6 ms·

Why Governments Don’t Get Startups

81 points by antr 15y ago

erikb 15y ago
I think Start-Ups as understood in the USA is also strongly connected to the peoples philosophy and culture. Knowing a little about the German and UK start-up scene, I feel that European entrepreneurs and investors favour a more risk-averse and engineered approach instead of the "let's do it and get rich or die trying" approach I feel is more common in the US. Just applying the US approach to another country where people think and feel totally different about the topic of founding companys can't work. But why should there not be other approaches that also work fine? Of course they might not lead to the same goals, Steve Blank has defined for a Start-Up-Ecosystem, but why should they? Maybe less innovation and less compensation might be okay, if you get also less risk for example.
- anamax 15y ago
  > Maybe less innovation and less compensation might be okay, if you get also less risk for example. You're assuming something about the value of the innovation and the cost of the risk. Would you be willing to pay 1000 failed startups for one Google? I would, because the cost of those 999 startups is largely borne by the folks involved while I get significant benefits from the existence of Google. Safe is usually just losing slowly but surely.
jswinghammer 15y ago
I'd rather government not even try to understand startups or business in general. That way they wouldn't try craft policies to stimulate business which are invariably misguided. It'd be better to just lower taxes and reduce regulatory burdens and just let things happen on their own. Even if they did make policies that they thought would help the lack of knowledge would make their ideas nothing more than guesswork and they wouldn't defend as being based on science or research or whatever. I'm not sure a society needs more startups and I have no way to know so I wouldn't think to make a policy to help create startups. It seems to me that the presumption that society cannot produce the things it values is very arrogant. The whole point of the price system is to allow society to communicate to entrepreneurs what is valued and what isn't. Let others in society (not in government) communicate to the entrepreneurs what they should be building.
- jachreja 15y ago
  More start-ups are an inevitability of the future in my vision. I'm not discouraging or encouraging it either way, in fact it's probably not the best outcome, but because of popular media and the cultural dramatization of the start-up world and how entrepreneurial innovation works, people think it's a "Let's work out of a garage for awhile and then see what happens" type of thing. I really hope that methodology and philosophy never becomes the penultimate choice for those that want to start their own business or innovate something. The government could potentially destroy that balance though, I agree. Where there is a need, there will be an innovation of some kind. The best ideas come partially from necessity.
  - nitrogen 15y ago
    I really hope that methodology and philosophy never becomes the penultimate choice for those that want to start their own business or innovate something. If "let's work out of a garage for a while" is the second-to-last choice, what is the last choice, and is it better or worse?
    - jachreja 15y ago
      Working out of one's mother's basement was my thought. :P Atleast a garages these days have some panache!
- T-hawk 15y ago
  > It'd be better to just lower taxes and reduce regulatory burdens and just let things happen on their own. As DanielBMarkham said in the top post, the problem is that governmental offices need to look like they are productively creating value. Getting out of the way doesn't get a bureaucrat a career advance. The government way would be to use tax money to create a startup development program, so that the administrators can point to successful outcomes from it and take credit. Never mind if we'd have more successful startups without a program at all thanks to lower tax overhead. Government cannot create such an outcome because government is composed of individual administrators all with their own self-interest. Government cannot remain idle even when remaining idle is the best solution, because each civil servant needs to be seen as Doing Something. My state, New Jersey, has as part of its income tax return a moderately complicated form that amounts to a $50 rebate credit against property tax. Wouldn't it have been infinitely simpler to just lower property tax by $50 in the first place? Of course. But the extra paperwork creates visibility that They Are Doing Something About Our Taxes, which perception is far more important to the politicians than actually doing something about taxes. I'm vaguely reminded of Internet Explorer's "enhanced security" stuff. IE looks more secure by emitting "we protected you!" notices all over the place, than if it had never been designed with such inherently risky OS integration in the first place.
deleted 15y ago
[deleted]
omouse 15y ago
It's because startups don't have as much cash as large multinational corporations. It's hard to understand someone who has very little cash ;)
DanielBMarkham 15y ago
I've interacted with several government groups over the past few years, each with a mission to help startups. I've also worked several times with large companies who want to "foster innovation" and "empower teams" -- ie, actually start making something that people want instead of being stuck in paperwork-land. I like what Steve has done here. He has a tendency to over-think things but understanding the different kinds of startups is critical to understand why things are so screwed up. The only thing I would add is that political groups, that is, groups of people who make decisions, make decisions based on politics. What else would we expect? That sounds a bit circular, so let me expand it out. If I am part of a committee who has ten million to spend to bring jobs to the region, my primary goal is to make us all look good, to look as if we are bringing jobs to the region, to whatever group set us up. It is not, necessarily, to bring jobs to the region. I can't, for instance, blow the ten million for twenty years in a row and then end up with a Yahoo. The numbers might work, but the politics never would. The acceptance criteria is not the jobs, it is the appearance. That's not saying that somehow there's anything crooked going on. It's simply damn hard to fund startups, as any VC will tell you. It's not hard, however, to construct some system of allocation and reporting that makes things look as if they are going along nicely, as any consultant would tell you. So a thousand government startup programs hum along, all giving out money and doing things that look important, all reporting back with solid numbers on how things are changing, and not much else happens. Everybody wants Google or some big startup that was formed somewhere else to move in -- that generates a lot of publicity and makes even more money flow in. Nobody wants a hundred lifestyle/small business startups that might employ 2-4 people. As Steve points out, those guys don't get their pictures on the front of magazines. Hell, most of the time you never even know they are there. Kind of hard to put that in an annual report somewhere, kind of hard to do a standup with the local TV station outside a new warehouse, kind of hard to do a ribbon-cutting ceremony with the local pols, even if the impact is the same or greater than the big score. What would I do? Beats me. I think the problem is somewhat intractable. But if I had to, I'd work on things that formed communities -- incubators, free wi-fi, regular talks from industry leaders, open-air forums, free beer night, setting up near a college, etc -- and ditch any kind of reporting whatsoever. I'd definitely ditch business plan competitions and other wonkish old and tired ideas that seem to be everywhere but never amount to much. My only metric would be startup attempts and the size of the community actually interested in entrepreneurialism. From there I would get the hell out of the way. Then wait about ten or fifteen years.
deleted 15y ago
[deleted]
trevelyan 15y ago
Where I live bootstrapping is a necessity rather than an option. Founders and early employees carry tons of risk, and once the business is profitable the idea of taking funding on worse terms than are available to much riskier early-stage startups in the US is laughable. Companies grow organically because it makes the most sense to fuel growth with revenue. Given that the vast majority of startup financing in the US is late-stage, it seems to me that a lot of companies that take investment in the States are doing it to de-risk participants, exactly the same thing that happens when pre-revenue founders take funding to pay themselves salaries. I think this is a good thing, but the insinuation that the rest of the tech world is building digital surf shops because we are beach bums who don't understand scalability is insulting and inane.
EP1 15y ago
Time to elevate this thread and the original post to the White House BEFORE the President's "jobs and economic recovery" speech next week. Seriously.

