
A social safety net for entrepreneurs - vincentleeuwen
http://unhustling.com/a-social-safety-net-for-entrepreneurs
======
bradleyjg
Just do a basic income and forget about all these complicated schemes -- one
for workers, another for students, another for entrepreneurs, another for
retirees, another for single mothers, another for disabled people, another for
farmers and so forth and so on.

If you insist you can make it means tested (either through income or assets or
both), but in any event we shouldn't be wasting time and energy infinitely
dicing up people in more and less "deserving" categories. The whole point of a
safety net is to catch everyone.

~~~
vincentleeuwen
Good point. I doubt political feasibility in the short term, but I fully
agree.

~~~
Rogerh91
Depends on the context of the situation. In a culture that stigmatizes
receiving help this can be quite difficult, but in an open and collaborative
setting that values everybody helping one another, I can see this flourishing.
The experiment in Switzerland to move towards this will be interesting to
watch.

[http://www.globalresearch.ca/swiss-in-forefront-with-
basic-i...](http://www.globalresearch.ca/swiss-in-forefront-with-basic-income-
proposal/5353952)

~~~
kops
Swiss system is awesome as a safety net but I am not quite sure if it helps
the entrepreneurs. The moment you register a company(either as GmbH or AG) you
basically kiss your social security goodbye. The only comfort is that if your
startup fails within a year, then you just have to liquidate the company and
you are back on the social security system. Not bad as a truly dooms-day-
scenario.

~~~
mcv
The article isn't about the current Swiss system, it's about replacing it with
unconditional basic income. It wouldn't be uncinditional basic income if it
didn't apply to entrepreneurs.

~~~
kops
What you are saying is absolutely reasonable assumption to make. But let's
face it, all social security systems are and should be to take care that
people don't go hungry and start prostituting themselves for a loaf of bread.
If I want to be an entrepreneur then I don't blame the authorities for showing
me the door and telling me to fend for myself. I may have a different opinion
in 2-3 months at the end of my runway though ;-)

~~~
mcv
In a system without basic income, sure. Just like someone with a good job
won't need government assistance. But the point about basic income is that
it's for everybody. From millionaires to homeless. And even entrepreneurs can
be poor. Businesses can fail. They need that loaf of bread just like anyone
else.

The idea of basic income is that everybody can afford that loaf of bread.
There are no gaps in the system to fall through. Nobody gets to decide whether
you deserve it or not. But to get beyond that loaf of bread (and some basic
shelter and health care), you need to work.

------
solve
Loans -- NO!

A common thing I see in most of Europe is that everyone assumes that loans can
only be good. Few have seen how much they have destroyed people's lives as has
been increasingly happening in the US. Add to that, most of Europe blacklists
anyone who files for bankruptcy from ever starting a company again.

If anything, follow the example of UK's SEIS program, which requires fully at-
risk investments (not loans or any kind of liquidation priority.)

Loans are a terrible idea, a huge step in the wrong direction.

~~~
gaadd33
How do countries in Europe blacklist someone who files for bankruptcy? Do they
do background/credit checks upon company formation in some countries?

------
netcan
The main problems with this idea is (1) state welfare institutions are not in
a good position to judge an entrepreneur's likelihood of success or even gauge
if they are an entrepreneur and (2) a welfare's system's priority is to avoid
abuse.

Also, I think that the group of people who are willing to live on welfare
incomes and the group of people who will start successful companies doesn't
overlap very well.

Current welfare systems in Europe sometimes do a good job of promoting self
employment by failing. A person on a welfare income is disincentivized from
earning officially. They can lose benefits by earning and a lot of the time
the fear of these is bigger than the reality. This means that to earn extra
they need to work unofficially which is usually some form of self employment.
The problem is in allowing the transition from this to larger scale official
businesses.

~~~
vincentleeuwen
I totally agree that welfare institutions themselves are in no position to
judge. I firmly believe though that institutions within the ecosystem like VC
firms or accelerators could take up that role.

