100 Startups Are Better Than 1

This week we saw another example of politically connected firms transferring wealth to insiders by way of government technology grants and subsequent asset flips to overseas investors.

$10 million that went to Endace to create R&D jobs in New Zealand. Those were very expensive jobs. And the asset value created has been captured by insiders with very little return on investment for taxpayers.

If the goal is to actually stimulate high-skill employment, rather than transfer taxpayer wealth to politically connected entrepreneurs, any technology grant policy needs to be far more cognisant of how the real world works.

Entrepreneurship is a trial and error occupation.

We have no idea which ideas will work until they’ve worked.

So trying to pick winners by giving one firm almost $10 million is bad policy.

There is no guarantee that Endace would get bought out thus justifying the grants they received!

It would be far smarter to give 100 startups just $100,000 each and free office space in a building in Wellington previously occupied by public sector tenants.

Something like BizDojo, but shifting the cost of a startup to buying yourself a laptop and using your grant money to cover server expenses and low level contracting like web design or more experienced developers.

The spillover effects from a density of young (no baby boomers need apply) developers, engineers and researchers living on mince and hot desking for 12 months would be far smarter than the current policy.

I think that Lightning Lab is far better policy but nowhere near the scale necessary to produce a major boost to high skill employment and wealth creation led by technology innovation.

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