81 points by antr 15y ago

erikb 15y ago

I think Start-Ups as understood in the USA is also strongly connected to the peoples philosophy and culture. Knowing a little about the German and UK start-up scene, I feel that European entrepreneurs and investors favour a more risk-averse and engineered approach instead of the "let's do it and get rich or die trying" approach I feel is more common in the US. Just applying the US approach to another country where people think and feel totally different about the topic of founding companys can't work. But why should there not be other approaches that also work fine? Of course they might not lead to the same goals, Steve Blank has defined for a Start-Up-Ecosystem, but why should they? Maybe less innovation and less compensation might be okay, if you get also less risk for example.

anamax 15y ago
> Maybe less innovation and less compensation might be okay, if you get also less risk for example. You're assuming something about the value of the innovation and the cost of the risk. Would you be willing to pay 1000 failed startups for one Google? I would, because the cost of those 999 startups is largely borne by the folks involved while I get significant benefits from the existence of Google. Safe is usually just losing slowly but surely.

jswinghammer 15y ago

I'd rather government not even try to understand startups or business in general. That way they wouldn't try craft policies to stimulate business which are invariably misguided. It'd be better to just lower taxes and reduce regulatory burdens and just let things happen on their own. Even if they did make policies that they thought would help the lack of knowledge would make their ideas nothing more than guesswork and they wouldn't defend as being based on science or research or whatever. I'm not sure a society needs more startups and I have no way to know so I wouldn't think to make a policy to help create startups. It seems to me that the presumption that society cannot produce the things it values is very arrogant. The whole point of the price system is to allow society to communicate to entrepreneurs what is valued and what isn't. Let others in society (not in government) communicate to the entrepreneurs what they should be building.