As for the income. I believe that (at least here in Amsterdam) the average
startup founder that is bootstrapping lives on an amount that quite resembles
welfare income. (if not less)

~~~
cmac2992
What incentive do VCs and accelerators have vet significantly more startups?

~~~
vincentleeuwen
1) Discovery - New initiatives are on their radar early 2) Business - Nobody
said they should do it for free. Most (local) accelerators and VCs are not
exactly raking in the millions, so this could be an easy 2nd business model.

------
bluecalm
Loans are terrible because they put huge burden on people who didn't succeed
(or haven't succeeded) yet. What you want is a loan which is only paid back
when you succeed... but wait then you will have many defaulted loans then so
you need to collect more on successful ones... but then people who are just
barely successful are still under big burden... what to do... I know! We can
try a progressive scale: the more successful you are the more you pay, you are
well off anyway. This surely looks like it's going to work... let's try such
loans in case people got ill as well or if they don't have anything to eat or
if they want to acquire education at young age or if they failed for w/e other
reason and need a loan like that to have another chance. Sounds great, let's
do it...

After many years of implementing our idea we see problems: the people who
benefited from our loans don't want to pay them back! They claim they didn't
need the loans in the first place (they are so small % of their net worth
now.. surely didn't matter much) anyway so they want to cut subsequent loans
as well... worse yet they acquired a lot of money and then power and influence
so people who need those loans can't do much about it. Worse yet: the people
who don't want to pay the loans back want to be the one managing them so they
can pressure people who didn't succeed...

You surely don't want that... imagine a country like that.

~~~
mcv
Netherland has a system somewhat like that: you can keep your unemployment
benefits for 6 months if you start a business while unemployed. If you're
successful, it gets turned into a loan.

------
EGreg
Social safety nets that are available to EVERYONE allow people to take risks
and try things. That and limited liability companies.

I have a saying: "Companies create products. People live lives." If you want
to do something, start a company and have it be subject to market discipline.
But people should have a safety net to shield them from the market's full
discipline. When companies run out of resources, they close. When people do,
they often become homeless and hungry or worse.

So in short ... ANY kind of safety net that is available to ALL people
(whether it's basic income, or negative tax ala Milton Friedman, or something
else) will do this. There doesn't have to be any concept of "wage earner" or
"entrepreneur", just how much income you make as a person. (I am ignoring here
the repetitive schemes some would use to hide their personal income by making
their company purchase things.)

And those of you who are for the free market and think the "poor" would have a
moral hazard and wouldn't work if they got free money ... look at the word
"free" in free market. Is a person who can't afford the SWITCHING COSTS of
educating themselves for another career or starting a business, and forced to
do the same sort of job in order to feed their family, really a "free"
participant in the labor market choosing from among the available options? Or
are they artificially kept locked into a particular industry because they
can't afford the costs to switch between their options?

~~~
ericingram
Free does not mean that you are uninhibited by circumstances. The free in free
market means you are not coerced into action by other actors. You are free to
act by your own will as long as you do not attempt to coerce others.

Safety net for anyone provided by government must first take resources from
individuals by force to provide it.

~~~
EGreg
Don't confuse the two things. Force is not 100% or 0%. In your system the "men
with guns" still come to evict you from your house when you fail to pay the
rent, therefore you are coerced into earning money.

You pay attention to the "force" used on the taxpayer. When you do business in
a jurisdiction then it often imposes taxes, but you are free not to do
business there.

But what about the "force" used on the person living paycheck to paycheck? The
government enFORCEs property rights (or, without government, it would be
private mercenaries that do it) and so the wage earner is still forced to do
what he doesn't necessarily want to do.

So although it may be that neither your employer nor any individual is
coercing you to work for that industry, nevertheless you can be coerced by the
system. Because what is force, really? Can you give me an example of force?
Perhaps nanobots in your bloodstream forcing you to do something is force.
Because if someone puts a gun to your head, you still have a choice: you can
choose to die, or do what he says. The point is that force is whenever your
alternative options are completely unacceptable to you. And homelessness /
hunger for days are such things. Exposing humans to market discipline without
ANY safety nets results in many of them being coerced -- not by an individual
-- but by their circumstances -- to continue in a path that may not benefit
them or even others. J K Rowling was for example able to make Harry Potter
into a billion dollar industry only because she was able to afford to write
it. She was a welfare recipient at the time.

------
atom-morgan
"Imagine a country where anyone could apply for a state loan for 18 months to
start their own company."

Imagine a country where anyone could apply for a federal loan to go to
college. Imagine a country where anyone could become a homeowner through
subprime loans. Isn't this kind of thinking causing us enough problems
already?

