I meant to post on this last week when Friedman’s op-ed in the NYT hit, Start Up the Risk-Takers. Friedman, not surprisingly, beats up on the US autos among others, and says that instead of giving them more money, we should instead turn to venture capital. He proposes giving the top VC’s (top 20%) a slug of money to invest in new technologies and then collect a share of the profits (80%) in exchange for this seed capital.
Fred Wilson, one of the most well respected VC’s in the business, responded on his blog: No thanks. Basically, he asserts that the problem isn’t a lack of money but that too much dumb money came in. Now we’re getting the crap washed out of the system, and the strongest investors still have money that they are putting to work.
While this little dialogue was interesting, I was troubled that this was even being talked about. It’s like the obvious was invisible to everyone discussing the topic. While money is important (and may or may not be the issue depending on who you believe), the bigger problem is complexity and bureaucracy.
The government should be making it far easier for people to start companies. Bottom line.
What if the Obama administration proposed a dramatic set of new rules intended to jumpstart new business creations?:
1) Minimize the complexity for forming a company. Today there seem to be about 8 different types of business types that you form (LLC, Inc, partnership, etc) and in any one of the states all with rather bizarre differences. How about a single, simple filing type which gets a company off the ground and “formalized.” It gives you the flexibility to finalize the specific type of business you want to be after your business gets traction. Why worry about tax treatments, etc upfront? Let people start the thing, and sort out the details later. Put the form online so that anyone can fill out the one page web form and in a matter of hours, their business is formally created. We need to cut the red tape.
2) Eliminate the complexity within a business at the start. Everything from hiring more employees to expanding office space is supported through the SBA or another body. Let’s make it as easy as using TurboTax to figure out how to add new employees, etc. I can picture an online form that asks simple questions and gives you the advice you need, makes changes to your corporate structure as a result, and recommends who to use if you need to use a vendor.
3) Health Care. One of the major (non-monetary) costs of our current health care system is that it is tied to employers and stifles innovation. Health care plans & costs for small companies is often prohibitively expensive. I’ve long argued that the reason we needed to see massive health care reform is not on moral grounds, but because it was such an impediment to the creation of small-businesses and entreprenuership.
The new economy that is going to have to be built to sustainably drive the world forward from here will, in my opinion, have to be driven by entrepreneurs and small companies. Technology has set us up for a world where david can regularly take on and beat goliath. This is awesome. As a country, we need every last drop of creativity and entrepreneurial drive we can wring out of our citizens. To tap into that we need to make it turnkey easy for anyone to start a new business. From there, the government can help create a transparent marketplace for these companies. The private sector will take it from there, and investors such as Fred Wilson, Reid Hoffman, Paul Graham, Andreessen and the slew of other great minds in the space will provide money and the advice needed to build great companies.
It’s disappointed that everyone’s answer to everything has become MORE MONEY. The black hole that is our financial system will continue to destroy more than its share of money for some time to come, so let’s think broader (and more intelligently). Let’s create more efficient and effective government that does it’s part, gets the hell out of the way, and allows individuals to unleash what’s best with themselves.