

Want to help startups? Just give them money - plantedd
http://www.rookieoven.com/2013/04/04/help-startups-give-them-money/

======
nthj
This feels like a One More Level of Indirection solution. [1] The problem, I
think most everyone agrees, is that the government isn't the greatest at
growing businesses. The obvious, delete-all-the-code approach would be to
leave more money in the hands of the businesses by lowering taxes.

Or, as the article suggests, we could pile on another layer of indirection:
encourage the government to keep taking my money, hope they're halfway decent
at identifying smart startups (which I'm sure they would be, the government is
awesome at everything else they do right?), and, wonder of wonders, they
identify the next Facebook 9 times out of 10, we still have to lose a
significant percentage of the wealth to paperwork, inefficiencies, and
bureaucracy.

> I’d be confident that I could do more for my startup, Plantedd, with
> whatever equivalent amount spent by government organisations to pay
> consultants to help us with marketing or IT or training.

Dude, I'd love that. Plantedd looks stellar. I think we want the same things.
I also think it's far more straightforward to lobby for more tax breaks for
startups and call it a day.

[1] <http://c2.com/cgi/wiki?OneMoreLevelOfIndirection>

~~~
plantedd
(The One Direction solution??)

I agree that more tax breaks for startups would help and it would be a more
straightforward thing to achieve. The two things don't have to be mutually
exclusive though, so I'd say we need both. For early-stage startups though,
sometimes the challenge is more in actually reaching the stage where there's
anything to tax - which is why I still think actually giving them the money in
their pockets is vital.

Thanks for the compliment about Plantedd!

~~~
nthj
> For early-stage startups though, sometimes the challenge is more in actually
> reaching the stage where there's anything to tax

Sure, I get that. I live in the startup world too. I just disagree that it's
the government's job to take my money and give it to you — and, of course,
vice versa: I won't ask the government to take your money and give it to me.

We already have a solution for the problem you bring up. It's called
investing. You exchange a percentage of your company for the capital you need
to get going. If a startup has trouble convincing an angel investor to part
with his money, he may need to revisit his business idea or iterate a bit
further. That's a good thing, it helps improve the startup.

But "government money" is really my money, and you're proposing that the
government force me to fund startups that have been unable to secure angel
investment. To be blunt, this seems really lame. I'd rather keep my money that
I've worked hard for and invest it into my own ventures.

[I should also note this is a debate of principles for me: I'm not saying "oh
in my opinion startups aren't worth my tax dollars", so much as "government is
inefficient at everything, and $PROPOSAL is a subset of everything, therefore,
government shouldn't be $PROPOSAL when another solution already exists.",
where $PROPOSAL = 'funding startups' in this instance.]

~~~
plantedd
You're right, it's a difference about the principles of the matter and no
doubt we disagree over the government's role (especially in an economic
downturn). Setting that to one side though, the truth is that the government
is spending your tax dollars already and I'm suggesting that there may be a
better way for them to do it.

~~~
crusso
_the government is spending your tax dollars already_

They should be spending a lot less of them, shouldn't they?

<http://www.usdebtclock.org/>

I mean, what business would ever be allowed to spend money endlessly without
thought to income? Why do we let the government do it?

Besides, we already have angel funding, ycombinator, venture capital, self
funding, debt funding, crowd funding, etc.

[http://www.instigatorblog.com/an-introductory-guide-to-
start...](http://www.instigatorblog.com/an-introductory-guide-to-startup-
funding/2007/10/17/)

We should not be taking tax money by force from some to fund the next
facebook.

~~~
bruceb
The gov't isn't a business. If it were it would not be serving everyone. The
post office (sorta of a gov't/business half breed) would charge you more to
send a letter from Miami to Fairbanks, Alaska than from your town to the next
town 10 miles down the road. Gov't has more responsibility than a business.

There are plenty of business with large amounts of debt.

This being said I don't back the proposal.

~~~
crusso
_The gov't isn't a business._

Right. Businesses have more direct financial accountability. That's why the
government stinks at doing business-like things and I'm objecting to a
proposal that thinks government should do more business-like things.

Not sure what your point is with the post office. It's a great example of the
government trying to do something that business came along and did ten times
better - accomplishing things that the post office said were impossible like
overnight delivery.

What's the merit in the subsidizing of people to live in out-of-the-way
places? This isn't the 1800s.

 _There are plenty of business with large amounts of debt._

1X yearly revenue in current debt and 5X in long-term liabilities? Hardly.

People at Enron went to jail for the type of accounting shenanigans that the
government considers to be common practice.

------
swombat
As someone who is running a business whose main occupation is to help the
government give money to tech companies and startups, I actually disagree with
this.

I think most startups don't need money (and they typically don't get any,
because most government funding is match funding, and so you have to spend to
get, and very early startups don't spend anything). Or rather, they need
money, but probably not from investors, and _certainly_ not from the
government. They need money from customers.

