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Safety Nets for Startups (theatlantic.com)
47 points by garbowza 1292 days ago | 26 comments



The problem with a safety net is that somebody has to weave it. If a person want to live the life of a start-up, that's fine. Go for it. Just don't expect me to pay for your essentials just because you want to spend a couple of years of your life building a social network or recipe exchange. Sorry, it's just not that important to me or to most other people.

Life is not without risk. I can minimize it by being smart about things. I could get hit by a car when crossing the street. So I look both ways and then hustle across. I want to start my own business. So I read books and running a company for awhile. I find a problem to solve. I come up with a plan. Then I attempt to execute it. I may fail, but that's life. I learn. I get a job to pay off any debts I ran up. Then I try again.

The one thing I can say I did agree with is the need to stop favoring large established companies over smaller ones. These laws and regulations need to be tackled at all levels of government: federal, state , and local. But to do that requires a fundamental attitude change about risk. Small companies are risky. Big companies are not as risky. Ultimately it needs to be about people educating themselves and deciding accordingly.

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good points. but i think the notion of having society help provide a safety net for startups exists in the context of, and in comparison to, all the other things society is currently forced to spend money on. personally i'd rather my taxes go to help provide a safety net for an entrepreneur than a truly lazy welfare parasite (important: i'm not saying all welfare recipients, i'm making a generalization to illustrate a point). and i'd rather my tax money went to help entrepreneurs than to fund overseas military adventures. i'd rather subsidize a couple taking a chance on starting a family business than to subsidize a gigantic multinational oil company. And it's not about choosing an ideal world, just one that's perhaps a little better or pragmatic than the alternative.

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If you think about it, if jobs are a huge concern, then enormous international war campaigns are guaranteed to give a lot of people employment.

Obviously I'd much rather have that same money spent on making life at home better, but at least you're creating jobs either way.

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War campaigns do not create structural employment, only demand shock employment. Id est, we don't need 10e6 jobs next year, we need 10e6 jobs for the next two decades.

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You could make the same argument about education. Life is all about risks, why should I have pay for the risky behaviour of parents of poor children. Abolish public education funding.

However, the reason it public school is a good thing (who runs the school - private businesses or public servants is a seperate matter) is because it creates human capital. Startup launching - or entrepreneurial "education", should be included in that human capital creation function that governments provide.

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> why should I have pay for the risky behaviour of parents of poor children

It's not a similar argument: people don't chose who their parents are, or where they grow up. The quality of life of a person who receives education (even if our education system isn't perfect) is definitely greater than the quality of life of a person who stays uneducated. It can actually reduce crime rates and improve the overall standard of living.

Startups are a little different, because the risks are optional, and there is a huge reward for success already built into the system. There are already tons of VC's making money helping entrepreneurs make money. It's a system that attracts people, and it's optional.

That doesn't mean we shouldn't teach entrepreneurship and creativity, but the human capital of the startup world is more of a luxury than a basic education. I would prioritize fixing our current education system before adding another layer of complexity.

If we can teach our kids in a way that allows them to be creative and inventive with already-established tools (writing, math, arts, etc.), they will definitely be better entrepreneurs. But they can also be better lawyers, better doctors, or better anything.

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Education increases quality of life. So does have a successful startup - it free's from the tyranny of working for someone else. So the "luxury" is really a matter of degree. Cost of startup schooling is the same as public school or state college, roughly 10,000 per year.

Already established tools were not already established when they were first implemented - the three R's. In our modern world we need to add a few more R's - computer programming, marketing/personal branding, and entrepreneurship should be a skill everyone is taught by societal funding.

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I see the health care issue as being pivotal. Many people can't find insurance on the private market at any price.

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The way I see it, the health insurance problem is the result of different people having different ideas on the "right" amount of health care and insurance to provide. Example... if somebody has a potentially fatal disease and $25000 worth of treatment can solve the problem, then go ahead and do it. But I don't want to pay to have some hypochondriac go to the doctor every time they get a sniffle. Other people believe all medical care should be free. Some people oppose measures to prolong life, some oppose pulling the plug. I haven't even started to touch the controversial stuff in the news recently. In order to fix health insurance availability, these decisions have to be made, because ultimately any "solution" will require government subsidizing somebody, whether its the person buying insurance or the insurance company or by providing the insurance directly.

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Agreed, mostly. We don't use car insurance the same way as health insurance, demanding $5 "co pays" for oil changes and tire rebalancing - you just pay for the services you need. For 'catastrophic' car stuff - body work after accidents, etc - yes, you have auto insurance to help cover those major expenses. Since we've had so many layers between medical users and providers over the decades, there's very little in the way of 'market forces' at work.

My own health (and that of my wife) isn't perfect, but it's reasonably good enough that we can afford our own private health policy, but only reasonably as a high-deductible variant of $5k or so. And... while it's not great to have to deal with large bills now and then, it's still doable.

We had $3300 in premiums last year, and $4300 in out of pocket expenses (roughly). That's $7600 - divided by 12 is $633/month. But we only had $3300 in premiums the year before - $280/month. That's the nature of insurance - we take some risk. Not everyone can do it, of course, but I have friends who are chained to jobs partially (mostly) because of employer-provided healthcare. For a family of 5, high-deductible insurance may be something like $600/month, with a potential extra $5k+ out of pocket, but that's a risk. Instead, they're usually paying more than that in premiums (either they are or the employer is sharing it), so that money's getting definitely being spent either way, instead of only potentially being spent.

