As anti-abortion laws pick up newfound support in statehouses across the country, they may come at a cost to both startups and area business communities.

Nine U.S. states--Alabama, Arkansas, Georgia, Kentucky, Louisiana, Mississippi, Missouri, Ohio, and Utah--have in the past five months passed laws restricting abortions, ranging from a near total ban on the procedure to bans after six weeks of pregnancy without exceptions for rape or incest. Two of these laws are already in effect and three have been temporarily blocked by a judge. (Many of the states pushing restrictive abortion laws are hoping to challenge Roe v. Wade, the 1973 Supreme Court decision that gave women legal access to abortion.) And while the remainder are expected to go into effect between now and January 2020, businesses and local economies say they're already feeling the consequences.

As of June 11, entrepreneurs and executives from more than 180 companies including Warby Parker, Slack, Square, and H&M signed a letter that appeared as a full-page ad in The New York Times denouncing the laws. They say that access to comprehensive reproductive care--including abortion--is necessary for business and the economic stability of their employees and customers.

The letter further reads: "It impairs our ability to build diverse and inclusive workforce pipelines, recruit top talent across the states, and protect the well-being of all the people who keep our businesses thriving day in and out."

The backlash is also hitting states directly. In Georgia, entertainment companies like Netflix, Disney, WarnerMedia, and NBCUniversal criticized a law passed in May that prevents women from getting an abortion once a doctor can detect a fetal heartbeat. The companies have said they will reconsider the state as a home to any productions, which would be a significant blow. The state saw $2.7 billion in direct spending from 455 productions last year, according to the governor's office.

In Alabama, a new law--which allows the procedure only if the mother's life is at risk or if the fetus cannot survive--was met with calls for economic retaliation from public officials in states including Colorado and Maryland. And in Maryland, which failed to pass a fetal heartbeat bill, its Democratic comptroller said he would advise the state's $52 billion pension fund to divest from Alabama businesses.

The full effect of these laws is still unknown, as some aren't yet in force. But in time, as the laws do come online--and as more states adopt similar laws--the potential for revenue losses could increase. Florida, Minnesota, and South Carolina also are considering legislation further restricting abortions.

'Bathroom Bill' Backlash

A helpful example for what may be in store for these states--and by extension their entrepreneurial communities--is North Carolina. In March 2016, the state's legislature passed the Public Facilities Privacy and Security Act--known popularly as the bathroom bill. Portions of the law, which banned individuals from using public bathrooms that did not correspond to their birth-certificate gender and removed anti-discrimination protections for gay, lesbian, bisexual, and transgender individuals, were later repealed. However, the state is still reeling from the backlash, which the Associated Press in 2017 tallied at $3.76 billion in lost business over 12 years.

Conference halls were left fallow after corporations pulled out of planned events in the state. Ringo Starr, Bruce Springsteen, Ani DiFranco, Demi Lovato, Nick Jonas, and Pearl Jam canceled their 2016 shows. The NBA even relocated the 2017 All-Star Game from Charlotte to New Orleans, while the NCAA refused to host championship events in North Carolina as long as the law was on the books.

PayPal canceled its plans to open a new global operations center in Charlotte--which was estimated to add $2.66 billion to the state's economy and employ about 400 people. Deutsche Bank announced it halted plans to add 250 jobs to its software development center in Cary, North Carolina.

Jan Davis, an investor at the Raleigh-based angel investment fund Triangle Angel Partners and entrepreneur-in-residence at the University of North Carolina's entrepreneurship program, adds that even with portions of the law repealed, "it's going to be more difficult to attract talent to move here." 

Investor dollars might become scarcer, too. In 2016, the median venture capital deal size for angel or seed funding in North Carolina was $640,000, according to data research company Pitchbook. That dropped to $530,000 in the year after the bathroom controversy and has since dropped further to $500,000 in 2018. Additionally, the median late-stage venture capital deal size went from $7.05 million in 2016 to $5.1 million in 2017, while the median early-stage deal size increased from $2.9 million to $3.5 million in the same time period. 

The states pushing restrictive abortion laws can expect similar employment and investment fallout, says Ted Zoller, the director of the entrepreneurship center at the University of North Carolina Kenan-Flager business school. "Investors with more progressive orientations will favor states that share their same views on social issues," Zoller said. "And they will choose not to invest in states that diverge from that orientation."

Brayden King echoes that refrain. The Northwestern Kellogg School of Management professor has conducted research into social activism's influence on corporate responsibility and legislative policymaking. "If the reputation of the state becomes so bad that companies don't want to bring business to the state--because the employees don't want to move there--that's going to hurt them in the long term," he says.

And to the extent that employees can also pick and choose where they live, they may avoid states with laws that they view as punitive. "North Carolina used to be called one of the best places to live in the country, but we aren't hearing that as much," says David Gardner, a serial entrepreneur who founded Cofounders Capital, an early-stage seed fund and startup accelerator, and runs a free co-working space in Cary. "Unfortunately, some of these southern states did not learn from our mistakes," he adds.

While boycotts at this level can be effective in swaying local legislature to reverse a decision, as was the case in North Carolina, there's no guarantee that the Supreme Court will even agree to weigh in.

Published on: Jun 13, 2019