My thoughts on why money is toxic to most entrepreneurs are pretty well
summarised in this article: <http://swombat.com/2011/12/8/investment-cushion-
springboard>

Growing companies that have figured out how to make their own money already
_do_ need money, but the reason they can make good use of it is also the
reason why they don't need it as much as the cash-starved early startups.

To a functioning company, money is lifeblood, and more money can help make the
company a bigger success than it already is (or make it more competitive
against other companies in the same space).

To an early startup, money is a toxic sludge that will slow it down, cause
weird and unpredictable mutations, and possibly kill it when it might have
lived.

Disclaimer: I'm talking about startups operating outside of the Magical Land
of Silicon Bubbles, who have to actually create a viable business rather than
just build something popular that makes no money and then sell it for a
billion dollars.

~~~
mindcrime
Ehhh, I don't know. I mean, yeah, I agree with the general gist of your blog
post there, but... For some startups, especially early-stage startups, they
_do_ need money...not necessarily _big_ money, but _enough_ money to actually
start at all. Or, let me put it a different way, even for the very early stage
startups, capital can be very important - in at least some cases.

I'm thinking of the bootstrapper scenario, where the founders don't have the
kind of cash reserves just lying around, to enable them to quit and work on
the startup fulltime right away. So they're forced to keep dayjobs and work on
the project nights and weekends. Now, you can get a lot done, especially from
a product standpoint, working nights and weekends. But when you need to go out
and meet people (potential customers, partners, distributors, investors,
whatever)... well, those people usually expect to do business during "business
hours". If you have a potential customer on the table, but you can't meet with
them because you're at work at your 9-5 all day, or because you can't afford
to fly to $EAST_BUMFUCK, or whatever, it really puts a crimp in things.

Of course, I'm not saying it can't be done... In fact, I'm in the middle of
doing this myself, and we find workarounds: I meet people over lunch, or come
in early and leave early at the $DAYJOB so I can meet early afternoon (or flip
it around for a breakfast meeting), and I use Skype, chat, etc. to do remote
meetings. And we solve the travel expense problem by focusing on customers who
are geographically close to us. And for us, the advantages of bootstrapping
justify doing this for now. But I can see where many startups would really
need - at a bare minimum - enough money for the founders to be able to work on
the project fulltime, and maybe some money to cover incidental expenses from
going through Customer Development.

~~~
swombat
There are many things that a person can do to liberate their time so they have
the flexibility to spend good chunks of flexible time on their startup. Those
things (e.g. moving to a more consulting/self-employed type role, not an
employee role) also teach that person how to run a profitable business, deal
with taxes, cash flow, sales, etc. Having someone else's money in your bank
account teaches none of that.

I agree that it is far better to be in a position to work full-time on your
startup, but I think it is not so valuable that it is worth taking the
downside of raising funds just for that. "Relentlessly resourceful" (to use
pg's words) people find the time to make it happen somehow.

Similarly, relentlessly resourceful people make it happen without having to
fly to east bumfuck. Shit, in today's world, with all the remote
communications available, and the fact that most companies (at least the SMEs)
are perfectly happy to do business remotely. And if your business requires you
to go to east bumfuck to make sales in person, and you don't have the
resources to do so, then you're just doing the wrong business. Pivot to one
where you _can_ do the sales remotely, or there are enough clients nearby to
sell to.

~~~
mindcrime
Sure, and like I said... I know it's possible, because I'm doing it. And as
much as I'm opposed to overly focusing on raising money[1], I can certainly
see how some entrepreneurs would be better served to go ahead and raise money
- at least some small amounts - earlier.

One reason, among others, is the risk of missing an opportunity because you
can't move fast enough to capitalize on it, due to lack of resources. For most
of us, there _is_ competition out there, and if they're moving faster,
capturing mindshare and establishing their position in the market, it could be
pretty damaging (psychologically, if nothing else) to not be in a position to
respond.

[1]: [http://www.fogbeam.blogspot.com/2013/03/the-point-of-
startup...](http://www.fogbeam.blogspot.com/2013/03/the-point-of-startup-is-
to-make-money.html)

------
tomwalker
Good article.

I must say that a unique benefit about Scotland for entrepreneurs is that
higher education is free. This reduces the debt burden of a new graduate
significantly that helps with any new venture.

I do agree that the money spent on bureaucracy by government bodies that are
meant to boost enterprise is wasteful, although the new gov.uk web project
suggests that sometimes projects can be done well at a decent price.

I echo nthj's comments in saying that tax breaks are the easiest way to
benefit all small enterprises, from tech start ups, to new retail shops,
plumbers starting their first business etc.

------
saosebastiao
I know of a few VCs who just can't help themselves...not just giving them
money, but telling them how to spend it too. And for some reason, they all
seem to want them to spend it on a hotshot HBS-trained former big consulting
general partner that will suck up all their cash and equity and give them a
failed business in return.

They like to claim that there is some value-add with having their experience
as "part of the team"...but for 90% of the VCs out there, it is bullshit. It
is just a ploy to get better deals.

------
nemesisj
In context this is a really strange article. The government bodies listed in
this article do give money to startups, and the bar is extremely low. In
addition, private investors (angels and angel syndicates) get matching funds
"for free" where the public money matches private money. I'm not sure why this
isn't exactly what's being described in the article.

