My problem with this article and this approach to "saving the economy" make little sense to me. While I believe startups and entrepreneurs who are starting now will lead the next wave of great companies, I don't think giving them money now will yield immediate results that we seem to need.
Yes, startups are strapped for cash, but even if you give them money, it doesn't mean job creation like the tagline of the article says. Growth and job creation won't be significant until the company is more established.
Secondly, most startups want to stay small, not because of lack of capital, but because they can be adaptive and nimble. Again, until the company matures, growing tthe company != growing the employee head count
I feel like instead of smaller startups, there should be something similar for small business. They won't have to go through the hardships of establishing the company and hopefully they'll already be profitable, etc. that a startup won't have/
"Another internet bubble" would probably be less damaging than the flattening of the IPO market, which has decimated venture capital.
When something that is essential for subsistence experiences a bubble (e.g. food, housing) it causes an incredible amount of pain, as we've seen in the past decade. Stock bubbles are, in comparison, harmless. Some people get hurt badly, and some make huge gains, but they aren't so ruinous that one should make huge sacrifices in order to avoid them.
Although government isn't great at directly producing entrepreneurs-- that's not its role-- the sort of infrastructural spending Obama is proposing can make the country more hospitable for entrepreneurs.
For example, if this country had a cheap, fast passenger rail system, people would be more mobile. This would lead to further condensation into startup hubs and there might be more of them. Rents in existing startup hubs would go down, which would be an excellent thing.
Also, universal healthcare. If the U.S. were to join the First World on this issue, it would be immensely valuable to small businesses, and remove a significant component of the risk inherent in starting a company.
I'd also propose this, although it (by definition) has to come from a private source rather than government: an "educational program" targeted toward serial entrepreneurs. The program would be sponsored by a VC firm and provide support, networking, and possibly (but not necessarily) funding. The VC firm would mentor the entrepreneur while he launched startups for a minimum of 12 years. At the end of the program, he would have the option of a job at the VC firm. Thus, entrepreneurship would have "exit options" that are competitive with (or better than) those of investment banking, law, etc.
> For example, if this country had a cheap, fast passenger rail system, people would be more mobile.
And if we all had ponies...
We can't have cheap fast passenger rail because the economics don't work out. The US is too big. It doesn't even work in CA (which is why the proponents have stopped putting up revenue and employment projections).
The US doesn't even have all that many places where local mass transit makes economic sense.
> Also, universal healthcare. If the U.S. were to join the First World on this issue, it would be immensely valuable to small businesses, and remove a significant component of the risk inherent in starting a company.
US govt healthcare, which covers half of the covered population, costs about the same as private (which covers the other half). In other words, US govt healthcare is no cheaper than private healthcare.
How will making it universal change that? (If you're going to argue that it will, why not demonstrate that it will with existing US govt healthcare?)
If "universal" isn't cheaper, how will it help small biz?
I am optimistic that universal health care may reduce costs indirectly.
We see stark differences in food quality laws in countries where the government pays for health care. For example, in most of Europe there's real sugar instead of corn syrup in soda. In Canada, Trans Fats are listed to several significant digits in the nutrition facts, whereas in the US the FDA allows rounding down to 0.0g when under 0.5g per serving.
If we look at the FDA food pyramid, and then compare farm subsidies, they are almost inverse. Better food quality alone would reduce costs, but right now there's no incentive.
> We see stark differences in food quality laws in countries where the government pays for health care. For example, in most of Europe there's real sugar instead of corn syrup in soda.
There's no "corn lobby" in the EU, a lobby that won't go away with universal healthcare.
> I am optimistic that universal health care may reduce costs indirectly.
"optimistic" isn't a plan or an estimation of likelyhood.
For what is the phenomenally expensive rail needed? If people are coalescing in hubs already in order to live and work near like-minded people, why do they need a fast, passenger rail system?
The condensation happens because, if people can easily reach their families and friends, they are more willing to relocate.
