How Can a Country Go About Creating a More Entrepreneurial Culture?


This is a fantastic question!
There are many steps that could be used to bolster innovation in this country.  Take, for example, the cash for clunkers and cash for appliances programs that the government put in place over the last few years.  In the cash for appliances program, the $300 million in incentives lead to billions and billions of dollars in spending (e.g.  $100 promo on a $999 refrigerator – The $100 that the US spent led to almost $1,000 in actual spending by consumers, or a 10 to 1 return).  Compare that to the $300 checks the US gave out several years ago, which at best provided a 1:1 return, but we all know that didn’t happen because some people saved the money instead of spent it.  Long story short, find a way to replicate the cash for appliances idea in a way to bolster innovation spending which isn’t already occuring.  For example, could the US offer a $10 million dollar incentive to any new venture capitalist start-up that funds over $100 million in VC funds/year?  This drastically reduces the risk level of the VC firm, but provides over $100 million in start-up spending (more than that, since the VC firm is unlikely to stop directly at $100 million in spending).  Could the US go a step further and offer this to large companies who start a wing of their company to do VC investing in their industry?  For example, would GE spend another $100 million in VC spending across their various industries if the US was going to give them $10 million and let them keep the profits from the VC wing of the company?  Companies, like GE, have shown that they will do anything possible to take advantage of tax credits or government incentives.  This seems like an idea that could bolster small-business investment all around the country in nearly every industry.

Other possibilities would be to provide tax credits to individuals who start businesses and spend $x amount of money.  For instance, we gave people $8,000 to buy a home last year and people went crazy over it.  What if we gave everyone a chance to get $8,000 in tax credits if they invest $50,000 into starting a new business?  That would be an instant 16% return on the business-owner’s money.  This type of incentive could cause someone who had been on the fence about starting the business to decide to take the leap.  It would also stop us from spending money on extremely small businesses and focus more on businesses that were more likely to have employees.

One last idea, on the vein of how to create a more entrepeneurial culture, would be to alter the tax structure on VC-oriented investments.  For example, right now you pay capital gains on long-term investments in established companies.  What if that was replaced by a 5% tax on any investment that met certain criteria?  A mutual fund that invested 80% of its holdings into VC firms, for example.  This would cause many of the millionaires in this country to allocate the more aggressive portions of their portfolios towards these types of investments and would instantly increase the amount of dollars that VC companies would have to spend, which inherently would raise the number of small business owners in this country.

Anyway, I am not in government, so what do I know.  Good Luck out there everyone!

Todd Hagopian

Please follow this conversation on quora.com:  http://www.quora.com/How-can-a-country-go-about-creating-a-more-entrepreneurial-culture/answer/Todd-Hagopian

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About Todd Hagopian (@ToddHagopian)

Todd Hagopian received his BA from Eastern Michigan University with a major in Political Science. After graduation, he worked as a Financial Advisor and a Bank Manager before returning to school. He attended Michigan State University, where he completed an MBA with a double-major in Finance and Marketing. Todd is now a Senior Product Development Manager for a Fortune 500 company. He frequently writes about business issues, social media strategy, and political issues that he finds important. Enjoy the blog!

Posted on September 23, 2011, in Business Strategy, Politics and tagged , , , , , , , , . Bookmark the permalink. Leave a comment.

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