No Investment, No Jobs

Editor's note:  We have had a lot to say about obstacles to job creation imposed by the federal government.  We were not as familiar with obstacles to job creation which have been imposed by state governments.  This guest writer is a highly experienced New Hampshire entrepreneur who likes nothing better than creating jobs, if only the government will get out of his way....

Remember when there were startup companies in every garage and warehouse in Nashua, NH?  Remember when everyone worked for some kind of tech company?  What's different now?  Who killed the goose that laid the golden egg? 

The techies are still here, and they're still happiest when making something work.  There are still plenty of empty garages and warehouses.  So why are the techies unemployed, or working at Home Depot and big defense companies?  Why aren't there any startups?

The difference is investment.  When things were booming, and startups were everywhere, it was a lot easier to get capital for a startup.  Regular people could be "angel investors", and kick in money to back someone's dream.  Nine out of ten startups failed, but the ones that succeeded more than made up for the failures.

Now startups and small businesses are starving for capital to create jobs, while the state and federal governments continue to raise the bar for investors in job-creating businesses.  At the state level we have laws (Chapter 421-B) restricting investment in start-ups to only people who have substantial net worth.   The latest federal "financial reform act" raises the bar even higher.  Is it any surprise that private sector job creation has gone down rather than up? 

In their chosen role as an investment advisors, the state and the federal the Securities and Exchange Commission have made it extremely difficult for ordinary Americans to invest in the kind of ventures that create jobs and that sometimes produce substantial returns for those who risk their money.  Instead investors have been squeezed into "safe investments" like  stock mutual funds, bonds, and suburban real estate   Anyone who has an IRA or 401K, or a house that's worth less than when they bought it knows how well "safe investments" have done.  Over the past ten years mutual funds have lost money after inflation, while foreclosures and losses on real estate continue.

Those of us who live in the real world have learned that all investment involves risk.  Unfortunately the "ivory tower" investment advisors in government haven't gotten the message.  They still think they are better qualified to make investment decisions than the people who have worked for their money, and who are quite capable of deciding what risks they will undertake.

Here in New Hampshire, state government can take the lead by lowering barriers to job-creating investment.  We can lower barriers to investment by repealing the parts of state laws (Chapter 421 of the RSAs)  that restrict people's decisions about how they'll invest their money.  This is called the "Uniform Securities Act", and appears to come from an organization called the "North American Society of Securities Administrators," in other words an organization of bureaucrats.

New Hampshire can encourage the establishment of private "angel" venture funds.  Angel funds will allow small investors to pool their money and invest in portfolios of startup ventures.  Individuals who choose to invest in job-creating ventures on their own should be free to do so, provided that entrepreneurs fully inform them of risks.

It's obvious that most people who will choose to invest in startups will have a significant level of risk tolerance.  There may be a danger is that some planners and brokers will advise clients to invest in areas that exceed their desired level of risk.  However, this is no different from the status-quo.  Some investment advisors already put their clients into inappropriate investments that erode wealth through inflation, market crashes and commissions.

The only way New Hampshire is going to grow and create jobs is through investment.  We've got the people; we've got the ideas; all we're missing is investment.  If we tear down the barriers to investment, we will put people back to work.  What are we waiting for?