jachreja 15y ago
More start-ups are an inevitability of the future in my vision. I'm not discouraging or encouraging it either way, in fact it's probably not the best outcome, but because of popular media and the cultural dramatization of the start-up world and how entrepreneurial innovation works, people think it's a "Let's work out of a garage for awhile and then see what happens" type of thing. I really hope that methodology and philosophy never becomes the penultimate choice for those that want to start their own business or innovate something. The government could potentially destroy that balance though, I agree. Where there is a need, there will be an innovation of some kind. The best ideas come partially from necessity.
- nitrogen 15y ago
  I really hope that methodology and philosophy never becomes the penultimate choice for those that want to start their own business or innovate something. If "let's work out of a garage for a while" is the second-to-last choice, what is the last choice, and is it better or worse?
  - jachreja 15y ago
    Working out of one's mother's basement was my thought. :P Atleast a garages these days have some panache!
T-hawk 15y ago
> It'd be better to just lower taxes and reduce regulatory burdens and just let things happen on their own. As DanielBMarkham said in the top post, the problem is that governmental offices need to look like they are productively creating value. Getting out of the way doesn't get a bureaucrat a career advance. The government way would be to use tax money to create a startup development program, so that the administrators can point to successful outcomes from it and take credit. Never mind if we'd have more successful startups without a program at all thanks to lower tax overhead. Government cannot create such an outcome because government is composed of individual administrators all with their own self-interest. Government cannot remain idle even when remaining idle is the best solution, because each civil servant needs to be seen as Doing Something. My state, New Jersey, has as part of its income tax return a moderately complicated form that amounts to a $50 rebate credit against property tax. Wouldn't it have been infinitely simpler to just lower property tax by $50 in the first place? Of course. But the extra paperwork creates visibility that They Are Doing Something About Our Taxes, which perception is far more important to the politicians than actually doing something about taxes. I'm vaguely reminded of Internet Explorer's "enhanced security" stuff. IE looks more secure by emitting "we protected you!" notices all over the place, than if it had never been designed with such inherently risky OS integration in the first place.

deleted 15y ago

[deleted]

omouse 15y ago

It's because startups don't have as much cash as large multinational corporations. It's hard to understand someone who has very little cash ;)

DanielBMarkham 15y ago

I've interacted with several government groups over the past few years, each with a mission to help startups. I've also worked several times with large companies who want to "foster innovation" and "empower teams" -- ie, actually start making something that people want instead of being stuck in paperwork-land. I like what Steve has done here. He has a tendency to over-think things but understanding the different kinds of startups is critical to understand why things are so screwed up. The only thing I would add is that political groups, that is, groups of people who make decisions, make decisions based on politics. What else would we expect? That sounds a bit circular, so let me expand it out. If I am part of a committee who has ten million to spend to bring jobs to the region, my primary goal is to make us all look good, to look as if we are bringing jobs to the region, to whatever group set us up. It is not, necessarily, to bring jobs to the region. I can't, for instance, blow the ten million for twenty years in a row and then end up with a Yahoo. The numbers might work, but the politics never would. The acceptance criteria is not the jobs, it is the appearance. That's not saying that somehow there's anything crooked going on. It's simply damn hard to fund startups, as any VC will tell you. It's not hard, however, to construct some system of allocation and reporting that makes things look as if they are going along nicely, as any consultant would tell you. So a thousand government startup programs hum along, all giving out money and doing things that look important, all reporting back with solid numbers on how things are changing, and not much else happens. Everybody wants Google or some big startup that was formed somewhere else to move in -- that generates a lot of publicity and makes even more money flow in. Nobody wants a hundred lifestyle/small business startups that might employ 2-4 people. As Steve points out, those guys don't get their pictures on the front of magazines. Hell, most of the time you never even know they are there. Kind of hard to put that in an annual report somewhere, kind of hard to do a standup with the local TV station outside a new warehouse, kind of hard to do a ribbon-cutting ceremony with the local pols, even if the impact is the same or greater than the big score. What would I do? Beats me. I think the problem is somewhat intractable. But if I had to, I'd work on things that formed communities -- incubators, free wi-fi, regular talks from industry leaders, open-air forums, free beer night, setting up near a college, etc -- and ditch any kind of reporting whatsoever. I'd definitely ditch business plan competitions and other wonkish old and tired ideas that seem to be everywhere but never amount to much. My only metric would be startup attempts and the size of the community actually interested in entrepreneurialism. From there I would get the hell out of the way. Then wait about ten or fifteen years.

deleted 15y ago

[deleted]

trevelyan 15y ago

Where I live bootstrapping is a necessity rather than an option. Founders and early employees carry tons of risk, and once the business is profitable the idea of taking funding on worse terms than are available to much riskier early-stage startups in the US is laughable. Companies grow organically because it makes the most sense to fuel growth with revenue. Given that the vast majority of startup financing in the US is late-stage, it seems to me that a lot of companies that take investment in the States are doing it to de-risk participants, exactly the same thing that happens when pre-revenue founders take funding to pay themselves salaries. I think this is a good thing, but the insinuation that the rest of the tech world is building digital surf shops because we are beach bums who don't understand scalability is insulting and inane.

EP1 15y ago

Time to elevate this thread and the original post to the White House BEFORE the President's "jobs and economic recovery" speech next week. Seriously.