Jobs Act: A great start, but more is needed
By Duncan L. Niederauer, CEO of NYSE Euronext
The struggling U.S. economy received a welcome boost when the Jobs Act survived our bitterly divided Congress — it now awaits President Barack Obama’s signature. The passage of this new law signals that leaders in both parties understand that providing targeted, temporary relief to small businesses seeking to access capital is critical to the recovery.
Small businesses account for 99% of all U.S. companies. They make up half of private sector employment, and have accounted for almost all net job growth in the U.S. over the last three decades. Yet today, many entrepreneurs with the ability to turn innovative ideas into successful, job-creating businesses do not have adequate access to capital. By easing the regulatory burden on small firms, the Jobs Act will help open new sources of capital for growing companies at a critical stage in their development.
In a free economy, capital markets play two related roles. In the primary market, a company that conducts an initial public offering or IPO receives a large influx of capital investment to expand the business, triggering significant job creation. In fact, according to the National Venture Capital Association, 92% of all jobs are created after a company goes public.
In the secondary market, ongoing capital investments enable companies to settle into a rhythm of growing their businesses as their shares trade publicly. Over the long term, the most successful companies prosper by investing in innovation, finding new ways to grow as circumstances change, and providing consistent value to shareholders.
On the NYSE (NYX) alone, there are roughly 350 companies that have been in business for over 100 years and have combined to create millions of new jobs. These firms may vary greatly in size, market, and focus, but they all share a common thread: public markets have provided them with reliable, ongoing access to the capital they need to grow. No other system for financing businesses has ever been created that has so persistently generated widespread wealth and employment.
While the Jobs Act is certainly a positive development, meeting America’s current economic challenges will require additional action. In order to reach pre-recession employment levels, the U.S. economy must still recover more than 6 million jobs lost during the downturn and create over 4 million new jobs to account for population growth.
If the U.S. is to create an environment where companies can invest with confidence about long-term prospects for growth, the business community must work together to do more. Bottom line, it is time for America’s corporate leaders to join together to fuel the growth of Main Street and our small businesses and entrepreneurs.
Since the financial crisis, a great divide has formed between entrepreneurs who are demanding capital and financial institutions that are willing to supplying it. Bank consolidation has had the unintended consequence of partially severing the historic connection between community banks and their local business communities.
Faced with increased regulatory scrutiny, more restrictive capital charges, and a still uncertain macro-environment, it is hard to see the financing of Main Street improving substantively in the near term. Micro-finance, Community Development Financial Institutions (CDFIs), and crowd funding all offer rays of hope, but none has shown sufficient scale to meaningfully address the problem.
We believe exchanges have a responsibility to help small companies grow by providing entrepreneurs with a source of capital. In the best of times, exchanges may facilitate a hundred or more companies executing an IPO each year. However, given the scale of our current jobs challenge, exchanges must look beyond the IPO and offer new avenues to allow small businesses to access capital markets.
A few weeks ago, we joined with other organizations to launch an initiative aimed at accelerating growth for small businesses. Our idea, “The NYSE Big StartUp”, is aimed at encouraging big companies to help small companies. It’s a pathway for corporate America to provide banking services, financial training, accounting services, legal services, marketing and logistics support, website construction, and other essential tools enable small companies which lack those resources to get to the next level. The program also offers training, mentoring and education programs for startups and entrepreneurs, as well as a fund to help ensure that capital is available to those least able to access it from traditional sources.
Getting America’s entrepreneurial engine firing on all cylinders requires cooperation between the public and private sectors. Good public policy, such as the Jobs Act, ensures that entrepreneurs and small businesses have access to the capital they need to expand and thrive. American corporations must be part of the solution as well. Small businesses and entrepreneurs are our neighbors, our customers, and our futures. It is time to unleash the unparalleled innovation and creativity of American business to find solutions even more powerful than the economic challenges we face.
Duncan L. Niederauer is Chief Executive Officer, NYSE Euronext