I did an interview with Irene a couple of months ago about the government's idea about bailing out small businesses. I blogged about how throwing it around or letting so called "experts" doesn't make sense. Having said that, we received funding from a government backed fund which is managed by professionals. Singapore also has a variety of well manged government funds. If the government is going to put money into the market, choosing the right people to run the fund is essential. The "old way" just greases the political machine. The difficulty is choosing the people who choose the companies and make the investments. Transparency is probably a good place to start. Incentives are also important. The devil is in the details and it's quite difficult.

Business Week
FEBRUARY 7, 2003
By Irene M. Kunii

Don't Stifle Your Entrepreneurs, Japan
The bureaucrats and politicians who have presided over a decade of economic woe need to encourage startups, not stymie them

[...]
Koizumi seems to understand that Japan can only benefit from more entrepreneurial activity. Now he needs to realize that serving up fresh pork isn't the way to nurture the young business leaders the country so desperately needs.

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We do a couple of things here in Ireland to stimulate new businesses.

1. We let people who start businesses themselves, and who have previously been working, 'claw back' some of the tax they have paid over the previous five years, provided they invest it in the business.

2. We have a scheme whereby a state body can take a stake in a technology company. It is always done on the basis of matching-funding with some other body.

3. There's another scheme whereby you can get a grant of around EUR 20,000 for a feasibility study. Again, this funding has to be matched, but there are a few things you can do to improve the ratio ...

4. The government does give cash to VC companies to invest in start-up operations. To be honest, I don't think this works all that well. The problem (to my eye) is that the funds they can bring tend to be too small. The partners in the fund have to be careful that they don't have too many small investments going. These companies would probably be better with some sort of 'angel' funding.

6. There's a scheme called the 'BES scheme' which allows investors to claim tax relief on up to EUR 30,000 on export-oriented ventures. You can raise a total of around EUR 300k this way, I think.

All-in-all, the schemes aren't that bad. The tax breaks schemes aren't that expensive for the exchequer, and I would think they are relatively easy to administer. It does take a lot, though to get the entrepreneurial mindset in place. A lot more than funding.

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