Focus on new businesses, not small businesses
How policy boosted London and Berlin startup ecosystems
JONATHAN Ortmans (pic) is president of Global Entrepreneurship Week (GEW) and Senior Fellow at the Ewing Marion Kauffman Foundation, which is often described as the world’s leading body focused on entrepreneurship.
His biography also describes him as a key figure in building startup ecosystems around the world.
This writer can attest to this fact, having witnessed how Ortmans took the floor during the first meet-up of Startup Nations and UpGlobal to share some of the learnings he had picked up in running GEW since 2007, and from his experience with Kaufmann Foundation over the years.
The meet-up was a side event of the 4th Global Entrepreneurship Summit (GES) being held in Kuala Lumpur from Oct 11-12.
The audience, many of them leaders of their own startup communities, listened with rapt attention as Ortmans spoke and offered some advice on how Startup Nations could become an effective and a global platform to help countries share knowledge about what works, and what does not, in trying to create a bigger pool of entrepreneurs.
Why does this matter? Because, in light of the slow economic growth in some major countries, more and more nations are finding the same results as the United States where the leadership has acknowledged that over the past 25 years, all net new jobs come from firms less than five years old.
Trained as an economist, with two startups and exits under his belt, Ortmans blogs weekly on high-growth entrepreneurship at entrepreneurship.org.
He will also be involved in a full-day session on Public Policy at GES – and it was on the effectiveness of public policy on helping create a fertile ground for entrepreneurs that Digital News Asia (DNA) sent Ortmans some questions.
DNA: Is public policy to spur entrepreneurship best done on a standalone basis or in a holistic manner? Have you ever seen a holistic policy targeted at entrepreneurship?
Ortmans: Profound reforms (as opposed to simplifying regulatory processes by tweaking administrative procedures) require deep political commitment.
Recently, we have seen cases of a holistic approach to entrepreneurship policy-making due to economic pressures and high unemployment. Policy-makers began realising that the best way to achieve difficult pro-entrepreneurship reforms was through a package approach, like the Startup Act proposal replicated in many congressional bills in the United States.
Tackling immigration, tax and other issues together allows the wide array of jurisdictions to view their issues through a different lens.
For example, legislators on judiciary committee issues do not typically see themselves as advancing entrepreneurial activity in their committee. By considering startup visa legislation in the context of a boarder package, they were able to view the options in a broader context.
From the perspective of one looking from the outside, the package approach sets the bar high for future incremental efforts (much like the US Congress introduced the Startup Act 2.0 and then the improved 3.0 version currently under consideration).
However, such a package approach has not always been successful. Many ‘holistic’ legislative projects have not been passed. This is because they are riskier policy endeavours.
Ultimately, more important than whether a holistic or piecemeal approach is best, is whether policymakers are open to experimentation, and that they set controversial issues (e.g. immigration) in the context of job creation, which is non-divisive issue.
The key is to change the nature of the conversation.
DNA: Is there an inverse relationship between policy to spur entrepreneurship and the economic development of a nation? Meaning the more developed a country, the less policy there should be to spur entrepreneurship?
Ortmans: To the extent that some nations have big struggles with corruption, rule of law or basic services such as clean drinking water, there are of course issues that underdeveloped economies must focus on, which developed [economies] need not.
However, what really matters is not how developed the economy is, but rather whether existing rules and incentives hurt or hinder new firm formation.
More and more nations are finding the same results as the United States, where leaders of both parties have acknowledged that over the past 25 years, all net new jobs come from firms less than five years old.
This is a stunning statistic for it tells us that in fact we have all been focusing on the wrong challenge. It is not about small businesses, but new businesses. It is during those first five years that entrepreneurs experiment, test, learn, innovate and disrupt.
DNA: We now hear of London and Berlin being hubs for tech entrepreneurship. Would you be familiar enough with their ecosystems to comment on the role policy played?
Ortmans: The London city government is very focused on high-impact entrepreneurship. In fact, Mayor Boris Johnson has a global vision for the city’s value proposition to entrepreneurs.
Last month, he proposed a new ‘London visa’ to attract talent from around the world. Under his proposal, City Hall would be given a yearly allocation of 100 of the government’s 1,000 existing ‘exceptional talent’ visas – designed for world-class scientists, artistes and performers.
In terms of policy at the national level, you have the Start-Up Loans initiative to provide budding entrepreneurs between the ages of 18-30 with a range of support, including access to business mentorship and capital.
British Prime Minister David Cameron created an entirely new body – the Start-Up Loans Company – chaired by respected British entrepreneur James Caan, to administer this programme. That is, the government lets entrepreneurs take the driving seat.
In my visits to Berlin, I learned that there is also considerable government interest in new startups and smart policies to support them. I remember being impressed by the speed at which the Technische Universität Berlin moves its graduating technology entrepreneurs to fail fast or succeed, which is a challenge in many countries, including in US top research universities.
In Germany, Global Entrepreneurship Week (GEW) is actually hosted by the Berlin-based Federal Ministry of Economics and Technology. With launching the so-called ‘Gründerwoche,’ the Ministry wants to create a nationwide network in order to promote the entrepreneurial spirit all over Germany.
As a result, the Ministries of Economy in all 16 states in Germany as well as many business umbrella associations are involved in the GEW campaign.
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