~~~
5l
The point is rather than these bodies acting as gatekeepers deciding what they
think will work or not, funds should be distributed via a lottery subject to
some basic criteria.

In fact, that is rather the point of the matching funds you mentioned - they
let the private sector decide the winners and come in on the same times. That
said, there's still a checklist of what sectors they will and won't fund - and
it so happens that some startups get unreasonably pigeonholed.

~~~
PeterisP
If you make it a lottery subject to criteria X, then it will be a profitable
"financial startup" business to cheaply make thousands of fresh companies
matching criteria X, extracting the "free money" out of the startup ecosystem.

I've seen it many times for various subsidy programs - where a few
"entrepreneurs" who learn how to game the system aren't just 'a few bad
apples' but actually obtain the majority or even 100% of such programs.

------
fmsf
How come your plantedd doesn't sell shrubberys? You are from the UK, you need
to add a special search result for when the users search "shrubbery"
<http://www.plantedd.com/t/categories?keywords=shrubbery>

~~~
plantedd
We have a category just for shrubs here
<http://www.plantedd.com/t/categories/plants/shrubs>, but yeh, our search
isn't clever enough at the moment.

------
oceanician
Is there no equivalent of the NW Fund in Scotland?
<http://www.thenorthwestfund.co.uk/>

~~~
plantedd
We've got things like the West of Scotland Loan Fund and similar schemes. The
equity or loan funding support is better, but there's still essentially a
large degree of inefficiency and a lack of effectiveness in the process
because you've got teams making decisions on who to pick without the benefit
of any randomised evaluation, so you're not gathering any objective data on
what's actually effective.

------
michaelochurch
There's good and bad here.

The good: right now, the funding racket for startups (unless they can get
clients, and under-35's tend not to have those kinds of relationships yet) is
unfair and, due to the illegal comparing-of-notes whereby a VC can turn off
interest in supposed competitors, probably extortionate. It sucks. A lot of
good businesses are shut out. Here's some writing I did on how to fix that:
[http://michaelochurch.wordpress.com/2013/03/26/gervais-
macle...](http://michaelochurch.wordpress.com/2013/03/26/gervais-
macleod-17-building-the-future-and-financing-lifestyle-businesses/) .

The bad: this means that startups are funded based on their ability to attract
attention and raise money (tip-jar model) when they really should be funded
according to provision of value. These will probably converge over time, so
you get eventual consistency.

On the whole, I think the good outweighs the bad. It's just that you couldn't
use a tip-jar model to fund, say, a new GPU-aware C compiler. There's a lot of
infrastructural technology that can't easily be funded by "dumb money" of the
populace nor by the "I-think-I'm-smart money" of meddlesome VCs and
executives.

There are a lot of hard financial problems to solve, but ideas like this are
bringing us in the right direction.

~~~
mindcrime
I'm really intrigued by the possibilities that crowdfunding may offer, once
the SEC fully implements the JOBS ACT stuff. I'm not sure I see the rosy
picture that this guy paints:

[http://radar.oreilly.com/2013/03/how-crowdfunding-and-the-
jo...](http://radar.oreilly.com/2013/03/how-crowdfunding-and-the-jobs-act-
will-shape-open-source-companies.html)

But I think he makes some interesting points. I don't think this just relevant
to Open Source companies either, although they may be uniquely positioned to
really tap into this mode of funding (or not... I need to spend a lot more
time thinking about this, especially since I run an Open Source startup).

I'd be curious to hear your thoughts on crowdfunding, michaelochurch.

~~~
michaelochurch
I think crowdfunding is an excellent idea but it's too early to see how it
plays out. It could fail; it could be The New Thing. Too early to tell.

One idea I've had, which I think has major steam, is passive payment. Given
that my consulting rate is high (full rate I don't disclose but it's _well_
over $200/h; however, I give lower rates, sometimes zero, for businesses I
believe in and non-profits) it really isn't a major cost to pay $2/hour for
websurfing. That's a rounding error. I have no problem paying $0.25 for the
time it took to write this post because the value of the time itself is an
order of magnitude greater.

People would need to have the ability to calibrate their passive payment,
obviously. For me, $2/hour is nothing; for the developed world, it's far too
much.

Right now, advertising is the only passive payment system we have and it's
extraordinarily inefficient.

Passive payment would make living by blogging much easier. For example, I get
about 1700 hits per day (2.5 minutes each) on my blog. If we assume the
average web user sets his passive payment level to $1.00 per hour (median
would be lower; mean might be around that) then I'd be making $70 per day. Not
enough to live on (in New York) but it would almost cover my too-damn-high
rent.

Passive payment would also be great for time-tracking. I probably wouldn't
waste as much time if I realized "holy shit, I wasted $0.73 reading that
garbage!"

Finally, it would obsolete those damn paywalls. I don't mind paying 95 cents
to read a good NYT article (again, the time is much a greater expense) but
bringing out my credit card is a hassle.

