Entrepreneurs’ Fund, Austin, TX:

Broadly at a tech industry level, I would say the impact has been mixed. Areas such as the Federal Communications Commission’s repeal of net neutrality, allowing large telcos to throttle their high-bandwidth offering, could create brakes on tech innovation by threatening smaller companies with higher costs for their online activities.

In addition, areas such as the tightening of H-1B visa rules and the proposed barring of recipients’ spouses from working here, as well as delayed implementation of a startup visa, will reduce talent availability and further throttle innovation. Research studies have shown that immigrants start businesses at twice the rate of native-born Americans and creation of new companies in the U.S., so [those efforts] will depress new company creation.

Michael Girdley, managing director of Geekdom Fund, San Antonio, TX:

I think it’s early to tell. There are definitely fewer founders running around with pitch decks compared to a few years ago.

Gabriele Niederauer, CEO and president, Bluegrass Vascular, San Antonio:

Trump reinstated the medical device excise tax in December 2017, which is not good for medical device companies. [Editor’s note: The medical device tax was scheduled to be reinstated in January 2018, but that month, Trump approved legislation extending a moratorium on the tax for another two years.] I’m now working with AdvaMed [the Advanced Medical Technology Association] to permanently repeal the device tax to provide medical technology innovators with the long-term certainty necessary to support future job growth and sustainable, cutting-edge R&D that will continue to spur the next generation of breakthroughs in patient care and treatment.

Bret Piatt, CEO of Jungle Disk, San Antonio:

As a technology provider to small businesses, the tax changes and the economic growth during the Trump presidency has helped our customers and the market we serve.

Silvia Mah, executive director of Hera Labs, San Diego:

The Trump era has been debilitating for companies like accelerators and government-supported entities that serve communities.

From 2014-2017, to spur economic growth in regions across the nation, the U.S. Small Business Administration (SBA) offered the Growth Accelerator Fund, through which accelerators could obtain $30,000 of funding for operational expenses of programs, initiatives, and events to equip entrepreneurs and small businesses with the education and access to capital to make them thrive. [San Diego-based women-led business accelerator] Hera Labs was a recipient for two years. This was a game changer in the way we delivered our programming, especially because it gave us the funding to develop rigor around our offerings and allowed us to obtain follow-on funding from local government and corporations. The funding for this initiative has been reallocated and administrative support has dwindled.

However, Linda McMahon, the new administrator of the SBA, has championed a 15 percent increase in the SBA’s lending limit for small businesses. Therefore, a larger variety of businesses (real estate, buying a business, equipment needs, etc.), can more easily access debt to launch or grow their business.

Separately, the unprecedented dialogue around sexual misconduct and gender equality since Trump was elected has sparked a new resistance to the administration that has led to the #metoo movement and positive change. The Trump era has inspired many women to become more politically active, and women-led marches in Washington, D.C., and across the nation have catalyzed change and activism, including more female candidates running for office, more female-led startups launching, and more women with capital activating that capital.

For decades, the percentage of female angel investors has been in the single digits, but in the last two years, we have seen an increase, and now an estimated 22 percent of such investors are women, according to a 2017 report by the Angel Capital Association. According to the report, 30 percent of angels who started investing within the last two years were women.

Dave Copps, CEO of Hypergiant Sensory Sciences, Dallas:

Well, trade wars are not good for anyone. In the end, the losers are consumers who now must pay more for the products they love.

As I read the news each morning, I see nothing but distractions from what is really important. I have to admit, it’s frustrating to see our country so distracted by petty things in this very important time. The news in countries like China is around their $40 billion A.I. fund for their universities; Asian countries like Singapore and Korea are transforming and expanding their educational systems; and what we read about every day [in the U.S.] is the wall and closing borders.

Our national conversation must change, and it must start with our leaders. I still believe we live in the greatest country on planet Earth, but our focus is off.

X: When should CEOs take a stand on issues?

Saxena: When the issue at hand conflicts with the core values and mission of the company and their own personal compass. When the issue becomes a roadblock in enabling the best out of your teams and their journey to delivering client value. 

Girdley: This is really a personal decision. If that’s the life a CEO wants to live and the battle they want to fight, who am I to say they should or shouldn’t?

Mah: Investors and CEOs should take a stand when there is a clear wrong. There is a moral code we all live by, and if we do not uphold that moral code in every transaction and investment we do, we cannot create more economic impact. However, if we uphold the values of integrity and trust in every business decision, then true impact can occur, access to capital becomes easier, partnerships that are beneficial to both parties are made stronger, and our national economy grows.

Copps: The short answer is now! It’s time now for CEOs to lead our companies in not only building great businesses, but to power our growth with cultures that celebrate and elevate diversity and equality. These are the elements that made our country great to begin with and will take us to new levels of innovation and productivity. As CEOs, we have a say in how our companies can operate and set standards: respect, integrity, and honesty. It starts with us!

[Editor’s note: This is part of a series of posts sharing thoughts from technology leaders about 2018 trends and 2019 forecasts.]

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