As long as most voters avoid reading the likes of Bloomberg and Business Insider, then life sciences startups — and, more directly, the investors enriched by the good ones — are going to be OK.

But coming under increasing attack from millionaires, billionaires and media types is the concept that rich people and entrepreneurs create jobs.

This is far from an academic debate for the life sciences sector — particularly in major markets like Cleveland, Pittsburgh, Philadelphia and the Twin Cities, where states continue to pour billions of dollars through straight cash and tax breaks into early stage companies, major research institutions and venture capital funds. Investors and startups have received this public funding because supporters of the approach tell legislators and voters: These are the people who will create jobs.

But that rationale is garbage, say the likes of Seattle venture capitalist Nick Hanauer and journalist Henry Blodget, the latter of whom has been methodically attacking the concept that investors and entrepreneurs are job creators.

(Conflict alert: MedCity, my startup, has received a significant amount of its investment dollars thanks to this taxpayer-supported system.)

Hanauer and Blodget’s point is that only consumers and a healthy economic ecosystem — not investors nor entrepreneurs — create jobs.

Saying “the entrepreneur and investors create the jobs,” in other words, is like saying a seed creates a tree.

A seed does not create a tree. The seed starts the tree and contains the blueprint (idea) for the tree. But the tree is created by a combination of this blueprint plus soil, sunshine, nutrients, water and a climate that has perfect temperature and atmosphere with enough of the above resources to go around.

Plant a seed in an inhospitable environment, and it won’t create anything. It will die.

And the same is true for entrepreneurs and investors. Without their future customers and employees, and a legal and societal environment that can nurture their growth, they’re done for.

And who are the customers who have the power to create and destroy jobs and fix the economy?

For the most part, the middle class — a.k.a., “the 99%.” (Yes, there are some companies that cater exclusively to the 1%, but not many.)

The insinuation is that the current economic setup is working against this healthy economic ecosystem. And the likes of Hanauer, Blodget and entrepreneurs like Kevin Ryan state the following:

• Entrepreneurs and their investors create “temporary jobs” until capital runs out. Consumers create permanent jobs.
• A better-off middle class is much better at job creation than the lightly taxed upper class and, currently, the “99 percent” are cash-strapped to the point they don’t have the buying power to support companies and, thus, create jobs.
• Tax rates and the American economy are easy on entrepreneurs — so much so that many foreigners want to come to the United States to start companies.
• The hundreds of thousands of jobs “created” by the likes of Jeff Bezos, Jerry Yang, Steve Jobs and others were actually created by “the combination of the companies, the companies products and services, and the market’s ability to pay for those products and services.”

Healthcare is the biggest employer in many major cities. But let’s drill down into some trends in the life sciences.

• Many investors like the idea of investing in a product and not a company. Result: no jobs.
• The jobs in key life sciences sectors are increasingly outside the United States (as are the consumers who will buy them).
• There are more acquisitions — which almost immediately eliminate jobs — and very few IPOs, which could create more jobs and a bigger local industry.

That’s not a good combination in the era of the 99 percent. And if the concept of consumers-over-investors takes hold, one of the first things to go would be the public subsidies of favored industry sectors in states. That certainly would have a fallout for some key geographies that focus on life sciences innovation.

Ohio has used gobs of tax money to entice venture funds to open up offices in the state, which encouraged these funds to invest in early stage companies here; tax credits to encourage angel investors in the state; and additional funds go to early stage companies and research.

Minnesota in the past year passed a tax credit and subsequently formed an angel-investment group.

In Pennsylvania, outlets like Ben Franklin Technology Partners have for years provided early stage capital via public dollars for life sciences companies.

A deconstruction of this system would certainly put Blodget’s theories to the test. Ohio’s robust angel investing environment was essentially created when the state contributed public dollars alongside the investments from individual private investors, who often get a tax credit when investing in startup companies.

What would happen with the state dollars gone? Many angel investors – real angel investors — would invest in companies anyway (as I have heard several times from people in these angel funds: “I don’t care if you have the tax credit. I care if you have a good business.”). And the angel funds contain these real angels.

But there are also a significant number of new angels attracted by the tax break. And many angels rely on their formal networks to do due their due diligence for them. So angel investment would slow down across the country. Also, some of the venture funds that opened offices here thanks to state dollars would also leave.

Would healthier consumers create an economic ecosystem that would drive the creation of these companies?

From reading the likes of Bloomberg and Business Insider, we may find out.

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