Why we need public policies to develop our entrepreneur community

On startups forums, it is common to hear that governments should not subsidize entrepreneurs or focus too much on investing in them. There were countless times when we heard: “It is up to the market to validate a startup’s success” or “the best the Government can do to help is to play dead”. Well, I can not disagree more. Public policies are useful and necessary to create an adequate environment to scale a business and invest, fill gaps where privates don’t want to act and assure competitiveness vis-à-vis foreign countries’ regulatory frameworks.

The most recent “Global Entrepreneurship Monitor” reinforced how entrepreneurship activities depend on “social and political conditions in which it operates.” In this work, and to rank the countries, the report sets a group of “Entrepreneurial Framework Conditions,” and it is not a coincidence that five of them result from active government efforts.

• Does the government promote and support startups?
• Are new businesses burdened with taxes and red tape?
• Are there quality support entrepreneurial programs available?
• Do schools introduce entrepreneurship ideas?
• Do colleges offer courses in starting a business?

We must address these fundamental questions when thinking about leveraging an ecosystem and, consequently, a country’s economy. Driving a public strategy for entrepreneurship is to make sure that existing startups and entrepreneurs have the conditions to thrive in their innovative endeavors and that we lead the way to a more competitive, inclusive, and sustainable ecosystem.

Which entrepreneurs did not get any kind of public input or support in their journey? From an entrepreneurship class in college to the help of a public incubator or a fiscal incentive for talent attraction – all of those wouldn’t be possible without the active will of public players.

Thinking about public policies means thinking long term. If not with legislation and consistent initiatives to decrease red tape, how can we make Portugal a more competitive economy for unicorns to headquarter their companies? If not with incentives to investors and founders, how can we support early-stage startups and later-stage funding rounds? If not with regulation, how can we encourage the representation of minorities in our tech teams?

Ecosystems in other countries have thrived with public policies and public sector active and directed procurement to support their ecosystem’s growth and economy. As well pointed out in Josh Lerner’s book “Boulevard of Broken Dreams”, a great example of this, that may surprise the skeptics, is the inception of Silicon Valley in the early decades of the twentieth century.

Here, the government played an essential role in directing important public institutions, like the U.S. Department of Defense, to procure and fulfill their needs through local startups that were developing new military electronics, power systems, and advanced instruments, usually with the active support of Stanford University, the regional source of talent and knowledge. Another example is Singapore’s entrepreneurial ecosystem – currently, along with Silicon Valley, one of the most relevant worldwide – that started in the late sixties after the deployment of several public policies towards entrepreneurship that assured, among others, incentives to venture investors seeking to locate in the city-state, subsidies for firms in targeted technologies and to researchers to move there, and subsidies for failed entrepreneurs.

Besides these important public supports for the foundation of the ecosystems, there is also room for public programs and measures targeting specific gaps and opportunities that established ones recurrently can show.

An example is an e-residency program developed by Estonia. This program empowers entrepreneurs worldwide by providing an opportunity to set up and run a business digitally. This will also be a reality in Portugal. In 2021, this Estonian program set a record of 4,700 new companies created by e-residents.

Portugal and many countries in Europe also encourage foreign entrepreneurs (out of the EU) to build a business in their countries with visa programs, like Startup Visa and Tech Visa.

In Portugal, the 200M matching fund, designed to encourage national and foreign investors to support Portuguese startups, is an excellent example of an initiative that had a relevant impact on the tech and entrepreneurial scene.

As a result of several public policies, like the above, but also of the private sector’s growing dynamism and initiatives, in 2021, the investment made in Portuguese startups exceeded 1Bln Euros, more than doubling the 2020 figure.

But other small things help a place be more fertile when it comes to the growth of the entrepreneur community. Espoo, a city close to Helsinki (Finland), recently defined English as a language service. In Portugal, several initiatives were created to make significant steps toward barrierless access to public services for everyone (such as the creation of Estrutura de Missão Portugal Digital or Agência de Modernização Administrativa).

And today, we have significant challenges ahead: not only in the sense that there’s a need to keep encouraging the growth of the ecosystem but also to make sure that sustainable, inclusive strategies drive this path of growth. Public initiatives are fundamental to encouraging, driving change, and setting the foundations for businesses to thrive.

Technology can enable a significant decrease in red tape or barriers that don’t constitute any protection to our system. Public policy can be the leverage for public institutions to drive their digitalization and move forward to agile governance, thus creating a seamless experience for citizens who want to build innovation and technology that will improve our lives.

Perhaps the defensive and disbelieving positions of some of the actors in the ecosystem come from bad results of poorly conceived or poorly implemented public policies. These exist too! Mainly when government officials ignore the reality of the market or miss the entrepreneurship process or do not get the diagnosis or implementation timing right, or do not create adequate monitoring mechanisms.

However, this is no reason to rule out public intervention. Let’s learn from mistakes and focus on designing, developing, and implementing good public policies to stimulate the ecosystem as they are positive, helpful and can even be critical in taking us to the next level.