Don’t coddle start-ups

In case you have missed it start-ups are the hottest new trend in economic development thinking.   Not small business.  Not attracting industries.   Not fostering more university research.  Nowadays we are heavily focused on trying to foster new technology-based start up companies.  Anyone with a laptop and an idea is a target.

This is a very important and positive trend.  In the long run, prosperous economies attract investment in many ways – start-ups, acquisitions, green field investments, partnership, etc.

But we have to make sure we don’t love the start-ups so much that we distort the very value they bring to the economy.   The technology start-up environment is the Serengeti plain of the economy.  Bad ideas get killed quickly.  Good ideas get a chance and great ideas will thrive.

In their zeal to promote the region for start-ups governments should not be in the business of funding bad ideas or keeping them on taxpayer-funded life-support.

Don’t get me wrong.  I am all for tech incubators and accelerators.   I love network building and mentoring.   I love using universities and colleges as incubators of entrepreneurship.  If I had my way we would do more to attract tech startups from across Canada and beyond.

But I don’t want bureaucrats out there on the  Serengeti plain trying to save the weaker animals with their pellet guns.

4 thoughts on “Don’t coddle start-ups

  1. Great point, David. No one bemoans governments giving capital to weak corporations more than the startup community. And its members should — and I think do — understand that the government has to turn off life support for startups that aren’t flourishing. The real test will come in two or three years when the some of the scores of startups we’ve seeded lately hit a wall. One final note: governments should not fund any but the best startups, but they owe it to weak businesses to reject funding proposals quickly. Slow ‘no’s breed resentment.

  2. Very important points David and Peter. We can’t get in the business of creating “zombie startups”. They send the wrong message to other startups and they keep founders and employees locked up in a company that is going nowhere, rather than recycling them in to startups with more potential. This has been on my mind a lot.

  3. This was certainly true in the past. I know a lot of people in the tech industry and it was pretty common in Fredericton for ‘certain’ “entrepreneurs” to easily find government funding with the promise of hiring some workers, then disappear when their half baked ideas didn’t pan out, then suddenly appear with another company name, another half baked idea, usually related to ‘online training’ of some fashion, and then get more government money because these owners had the connections-and usually were pretty well paid.

    The government could do more just by being more public in their investments. But they are so afraid of the backlash that it usually doesn’t get mentioned until its a sure thing. The best thing for government is along the educational lines that they used to have-debt holidays for students after they graduate and things like that. But really its the educational system-the government is in FULL control of the curriculum, and I’ll bet that most schools have very little in the way of entrepreneurial training, or even technology training. Its almost a moral issue that kids need to be told “hey, theres a good chance that whatever your interest is, YOU are going to have to make yourself a job”.

    On the investing side, I think most agree with that guy that posted the other day about finding money outside the province. NO government money unless its simply to ‘top up’, and its got to be equity based. A young person was saying “if I only had the money I would start a company”. Any business person knows the WORST thing you can do is sink your own money into a business. Chances are that if other people don’t like your idea enough to invest in it, nobody is going to be interested in buying it.

    The ironic thing is that like human rights, there has never been a better time to be an entrepreneur. Crowdsourcing, kickstarter, there are almost literally hundreds of online places to go get public money, and thats not even including ‘official’ investors. The govenrment could do a lot simply by using some of that pension fund money and allotting it to NB businesses, and having more contests, and getting schools more active in entrepreneurship. Even setting up half baked investment deals where companies only get government perks-use of crown land, use of computer equipment, space in unused government office space. Virtually none of these take ANY money at all.

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