~~~
JonFish85
Doesn't this already exist? Apply for a small-business loan[1]. If you're a
startup, you probably will have a hard time getting it, which is why VCs
exist, but if you have a solid business plan, you can probably get a decent-
sized loan at reasonable terms.

[1]: [http://www.sba.gov/category/navigation-structure/loans-
grant...](http://www.sba.gov/category/navigation-structure/loans-grants/small-
business-loans)

------
veganarchocap
I would argue that you don't start outright by forming your own business. You
gain experience and stability through working for other agencies and
companies, in this time you work on your own plans, save your own financing
and ease into your own business at a period when self-sufficiency blooms from
your and your staffs productivity.

I'm currently at this phase, I wouldn't quit my job and request state handouts
because there's no saying that my idea for a business would work and it would
be forcing other tax payers to accept the risk. So in other words, the
inherent risks which come with entrepreneurship would be placed on the tax
payer.

This would also mean people would take more careless business risks. This is
similar to why bank bailout made banks less accountable, I think there needs
to be a greater separation between state and economy ultimately.

Government subsidies also distort the true market value of services, for
example in the U.S. if you invest in a government lobbied program, you can see
in the region of 200%+ profit returns, whereas the most wealthiest returns for
non-state backed industries are more like 7-10% profit returns. This leads to
bubbles, inflation and would automatically mean a higher tax burden for tax
payers.

You're definitely correct that something needs to happen to make it easier for
start-ups, I would argue though perhaps a tax relief for start-ups once they
are up and running, or a reduction in regulation to make it easier to get
going. I'm thinking of starting my own business here in the UK and the
government forms alone are putting me off and this is before I get slammed
with small business rates etc!

~~~
vincentleeuwen
There's definitely truth there. Less rules is always better :)

------
rayiner
Loans to start businesses is the basic premise of microfinance:
[http://en.wikipedia.org/wiki/Microfinance](http://en.wikipedia.org/wiki/Microfinance).
It can work well in certain contexts, though it would probably be politically
impossible to impose in developed countries the kinds of screening
requirements that have proven successful in developing countries (e.g. only
making loans to women).

As for "entrepreneur" the concept might seem more practical if you think less
of B2B software startup and more of:
[http://www.ted.com/talks/ron_finley_a_guerilla_gardener_in_s...](http://www.ted.com/talks/ron_finley_a_guerilla_gardener_in_south_central_la.html).

I would love to see something like this applied in decaying urban
neighborhoods. These neighborhoods survive because of the welfare system, but
its mere survival. Welfare doesn't provide capital, which means no grocery
stores, no restaurants, no shops, none of the basic infrastructure around
which neighborhood social structure can coalesce.

------
kephra
Germany has several safety networks:

\- Arbeitslosengeld is an unemployment insurance money paying 60% (alone) to
66% (families) of former income for one or two years. But you have to pay into
insurance first. Payment is deducted automatically by payroll tax.

\- Hartz IV offers Euro350+housing per month, if you are available for the job
market.

Now for entrepreneurs Germany offers a Gruendungszuschuss. Thats 60% of the
former income + Euro300 for half a year longer then Arbeitslosengeld. Unlike
Arbeitslosengeld its completely tax free, and nearly without requirement.

Health, unemployment, and retirement insurance for self employed are
voluntary. Most self employed take health insurance, and omit the the other
two.

Last not least its possible to go to Hartz IV as a self employment. This is a
pain in the ass, as one has to show them your books every month, to get the
difference between income an Hartz IV money.

Now the drawbacks. Health insurance for self employed assumes that you at
least earn Euro2000, and charges 15% = Euro300 per month minimum. They will
charge more, if you earn more, but wont cache back, if you earned less.

Most entrepreneurs don't have retirement insurance, because its to expensive
when you start your business, and once you lack retirement insurance by being
unemployed or self employed, the payout is less then Hartz IV. Retirement
insurance worked fine for my parents, who had been employed for more then 40
years. But I'm 47 now, worked only 3 years as a slave, and would get less then
Euro100 for retirement.

There is an infamous politician, called von der Leyen, who came up with the
internet Stopp sign, and who is proposing forcing self employed into
retirement insurance. I hope she fails here again, as forcing retirement
insurance would force many small self employed to close business and to go
unemployed again.

