Handups vs Handouts — how the Irish Government should be helping Irish Startups to grow their businesses.
It feels like sometimes the key failure in current policy towards developing a proper, fully functioning entrepreneur ecosystem in Ireland is pretty much based on the current assumption by the government and related parties that entrepreneurs are morons.
Entrepreneurs aren’t dumb (well most aren’t) so those who want to start their own business don’t need to be treated with kid gloves. They’re among the most capable of us, they find a path in the chaos, they find innovative ways to get stuff done. Point them vaguely in the right direction and they’ll find their way. Tell them to drive from Dublin to Galway and you don’t need to hand them a map or even car keys, they’ll find the way, someway, somehow.
In the minds of our government and local officials, every entrepreneur needs to be led by the hand through the entire process of starting a business from start to finish. We focus the limited resources our country has on a system that seems to replicate our national driving license setup; you get some lessons (mentors), fill in some paperwork (oh so much paperwork), take a test (judgment from a panel/board/etc) and then hey presto, congratulations! Here’s your entrepreneur license!
And then we wonder why we’re not creating more businesses with truly visionary ideas.
We put entrepreneurs, our best and brightest, some of the smartest and most energetic people our country has to offer, usually people with tremendously risky ideas, in front of, usually well intentioned, people whose very jobs are dependent on taking no risks and we expect them to have meaningful and productive conversations.
Yet what we’re doing in Ireland is creating a support system that cradles entrepreneurs inside a protective bubble instead of creating a dynamic environment and market in Ireland that supports entrepreneurs, whether or not they choose to engage with the support mechanisms of the state. We’ve created an advice economy where talk is valued over action, where drowning in paperwork is the number one* cause of death of most new businesses (* may be a made up statistic).
We need a modern system that creates a positive relationship between entrepreneurs and the systems of the state. We need policies that create a market in which entrepreneurs thrive and are the envy of their peers in other countries, not because of the handouts, but because of the hand up!
What do we need in Ireland? Well here’s some ideas to start, additions and suggestions are more than encourged in the comments;
(1). We need a system that creates learning from those who have actually been there.
Government and state bodies, STOP, stop now! Stop legitimizing the horrific ‘mentor’ culture that you’re financing! Stop putting people who’ve never jumped out of an airplane in charge of teaching people how to jump out of airplanes.
Stop supporting an industry that gets paid to give horrifically bad advice on topics that they know nothing about. In a world where ‘business best practice’ changes on an hourly basis, the only people qualified to give advice are those operating in it. Those learning from books entitled “How to be a consultant” need to stay far away from our startups. Create real conversations and real learning networks by bringing together entry-level entrepreneurs, with actual successful entrepreneurs, not ones who are just successful because their twitter bio says so.
Basically stop paying people to ‘mentor’! When did mentor become more a verb than a description of an individual? Entrepreneurs who’ve been there will help other entrepreneurs because of the bond that exists between those who’ve chosen the world’s toughest profession. Stop outsourcing the transfer of knowledge between generations of Irish entrepreneurs and instead focus on it as a priority.
Solution: We need more one-on-one communication between entrepreneurs who’ve been there and entrepreneurs that are trying to get there. What we need is better described as coaching, or even better described as, what we actually do, it’s called “getting a cup of coffee”. Buy 500 pre-paid credit cards with €100 credit on them and give them to successful entrepreneurs to pay for said cups of coffee, best money the government could ever spend. Job done. Ok, that’s massively simplifying the issue but the principle is sound — facilitate more discussions between those who have done and those who are just starting to do, and keep those who talk as if they’ve done, but in reality are just all talk, away from and out of the discussions.
(2). We need a system that encourages risky behavior.
That’s something that’s very tough for the employees of government or semi-state bodies to get their head around. In pretty much every other aspect of government, everything you’re ever taught is to avoid risk, embrace certainty and back the ideas with guaranteed outcomes.
There is no roadmap to success when you’re an entrepreneur, no safe, secure path and by discouraging entrepreneurs from taking risks we’re paralyzing them when it comes to the hard decisions.
Take the holy bible requirement of most government programs and supports, the all hallowed business plan; the playbook for a successful business. Anyone who tells you that you can predict the first three years of any startup business to the point of documentation is one thing and one thing only — a liar. The greatest and most masochistic piece of fiction since ’50 Shades of Grey’ your average startup business plan is designed with one thing in mind, giving validity and backup to whatever metrics and KPIs the reader and decision maker needs. Believing that a startup’s business plan represents a true picture of the future of their business is like believing that a program for government document is what will be delivered over a term of government.
Solution: We need a set of success metrics for government and state bodies that recognizes that sometimes the right decision is also the riskiest one. We need an understanding that taking the ‘safe route’ usually results in the entrepreneurial equivalent of a thousand papercuts, stopping them from taking the leap of faith that crosses the canyon and helps them arrive at the promised land of profitability. Let’s revise metrics to focus on the number of businesses started and then the success rate of those businesses, as opposed to the unrealistic obsession of jobs created.
