Digital Platforms Critical to Local Small Businesses and the Startup Surge

By SBE Council at 11 August, 2022, 11:33 pm

Harming the Digital Ecosystem via Intrusive Tech Regulation Would Impair the Startup Ecosystem and Local Businesses

by Karen Kerrigan –

Business creation in 2022, as measured by new business applications for EINs, continues to outpace pre-pandemic levels, although we have seen some “softening” in activity during the early spring and summer months. No doubt, inflation and economic uncertainty are factoring in on the thinking of aspiring entrepreneurs on whether they want to take the risk of starting a business.

As a reminder, there were 5.4 million new business applications in 2021, which was a 53% increase from 2019.

Obviously, we need to encourage new business creation – in good times and in bad – as entrepreneurs and their businesses provide competition and choice in the marketplace, create jobs and economic opportunity, support local communities, and are a source of innovation and creativity that lead to a more vibrant economy.

Technology and tech platforms have played a key role in driving startup activity. Many existing small businesses have also greatly benefited from the accelerated adoption of digital tools, a byproduct of the pandemic era that shaped new business models and new consumer expectations. Startups, small businesses and consumers are able to do things more affordably and efficiently. A lot of time and money is saved by using digital tools and platforms.

During a period of high inflation and economic uncertainty, isn’t that something Congress should work to preserve?

Unfortunately, the “American Innovation and Choice Online Act” (AICOA), S. 2992, would upend these positive benefits for startups, small businesses and consumers, and add new costs and uncertainties for Main Street businesses and their customers. Congress needs to focus on the key pain points of startups and small businesses – one of which is high inflation – not make matters worse.

Downstream Impact of “Big Tech” Legislation is a Terrible Deal for Small Businesses

The findings of SBE Council’s June 2022 “Small Business Policy and the Economy Survey” made it clear that small business owners would suffer if legislation such as AICOA was advanced into law.

In our survey, 75% of small business owners said that digital tools and platforms are important to the success and growth of their businesses. Given small business concerns about inflation, the possibility of a recession (at that point, 88% said one was coming – and they were right!) along with disorderly supply chains, the last thing entrepreneurs need is disruptive policy that will slow sales and hurt revenues – 55% expressed worry that legislation and regulatory efforts targeting “big tech” would negatively impact business sales and operations, and the broader economy.

New Worries and Costs on Top of Existing Inflationary Pain

Entrepreneurs know that excessive regulation of larger businesses generally ends up hurting small businesses and consumers. Sweeping regulatory initiatives mean higher costs for their businesses, steeper barriers to entry, higher prices for consumers, and less innovation and choice. Not surprisingly, small business owners are keenly aware of this dynamic. Moreover, 24% of small businesses say they may be forced to closed if legislation such as AICOA were advanced into law.

Startups Not Keen on “Big Tech” Legislation

Again, pandemic startups are a bright spot for the U.S. economy and its competitiveness, especially following a period of time when so many businesses were force to permanently close due to pandemic shutdowns. These startups relay heavily on technology and technology platforms, as revealed in our “Pandemic Startups” survey released in early spring. Startup entrepreneurs are also wary of big-tech policies being pursued on Capitol Hill  – 61% of startup entrepreneurs expressed concern that that these anti-trust/regulatory actions would negatively affect their businesses.

Small Business Message to Congress: Focus on Our Priorities

Not surprisingly, “inflation” tops the list of concerns for startups and small businesses – they want Congress and President Biden to focus on relief. Other priorities include: tax relief and simplicity, affordable health coverage, supply chain issues, cybersecurity, less regulation, interest rates, the labor shortage and access to skilled workers, and access to capital.

Unfortunately, only 5% of startups say that Congress is focusing on policies that “are helping the economy and small businesses like mine.” And only 9% believe President Biden’s policies “make it easy to start or grow a business.”

Congress and President Biden must focus on the pain points of startups and small businesses. “Big tech” legislation via radical regulatory intervention is not a priority for our nation’s small businesses. Moreover, these efforts would trigger risky and costly disruption within the digital ecosystem and that would obviously harm startups, small businesses and their employees.

Karen Kerrigan is president & CEO of the Small Business & Entrepreneurship Council.