~~~
Xylakant
Sorry to say, but you're not really up to date here. Restrictions have been
tightened and benefits cut in the last years:

> Arbeitslosengeld is an unemployment insurance money paying 60% (alone) to
> 66% (families) of former income for one or two years.

It's a maximum of 12 month unless your 50 or older. The minimum is at 6 month.
The actual duration depends on how many month you were employed in the last 5
years. You need to have at least 12 month to be eligible at all. If you're
on/off employments the times get summed up.

> Gruendungszuschuss

used to be a fine thing up until 2011 when it became voluntary from the
government side. Before it used to be that any application that passed a very
low bar would get accepted, now it depends.

It's actually your unemployment money plus a fixed amount for health
insurance. The fixed amount gets paid for up to a year and can get extended.

You must be unemployed on the day that you apply. This is the reason I was
unemployed for a single day - applied and founded the next day. If you're
trying to convert a running side-job things get tricky. If your business fails
and you're trying to get another Gründungszuschuss you'll not get it.

> Health, unemployment, and retirement insurance for self employed are
> voluntary.

Health insurance is mandatory nowadays. You can still choose which, but you
must choose one.

> Last not least its possible to go to Hartz IV as a self employment.

You can try, but you'll probably fail. Hartz IV has a lot of obligations
attached, such as having to go to job interviews when they send you an offer.
That doesn't sit well with founding.

> Now the drawbacks. Health insurance for self employed assumes that you at
> least earn Euro2000

The first year they ask you for an estimate. It's true that you don't get your
money back, so go for a low estimate. Don't lowball it though, there's a lot
of freelance that get taken by surprise when they have to pay up at the end of
the term. Rules for private health insurance might differ, I don't know about
that. However, if you earn much less than 2000 Euro you're in trouble anyways,
after taxes there's not much left of that. I always assume that ~ 40% of what
I invoice is taxes.

> There is an infamous politician, called von der Leyen, who came up with the
> internet Stopp sign, and who is proposing forcing self employed into
> retirement insurance.

Actually, I hope that this push succeeds. There could be exemptions for the
first (two?) years, but any self employed person that can't afford retirement
savings is just kicking the can down the road.

~~~
kephra
> Actually, I hope that this push succeeds.

For me it would be a reason either to leave Germany! I'm 47 years old, and
worked less then 4 years employed. The result is, that my retirement insurance
would be less then Hartz IV, even if I start retirement insurance and work
till 70.

Unemployed, and retirement insurance make no sense. Not for normal pay roll
worker, and even less for self employed.

~~~
Xylakant
So if you're 47 you either have some savings for your retirement or you need
to build some very fast. Otherwise you'll be living of Hartz IV anyways. I
fail to see your point? Do you want to rely on social security while not
paying into the social system - sorry, for me that doesn't work. I'm all for
making freelancers save money for when they're older, as long as they can
choose how they want to do it.

