

Why Governments Don’t Get Startups - antr
http://steveblank.com/2011/09/01/why-governments-don%E2%80%99t-get-startups/

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jswinghammer
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.

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jachreja
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.

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nitrogen
_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
Working out of one's mother's basement was my thought. :P

Atleast a garages these days have some panache!

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erikb
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.

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anamax
> 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.

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trevelyan
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.

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DanielBMarkham
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.

~~~
dasil003
> _It's simply damn hard to fund startups, as any VC will tell you._

This is the crux of it right here. VCs have the opportunity to directly earn
themselves millions of dollars by making good funding decisions. Some of them
are good at it, but there's no formula to apply; it requires intelligence,
savvy, drive and a good dose of luck.

Now if you think about how government works, even the most upstanding public
servants with the best of intentions _simply do not have what it takes_ to
make the right cut-throat funding decisions that are necessary. Hell it might
even be illegal in some jurisdictions to show the kind of aggressive
preference that is required.

All the cynicism about bureaucrats wanting to look good might be true, but
even if it's not, they're still fucked if they try to do it themselves. The
best a government can hope to do is to not get in the way of people who _are_
capable of doing it.

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DanielBMarkham
_"...All the cynicism about bureaucrats wanting to look good might be
true..."_

No cynicism was intended. I'm simply trying to share my direct experiences, as
indicated. My interests are in solving this problem, not throwing mud around
and claiming it is impossible. When given a bucket of money, a vague and
somewhat impossible task, people create systems of allocation and reporting
that show progress, even though no actual progress is being made.

This has nothing to do with the government, government programs, or
bureaucrats -- one of the big mistakes funded startups do is generate a lot of
activity and paperwork without generating any results. There are a ton of
startups generating mountains of paperwork -- reports, contracts, studies,
research, white papers, market position statements, etc -- that will never
have enough business to break even. Why? _Because results are freaking hard_ ,
that's why. It's difficult to dynamically create a flow diagram full of ideas
of various providence and adjust and tweak it as necessary. Much easier to
construct some other, simpler measurement criteria that's more doable and
simply measure against that. This is an attribute of groups of people put into
stressful, complex, and difficult-to-tract situations that have to report to
other groups. Organizational setting is not important. Apologies if somehow it
read cynically. There is a great tolerance for dealing with uncertainty
involved in the area of value creation that most people, frankly, find very
uncomfortable.

~~~
dasil003
Actually no it didn't read cynically, that was just an addendum directed at
the prevailing stereotype of government workers.

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omouse
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 ;)

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EP1
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.