What might be interesting is to get employers to start offering high-deductible plans, but putting x% extra in to a pool, then sharing a portion of that as a bonus each year to employees who don't use it, but it's there to help if employees need to access it - perhaps something like 50% of your out of pocket deductible could be paid by the company.

But... that's just really confusing over time, imo. Just make it easier for people to buy insurance in the open market - get away from employer-sponsored health insurance. We've moved away from employer-provided retirement packages - make the same move on health insurance.

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What I've seen (and really like) is doing a great High Deductible Health Plan (i.e. HSA-eligible) -- something where you get top quality coverage for extreme things, and get access to the best doctors, and negotiated prices for everything from the first dollar each year, but are on the hook for the first $5k or so of costs.

Then, your employer gives you $5k/yr tax-free into your HSA account; if you don't use it, it's basically equivalent to a Roth IRA. It's actually better to spend cash out of pocket and then leave the full amount in the HSA, since it can be invested tax-free forever, and all gains are themselves tax-free. You can easily end up with a few hundred thousand dollars extra.

This accomplishes the useful goal of getting people to be price conscious for their medical services, but doesn't impoverish them. The one thing it might do is promote time shifting expenses (if I know I'm over the $5k limit in one year, I'll get all my other elective stuff done that year), but it's not a big deal otherwise.

IMO, the HSA thing was one of the best reforms in health care in a long time, and one of the (few) good things GWB did.

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My current employer does this. Deductible is 2400/year for a family. Then they give us 200 per month into the HSA and we could contribute more. The insurance companies like this because it gets people to be more cost conscious. It is cheaper for my employer to offer the high deductible plan and give us the deductible than it is to give us a no deductible plan.

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In Sweden there are, in some cases, so many government subsidies and incentives to open a McDonald's or other business that the business can run for years without ever turning a profit.

I don't think that is a good thing. We frequently discuss here on HN to fail fast and try again. That seems to be the opposite.

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Interesting article - but I don't think the writer gets it.

"We should focus on minimizing the downside of losing so that startup roulette feels less risky. After all, startups shouldn't just be for rich kids who can afford to take a chance on a big idea."

If more risk averse people began starting companies - would the ratio of success to failure change? My guess is that it would. Who knows in which direction.

There's always some BS stat in these articles about the percentage of entrepreneurs that succeed. Without a definition for what a successful entrepreneur is. How is that defined?

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Starting a startup is not equally risky for everyone. Some people have their own safety net (family, saved up money, etc) while others don't, making it too big of a risk to start a company.

Most entrepreneurs I know didn't take any crazy risks. They knew they'd be ok if their startup failed. Many people don't have that luxury.

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Part of being an entrepreneur is resourcefulness. The idea is that if you want success bad enough, you'll find a way to save enough money to quit and give your idea a chance. That's the theory at least, I'm sure in practice a huge chunk of the population will never be in such a lucky situation.

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If you're going to be working 40+ hour weeks for a boring soul-crushing job, then you might as well get a few perks out of it, such as health insurance.

I don't see the govt supporting people who don't want to get a corporate job and instead choose to chase their dreams.

It'd be great if things were different, but they're not going to change anytime soon. Why would anybody put up with dead-end jobs if they could just work on their passion their entire lives?

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> If you're going to be working 40+ hour weeks for a boring soul-crushing job, then you might as well get a few perks out of it, such as health insurance.

Part of the problem is that health can even be thought of as a 'perk' in the first place. Most of the safety net effect could be achieved simply by removing the link between health cover and employment. Just do what most of the rest of the world does (where employment status is irrelevant to health cover) and a major disincentive to innovation is removed.

Unless of course, the objective is to entrench dependency to large organizations. In that case, the present system works just fine.

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I completely agree that it would be great, but it's not going to happen in this country. As you said, making people's lives dependent on working for large organizations is simply too convenient for the folks in power.

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I love the idea of policy incentives that encourage entrepreneurship, but referring to such a framework as a "safety net" is a misnomer that hurts the author's argument.

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Safety nets for startups? Please. We need safety nets for people who work for wages 40 hours a week, not for people who went to Stanford and have their parents' money fuelling their dreams.

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That's a pretty narrow minded view of entrepreneurs. There are far more companies started by people who didn't go to Stanford and aren't working off their parents dimes than companies that are.

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Yes, but those companies aren't called startups. They're called businesses.

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I like the general idea. :) A first step would be getting rid of government policies that favor larger companies at the expense of startups. At least europe is full of those policies.

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There can be a safety net for startups - college. If colleges could be refocused from teaching psychology to creating tech businesses, then student loans could be the financing. Anyone, including middle aged or seniors could go to college from 1-5 years, learn tech skills while creating a company from day 1, and have the current student loan industry finance it all. Olin College in MA and Waterloo University Independent Studies Program, Ontario, Canada, are two such examples that are close to the description (although not completely, because they focus on projects and not projects with business plan attached).

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i like your idea. arguably the recent rise in incubators and accelerators is doing something close to what you've described. i do think as a society we need to stop throwing huge piles of money at universities "teaching" fuzzy make-believe or peripheral things and instead spend less, or more tactically, on core subjects and more practical skills. universities have become essentially just expensive resorts for middle/upper-class twenty-somethings, in many cases. there ways to educate and filter and certify folks that are much faster, cheaper and more egalitarian, and thankfully there's a growing movement to make this more mainstream.

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