------
martinkallstrom
In Sweden the same social safety net applies to everyone, even entrepreneurs
(gasp!). There is basically no more risk in starting a company than in being
employed.

~~~
mjn
This is sort-of the case in Denmark as well, though the conditions for what
counts as "unemployed" for an entrepreneur are a subject of some discussion.
Currently, you qualify on the same basis as someone who loses their job only
when your company declares bankruptcy and is liquidated. That's the event
that, for a business owner, counts as equivalent to being involuntarily fired
or laid off for an employee.

You do also qualify for the base welfare system without any strings, though.
For example if your income is too low relative to the cost of housing, you may
receive a housing subsidy.

------
csmatt
Living in the U.S. and having gone through the effort of attempting to create
a startup, programs, money, mentorships, etc. are out there, but you have to
have a real drive and be able to brush off rejection. I don't think the
process should be free of negative consequence and adversity. Both help weed
out the people who won't be able to handle the more important challenges.

~~~
subsystem
I don't know. On the one hand it's good to face adversity early on as it
forces you to get your act together and spares you trouble down the line. On
the other hand if your skill or situation is different from troubles that you
think you'll face, than the adversity becomes arbitrary. So you end up with
people who where "good at the entrance exam" when you really want people who
are at their best at the end of the process.

------
mcv
I did get a startup allowance for 6 months, and I live in Amsterdam, the same
city this article is about.

Here's how it worked: My old employer went bankrupt, and as a result, I could
get unemployment benefits based on my last salary quite easily. Anyone in
unemployment can start a company while keeping the unemployment income for 6
months. You do have to write a business plan which needs to get approved.

And the money you get is technically still for unemployment, so if it turns
out you weren't unemployed, you have to pay it back. It's based on the money
you make during the first year as an enterprise. Above a certain threshold,
you have to repay the entire loan, below it, you have to repay proportionally.

Still a good deal, because it gives you a lot of security, though it'd be nice
if it was a bit more than 6 months.

------
velodrome
A government loan is not a good idea. A government loan should only be given
if it serves the public good or serves the government's own interests.
Otherwise, people will scam this thing and bankrupt a country. Think dotcom
boom/bust - a lot of people lost money.

The government should allow people to take loans against your own retirement
funds (like a 401k loan but with looser terms). This way there is fear and
validation of an idea goes through a more vigorous process.

Also, they government should provide free resources to people and companies to
help get started. Like office hours for starting a business, managing money,
employees, etc. Incubation programs in empty buildings, libraries, and
universities is an interesting idea too.

------
lucienburm
This is not really a safety net Vincent, but you are really talking
investments. How would a state judge your capabilities in this.

I think the basic support is in place besides some counterproductive
conditions that go with it, eg (as you said) the obligatory job applications.

So essentially anyone with entrepreneurial spirit can start kicking it. A
safety net seems very unsafe method to foster/filter entrepreneurs.

Best method in my opinion is to support growth and activity as much as you can
as a government and provide low thresholds for startup needs.

In short, i am a Brad Feld schooled adept ;) Entrepreneurs are the leaders,
others, like government are feeders and should not sit on the leader chair in
any way.

------
cjbenedikt
I think the general point is very relevant. Don't all founders start because
they think they'll be successful? Otherwise they wouldn't in the first place.
Alas, markets may beg to differ and your product/service even if it appears
useful is not in demand. Even Apple was down at some point...;-)). If this
happens during a recession try finding a job - good luck. A safety net of
sorts is useful and the now EU wide initiative to at least have a discussion
about a guaranteed minimum income is a starting point. Maybe it could also be
an attractive proposition for a social impact entrepreneur to come up with a
solution.