(3). We need a system that recognizes the lack of global borders.
We don’t live in a world of 26 counties, we live in a world of 196 countries.
Firstly, when a company in Ireland launches, from day one they can, and often are, a global business. The idea that you crack the Cork market, then the Dublin market, then the Irish market, then the UK… oh fuck, we’ve run out of money! Business just isn’t that linear anymore. For most new businesses, the Irish market is simply too small to allow them to create the sort of breakthrough growth velocity to successfully make it into orbit, they have to take advantage of technology and get things growing internationally from day one.
Secondly, often startups need to hire key people from overseas, they need those people with very specific skills, at a particular experience level that our education system hasn’t delivered yet. Our third level institutions have reacted well to the skills shortage, but in some areas if you need someone with 5–10 years practical experience in a certain field, there may still be a need to recruit from overseas.
(On a side note, I do think that third level colleges would benefit greatly from more interactions with newer technology companies before setting syllabus and delivering technical courses. Many of the software languages and skills being taught may be relevant for older technology companies but are wide off the mark when it comes to the more modern company that most graduates will be drawn to).
We need to be able to easily facilitate these key hires to come to Ireland and work with the minimum of paperwork. I think Irish people will always have a bias to hire Irish people so when they need to hire an overseas hire, there’s usually a key reason why and we need to stop being a country that makes it overly difficult to do so.
Probably of most importance, from a policy perspective, is that the government needs to realize just how mobile startups are. Look at some of the countries often lauded success stories, people like Stripe and Intercom, both of whom it just so happens are US companies. It’s becoming increasingly easy for companies to bypass Ireland entirely and set up as US or UK companies so the government needs to realize that there is competition for where ‘Irish’ businesses actually set up in the first place.
Solution: We need to pay very close attention to what incentives other countries are putting into place to support startup companies. We used to be leaders in this space in Europe, but now we’re very much behind the times.
(4). We need a system that encourages employment.
Startups are nothing without their people. Sadly, probably one of the hardest things to do when a new business is getting started is to hire that first employee. It’s the moment when everything changes and where the risk all becomes very real for a first-time entrepreneur as now they’re responsible for someone’s livelihood apart from their own.
Hiring and the decision to hire is usually based around certainty of cash flow, the most important words in the English language for new entrepreneurs. So anything that we can do to assist them in this regard has a huge impact, whether it be a reduction in the cost of hiring that employee through reduced taxes or even direct subsidies, will have a huge effect on the number of people employed by our small businesses and might create the sort of growth conditions that allow a fledgling business to become self-sustaining.
Solution: We need to cut new businesses a break when it comes to taking on those first few critical employees. Austria recently introduced a system where any startup is relieved of the burden of having to pay auxiliary wage costs for the first three employees of during the first three years in business. It’s usually not the salary costs that make hiring hard, it’s all the associated costs, if the government could give a break for a year or two on some of these costs it would really encourage
(5). We need a system that prioritizes speed.
How do startups survive long enough to gain a market foothold in a world where every market has giant juggernauts trying to crush them? Easy — speed and agility, they can move so much faster than their corporate competitors.
It has often been described to me like a sprinter racing a hurdler on the same track, the sprinter has a clear advantage and can even take having to leap over the odd hurdle. But keep putting more and more hurdles in their way and eventually, they’ll come crashing down to earth.
Solution: Everything about our system needs to be designed for speed, we need 10 day, 21 day, 30 day guaranteed turnarounds for anything that involves interaction between a new business and a state body.
(6). We need a system to limit the middlemen.
I’m a huge fan and supporter of Enterprise Ireland and the work they do, however, they’re not without an issue or two, purely because of their size and status as a semi-state body, which isn’t really their fault.
You can’t operate a semi-state VC fund without huge difficulties, the very nature of investing in risky, innovative businesses isn’t very compatible with the responsibilities of managing public funds. So Enterprise Ireland are in a very difficult situation, their desire to provide funding to new and innovative businesses are tempered and limited by the need to be publically accountable for all funding. Let’s face it, if an Irish company is the first one to create transporter technology from Star Trek, it’s a huge bet for EI to take. Success means acclaim, failure means intense media questions around ‘irresponsible funding practices’.
EI’s exposure to so many Irish companies also brings with it a huge amount of knowledge which they could be better sharing through increased and more specialized training and networking activities. The experiences and expertise of some within Enterprise Ireland could be better harnessed than making them act as defacto loan officers.
Solution: Start by taking a small % of the money that’s going to these bodies and use it to finance direct support for entrepreneurs in the form of tax and employment incentives. Eliminate the absolute reliance on EI for direct funding of startups and let them focus on other areas that they do great at, like training and upskilling. We also need to encourage more diversity within the hiring in Enterprise Ireland, by trying to bring more experienced people from industry into their ranks.
