Startup Formation and Scale-Up: Make America the Best Place to Build

Startup policy is national-capacity policy

Startups matter because they explore. Large firms can scale. Universities can discover. Government can set missions and buy what works. Startups often do the high-variance work in between: building prototypes, finding early customers, hiring across disciplines, and turning technical uncertainty into products. A serious innovation platform should make that middle stage easier to navigate.

The country already has pieces of a builder ecosystem. SBA provides loans, counseling, and programs for small business. SBIR/STTR funds small firms conducting R&D with commercialization potential. Census tracks business applications and projected business formations. USCIS has an International Entrepreneur Rule that can parole some startup founders into the country. IRS guidance now allows deductions for domestic research and experimental expenditures under new Section 174A. The question is whether these pieces add up to the best place in the world to build a frontier company.

They do not yet. Formation and compliance remain fragmented. Founder immigration rests on parole rather than a clean statutory visa. Public procurement often cannot be an early customer. Noncompetes still limit mobility in many places after the FTC's nationwide rule was vacated. Employee equity can be opaque and tax-punishing before liquidity. R&D tax rules have changed enough in recent years to make planning harder than it should be.

Fast formation needs firm legal boundaries

Starting a company should not require founders to discover the federal government one silo at a time. A startup may need an employer identification number, payroll setup, beneficial ownership reporting, export-control awareness, tax elections, worker classification guidance, immigration options, SBIR/STTR opportunities, and state registration. Today those tasks live across agencies and websites.

The platform should support a federal startup formation and compliance portal that works like a guided operating checklist. It should not replace state corporate law or reduce serious requirements to a checkbox. It should help founders understand what applies, file what can be filed federally, hand off cleanly to states, and document decisions. For frontier companies, the portal should flag export controls, sanctions, controlled technical data, dual-use risk, and government contracting basics early enough to prevent expensive mistakes.

This is not deregulation by confusion. It is the opposite: make compliance legible so small teams can comply without hiring a full legal department before they have a product.

Early capital should buy learning and transition

SBIR/STTR is one of the country's strongest startup tools because it funds technical risk before a private investor or ordinary lender may be ready. But the gap between a successful grant and a scaled product remains hard. Some teams win awards and never find a market. Others build useful capability and cannot get through procurement. Others need matching capital, demonstration sites, or regulatory guidance more than another small grant.

The policy should push SBIR/STTR toward transition without turning it into a venture-capital substitute. Faster awards, state matching, commercialization-readiness support, and public first-customer pathways should be measured by follow-on capital, revenue, procurement transition, standards adoption, and survival. Agencies should publish where projects go after Phase II, not only how many awards were made.

Mission agencies and GOV-09 matter here. A startup building robotics for elder care, grid software, secure AI evaluation, advanced materials, or biomanufacturing should know which testbed can evaluate it and which public buyer could adopt it if it works.

The United States needs a startup visa

The United States benefits when ambitious founders build companies here. The current International Entrepreneur Rule can help some founders, but parole is not the same as a statutory visa. It is discretionary, temporary, and politically fragile. A builder deciding where to incorporate, hire, raise money, and move family should not have to bet the company on whether parole policy survives the next administration.

The platform should support a startup visa with objective thresholds: investment, grants, revenue, job creation, participation in a qualified accelerator, or admission to a federal mission program. It should include fraud controls and objective milestones, then convert to a longer-term path when the company creates jobs or raises qualified capital. The United States should not train, fund, or attract technical founders and then make them build somewhere else.

Worker mobility is part of startup formation

Startups are built by people leaving one project to start or join another. Noncompetes slow that movement. The FTC's 2024 rule tried to ban most noncompetes nationwide, but the Commission later acceded to vacatur after courts held it lacked authority. That leaves a serious policy problem with an institutional lesson: the goal may be sound, but Congress should write the rule.

The Innovation Party should support a statutory limit on noncompetes that is clear enough to survive. Ban noncompetes for ordinary workers and most startup employees. Preserve trade- secret law, invention-assignment rules within bounds, nonsolicitation where narrowly tailored, and sale-of-business exceptions for founders who are actually selling goodwill. Worker mobility should be the default; protecting confidential information should not become a general ban on leaving.

Employee equity needs the same practical treatment. Equity can help workers share upside, but only if the terms are understandable and the tax treatment does not punish workers before liquidity. Startup workers should receive plain-language equity summaries: vesting, exercise cost, tax risk, dilution, repurchase rights, transfer limits, and what happens at exit or failure. Tax deferral for illiquid startup equity should be paired with disclosure, not used to hide risk.

Stable R&D tax rules matter more than slogans

Founders can plan around a tax rule. They struggle when the rule changes repeatedly or applies to software in ways that drain cash before revenue. IRS guidance after the One Big Beautiful Bill Act added Section 174A, allowing deductions for domestic research and experimental expenditures for tax years after 2024 and transition options for earlier years. That move is directionally pro-builder because domestic R&D expensing matters for cash-limited startups.

The platform should make the principle stable: domestic R&D should be deductible in a way small firms can understand; foreign R&D and tax gaming should not receive the same treatment; and compliance should be simple enough that a small technical company does not spend scarce capital decoding tax mechanics instead of building. The research credit and R&D expensing are not substitutes for product-market fit, but they can decide whether a technical startup survives long enough to find it.