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Category: Government, Startup

How Can Governments Encourage A Startup Culture?

This was a question on Quora, to which I wrote the following response. And there are quite a number of things. The obvious are of course:

  • Make it easy to incorporate (online, no or low registration fees, no need of go-between services such as notaries or lawyers, low or now capital requirements)
  • tax breaks for the startup and its investors
  • bankruptcy code that doesn’t make you a legal pariah for many years, but allows you to try again quickly (note: failure is a critical path for learning; learning how to walk is accompanied by many times falling)
  • create programs such as sending your startups (those where it makes sense) to Silicon Valley accelerators (or other innovative regions) for learning and for business development without fearing that this is the way to lose your startup to America, when in fact a large part of the startup will be staying home due to cost reasons, but when it grows in the US, the home subsidiary will also grow (see as an example Prezi from Hungary or many Israeli companies)

And then there are other less obvious ones that require governments and its agencies to change their own codes:

  • become a customer for startups (governments have huge purchasing power, but often those processes prefer vendors that have huge resources and time to go through a bidding process)
  • promote startups through your institutions (chamber of commerce, trade commissions, economic ministry) and not just the big corp that you deem important
  • create a startup coordinator (ideally a (former) entrepreneur him/herself) in the government that reports directly to the prime minister/chancellor
  • give startups a voice in government initiatives (examples how not to do it are Germany’s Industrie 4.0 initiative that totally ignores startups and generally does make bad work)
  • add entrepreneurship to the education curricula starting as early as elementary school
  • create investment funds that double the investment of private investors in startups (see also the Israeli example)
  • set up TechShop/FabLab-style, publicly accessible maker spaces; consider them as libraries serving the community
  • sponsor startup events (Web Summit in Ireland, Pioneers Festival from Austria etc.)

Of course this may not be enough and startups should also give input. In Austria there is an organization aptly called AustrianStartups that serves (among other tasks) as a lobbying organization for startups and creates suggestions how the government can support startups and the startup scene. In the UK the lobbying group Coadec published a Startup Manifesto that is also worthwhile to read.

I do see a couple of more items that could be used to support startups. Especially in Europe there is a tendency to over-regulate in regards to data privacy laws, copyrights, and most importantly labor laws that really create a huge disadvantage for European startups compared to the ones from the US.