(7). We need a system that recognizes that age no longer equates to experience.
Calm down, this isn’t a pot shot at the grey haired, just the simple reality that in this face paced, ever changing era of modern business, age no longer automatically equals experience. Some skills and instincts improve with age and the expert knowledge that many of our ‘more senior’ entrepreneurs and business leaders can provide in certain areas is invaluable.
However, 25 years of selling anything on the international markets only gets you so far when it comes to the huge changes in selling, distribution and marketing over the past two years alone. How business is done evolves on a near daily basis and an entrepreneur’s ability to react to that is now completely independent of age.
Solution: This one’s easy, we just need to listen. We need to stop assuming that youth means inexperience. When it comes to technologies like VR and products like SnapChat and Pokemon Go, who would you rather get your information from?
(8). We need a system that recognizes that startups are a team sport.
When traditional SME’s and business go well, they usually have one winner — the owners, so we have a capital gains tax system that recognizes that. Trouble is that in startups, the team usually wins (and loses) as a team and their remuneration packages are designed to reflect that fact. Early startup employees usually have a stock option as a significant part of their packages.
Compared to other countries, the Irish system when it comes to handling stock grants to employees is very difficult, not deliberately, it’s just the legacy of a time where only company directors and very, very senior employees were stockholders.
Solution: We need a manageable legal and tax system to allow for the sort of stock grants for your ordinary employees that are a standard part of the remuneration package in startups.
(9). We need a system that makes investing a profitable and positive thing.
Tax incentives — are they the dirtiest words in Irish politics? It often feels like this is something that’s going to be part of the Irish genetic memory for all times.
Here’s the simple facts — Someone has to provide the capital for innovation to happen, for new businesses to be built. It can continue to be our state bodies like Enterprise Ireland or we can create the space for the market to generate the investment capital.
Our current system just doesn’t recognize or reward the risks that investors take when they chose to invest in startups and SMEs. So few successful exits means that many investors, wipe their brows and consider themselves lucky just to get their initial investment back.
Solution: We need a proper tax incentive for investment in startups and small business. We need an incentive that recognizes the tremendous risk that the investor is taking with their hard earned money in backing a high risk proposition. In fact we need to minimize the total risk for them, while making a successful outcome attractive for them. So firstly how about a tax incentive tied to capital invested against an eventual payout? (invest 100K and the first 100K returned in the case of a successful exit or sale is tax exempt), the government will still make its pound of flesh on the balance of the payout but it encourages investors to place larger bets in the hope of a larger tax free amount. Secondly we need some element of protection for the investor, if the whole business goes belly up within two years of formation, we should let the investor take a tax break of at least 50% of their investment. They still hurt, but when making the investment decision in the first place it helps mitigate the potential risk.
(10). We need a system that recognizes the hard work and sacrifice of our entrepreneurs.
When entrepreneurs take on the huge risks associated with starting a business, a business that benefits the wider economy in terms of jobs, taxes and exports, surely they’re entitled to an expectation of a system that will do its best to support them and not just constantly put up roadblocks in their way? Life as an entrepreneur is pretty tough, low or often no income, long crazy hours, zero work life balance, betting everything on red or black with often a single spin of the wheel. That’s the life they choose, but when the bet pays off, everyone wins.
Primarily, from a government perspective, we need to look very differentially at different levels of entrepreneurs and stop pretending that everyone is a captain of industry who’s just looking for another tax break. We need to support entrepreneurs with policy action to create an environment that makes their lives just a little bit easier. We need to minimize the red tape and always bias for action over talk.
ln developing policy in this area, we need to do a long hard analysis of the risks, and then see if there are simple solutions to help reduce the risk, or share the burden. We need a fresh look at much in this space.
Sure, the government might need to temporally sacrifice some short-term tax revenues to put some of these ideas in place but there’s a cost involved if Ireland wants to be the ‘best small country in the world to do business”. We also need to stop using the fear that ruthless multinationals will exploit any new benefits put in place through clever legal manipulation, let’s face it that’s about forming proper legislation that puts appropriate limits in place so that the policies work for startups and small business but don’t effect larger and more established businesses.
In the end of the day, what’s holding Ireland back from being the best country in the world to start a business? From here it looks like a governmental fear of the unknown, a lack of actual experienced people with ‘in the trenches’ knowledge to help guide them, an obsession with listening to ‘experts’ so detached from the day to day struggles that most entrepreneurs go through, a worry that being seen to be ‘pro-business’ will be seen as being elitist. And there’s no way that creates a culture for startups to grow, develop and go global.
What could be better for Ireland right now than a government that prioritizes helping small business owners and first-time entrepreneurs achieve their dreams of starting and running their own businesses and creating a few jobs in their locality?