I don't think fast rail travel is "phenomenally expensive" compared to our current infrastructure of highways and airports, which are inappropriate and expensive (but used, due to a lack of alternatives) for mid-distance travel.
Can you point to other situations where an advanced infrastructure created by government led to an increase in entrepreneurial activity?
I ask this because about every state nowadays has special departments and programs to promote hi-tech startups. But of course they are actually only flourishing in a small number of spots. I've worked with a few of these programs, and some are led by extremely talented and skilled administrators. And they're well funded. Is your premise that direct involvement like this will not work but that indirect involvement would? Kind of like putting out a fire by building a swimming pool?
Not trying to mock you or start an argument, but I don't understand how much indirect contributions can actually help. Seems to me, and it's just my opinion, but societies with lots of government-provided goodies actually have less startups. It's the ones where there's this balance between chaos and order where you get the most growth. Not ones with lots of danger or ones with lots of cushions.
> Can you point to other situations where an advanced infrastructure created by government led to an increase in entrepreneurial activity?
Military spending has spawned huge amounts of both direct and indirect innovation. Aviation and the space program, the internet, scores of "trickle down" consumer electronics such as GPS, Popeye (created to sell a surplus of canned spinach after WWII!), the list goes on and on. Plus there's the education of large numbers of the population that would otherwise lack opportunity.
The doctrine of "small government and a strong military" is an oxymoron. Military spending is an extremely effective form of high tech government subsidy. Of course the downside of having a huge military is the temptation to use it inappropriately...
Military spending is fine if it's making the country and the world safer. I'll pay for that. But the recent multi-billion-dollar handout to Bush's and Cheney's contractor friends has made the world a lot less safe.
Can you point to other situations where an advanced infrastructure created by government led to an increase in entrepreneurial activity?
I think this has been covered by other posters and I can't add much to what they have already said.
I ask this because about every state nowadays has special departments and programs to promote hi-tech startups. But of course they are actually only flourishing in a small number of spots. I've worked with a few of these programs, and some are led by extremely talented and skilled administrators.
Right, because the initiatives I have in mind are national and, therefore, unlikely to have targeted local effects. You're talking about a separate issue, which is that it's very hard (impossible, in most cases) for a city to become a startup hub if it's not one.
Government intervention is not going to turn Dubuque, Iowa into a startup hub. There are too many ingredients necessary-- good universities, venture capital, entrepreneurial culture, good hackers, the ability to reach relevant customers, and reasons for a startup to stay there once it is successful. It would be possible to upgrade cities that have some or most of these ingredients (e.g. Pittsburgh or Minneapolis) to full-blown startup hubs, but most cities will never reach that level. However, the nearly impossible problem of turning Dubuque into a startup hub has nothing to do with that of increasing entrepreneurship on a national basis.
Seems to me, and it's just my opinion, but societies with lots of government-provided goodies actually have less startups.
I would imagine that you're talking about the European countries, but the government benefits have nearly nothing to do with the EU having fewer startups. Regulation and a less entrepreneurial culture take more of the blame.
Then how come startups don't flourish everywhere those services are offered? How come, for instance, Israel is the scene of a lot of startups? Or parts of India?
I've heard of quite a few Israeli startups. FilesX being bought by IBM comes to mind off the top of my head. Bangalore is also starting to see its share of startups.
Why does nothing grow if you pour water on a rock? How are large plants able to grow in the desert?
You need a mix of many factors in order to encourage tech startups, and startups can't "flourish everywhere" because many of those necessary ingredients are only found in half a dozen "star cities".
Yes, startups are strapped for cash, but even if you give them money, it doesn't mean job creation like the tagline of the article says. Growth and job creation won't be significant until the company is more established.
Secondly, most startups want to stay small, not because of lack of capital, but because they can be adaptive and nimble. Again, until the company matures, growing tthe company != growing the employee head count
I feel like instead of smaller startups, there should be something similar for small business. They won't have to go through the hardships of establishing the company and hopefully they'll already be profitable, etc. that a startup won't have/