------
subsystem
I assume that we're talking about starting companies here? Because once you
become larger you have the same benefits as everyone by being employed by your
own company. With that in mind I think unemployment benefits or similar is the
wrong way of thinking about it. You aren't really unoccupied, you just
currently aren't getting paid enough for what you do. This is a lot more
similar to being a student. So student benefits is probably a better match.
For instance if you could take the student loan from you masters degree
"quota".

In general I think low cost of living is the best safety net there is for
entrepreneurs.

------
GuerraEarth
Hi guys. I smiled at the "no shit sherlock" rejoinder. I want to say that some
people thrive in hardship and don't desire a safety net. Maybe we are in the
minority. I like redundancy in the things I make--to make sure they work even
if one part fails. (NASA loves redundancy) But I don't like it for my own
self. I think a social safety net would be restraining and antithetical to the
whole idea of being groundbreaking.

------
mgkimsal
"Imagine a country where anyone could apply for a state loan for 18 months to
start their own company. Then after these 18 months, the loan becomes either
an allowance or remains a loan, based on company performance."

Isn't that what angel investing basically is? Well, except for the loan part -
often it's not required to be paid back.

If you're not capable of convincing a few people to invest a minimal amount in
your idea, you probably won't be able to sell it to those you need to
(customers, or at least other sales people).

"Why is filling a job position rewarded while creating one is not? Do
employees add more value to the economy than entrepreneurs? I doubt it. "

Well... the 'job' as it were actually exists - the 'value' of the
'entrepreneur' in this case is still unproven, otherwise there'd be revenue
for him to live off of and hire other people.

Possibly too, the idea of 'entrepreneur' gets blown up in the media to mean
'mark zuckerburg' and 'google', and certainly many large companies the press
lauds tend to have a habit of avoiding taxes which help pay for social
programs like what this one might be.

Also, encouraging someone to go in to debt doesn't seem a good way of life.
How many "entrepreneurs" now have 6 figure credit card debt after chasing the
dream because they watched "the social network"? Not trying to trivialize it,
but I know far more failed entrepreneurs with moderately large debt issues
than I do successful ones (and I know both). Someone trying to start a
business which now has extra debt burdened on it (which might not be
dischargeable in bankruptcy - see student loans in the US) might just adding
on problems. Certainly, for many people, trying to cope with looming debt
while they try to work on a business is a heavy burden that contributes to the
business failure itself.

~~~
vincentleeuwen
"If you're not capable of convincing a few people to invest a minimal amount
in your idea, you probably won't be able to sell it to those you need to
(customers, or at least other sales people)."

Angel investing is only a workable solution if the company has massive
potential. One should not forget that there are all kind of SME companies that
don't quality for this. Still, many of these do add a lot of value to the
local ecosystem.

------
bsbechtel
Why does it need to be regulated on the national level? Why can't local
governments have their own systems and compete for entrepreneurs?

~~~
mjn
Since there is freedom of movement within Europe, you can think of the
national governments as 32 local governments [1] that have their own systems
and compete. Populations are a bit more sticky than with U.S. states, due to
significant cultural/language/etc. differences. But on the other hand, you
also have a more meaningful choice of systems, precisely because the countries
differ much more than U.S. states do.

[1] Freedom of movement applies within the EU (28), the EEA (+3), and
Switzerland (+1).

------
joyeuse6701
one has to make sure that market prices do not rise enough to negate the
effect of basic income. this may seem obvious but ideas like basic income and
other socially important programs don't really look into the possible
reactions society and culture will have.

------
spencerbeepboop
I was hovering over that pretty "kudos" button, and I accidentally kudo'd.

~~~
vincentleeuwen
No shit sherlock. I'll take that count minus one from now on.

------
kakoni
Wasnt it so that in France you can get unemployed benefit while starting your
business?

------
vincentleeuwen
Off course this only goes for governments that operate a welfare system

------
danifankhauser
Providing such a safety net would remove the risk from starting a company.
Sometimes taking on that risk is what pushes an entrepreneur to get a product
out in three months rather than 18.

