Yes it will distort the startup market slightly - but the people creating startups are smarter than the government!
We started a company in "a special development area" = 30 years of high unemployment since the shipyards closed and a civil war didn't help. Every government department was queuing up to give money to create new entrepreneurial industries.
Department 'A' required you to have less than 5 employees - no problem you just count the founders.
Then Dept 'B' had a grant if you had created 10 jobs - no problem you just count every web designer and contractor.
Dept 'C" gave you money if you worked in a green technology - no problem you just sign up another startup doing green stuff as a customer and do some work on their website.
It actually did a fantastic job of creating an unofficial network of startups who all borrowed staff off each other and discussed the latest tricks to get the latest grant.
Still cost less than having the army on the street,
We started a company in "a special development area" = 30 years of high unemployment since the shipyards closed and a civil war didn't help. Every government department was queuing up to give money to create new entrepreneurial industries.
Department 'A' required you to have less than 5 employees - no problem you just count the founders.
Then Dept 'B' had a grant if you had created 10 jobs - no problem you just count every web designer and contractor.
Dept 'C" gave you money if you worked in a green technology - no problem you just sign up another startup doing green stuff as a customer and do some work on their website.
It actually did a fantastic job of creating an unofficial network of startups who all borrowed staff off each other and discussed the latest tricks to get the latest grant.
Still cost less than having the army on the street,