Private Incubation

“Government exists to support, not to create” Startup Communities by Brad Feld

 

Many government programs fail to help businesses to start. They eliminate barriers (taxes) while they are young. Many firms companies will never live to see these benefits. We should assist entrepreneurs at earlier stages.

 

Hundreds if not thousands of incubators and acceleration programs have sprung up across the country over the past decade. It is time for private firms to be encouraged to support the effort. Initiatives like  TimesSpace and Powered by Techstars are just the tip of the ice berg. To cross the chasm the governments should incentivize programs of their own.

 

Proposal: A tax credit (fair market value of provided office space) for any firm that incubates a new venture with a two year cap. An equity exchange could be negotiated by participating companies to further align incentives.

 

Numerous studies show the benefits of mentoring. What is special about this relationship is it comes at minimal costs compared to education and other forms of business development.

 

 “Study found that 25% of employees in a test group who took part in the company’s mentoring program had a salary grade change, compared with 5% of employees in a control group who did not participate in the program. The research also showed that the program had positive financial benefits for mentors: 28% of mentors in the test group had a salary grade change as opposed to just 5% in the control group.”

-Wharton study on mentoring

 

Perfect for Everywhere:  A mentoring incentive would impact both rural and urban communities positively. In large cities it would help young firms avoid failure by initially eliminating real estate costs. In smaller areas it would help strengthen the sparse network by building community.

 

Minimal externalities: Many taxes and subsidies create unintended consequences. Ex. creation of a tax free zone is comparable to a tax on firms operating beyond the zone. This program would not.  The government would be losing minimal tax revenue as startups taking advantage of this program would probably not be paying for office space at their young age. Mentoring firms are making use of previously un-monetized office space,  not losing profit in the process AND paying it forward. 

 

 

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