Start-ups need more realistic help

By Tu Jenn-hwa 杜震華  / 

Wed, Jan 29, 2014 - Page 8

Premier Jiang Yi-huah (江宜樺) has said he will make the economy the government’s top priority this year in order to implement the pledges that President Ma Ying-jeou (馬英九) made in his New Year’s Day address, entitled “Working in Unity to Bolster the Economy.”

One of those pledges was to encourage youth business start-ups and innovation and Jiang said that these are a crucial factor in responding to fluctuations in the economy by boosting business vitality.

Jiang also told Minister Without Portfolio Joyce Feng (馮燕) to establish a cross-ministerial youth business start-up platform to integrate the sharing and connection of government resources. At the moment, 12 government agencies have invested NT$3.93 billion (US$130 million) in 43 projects.

The government has obviously realized the importance start-ups have for economic development, so it is attempting to maximize the economic benefit of new businesses through greater investment and cross-ministerial integration. However, its attempt to vitalize the economy will not necessarily work and good intentions do not guarantee a good policy.

Starting a new business is very risky and most new ventures fail. If the government does not thoroughly study the characteristics of start-up activities, it will not be able to give potential entrepreneurs the knowledge and skills they need. If the government offers entrepreneurs a few simple classes and then pushes them into starting a business, it will be like asking them to “kill a tiger with their bare hands or swim across a river,” as the Chinese saying goes.

Each government agency offers some assistance. For example, the Council of Labor Affairs’ business training courses are divided into beginner, intermediate and advanced classes. The beginner classes include lessons on preparation, business type selection, risk assessment and loan applications. The intermediate classes are on product knowledge, fund-raising, preparation for opening, financial planning and how to write a business plan. The advanced classes offer a series of topical seminars.

The Ministry of Economic Affairs’ Small and Medium Enterprise Administration also offers business and loan assistance programs.

At first sight, the government’s entrepreneurship guidance seems complete.

However, starting a business involves a number of aspects, and a business may stumble or fail when a problem in any of these areas remains unresolved. Since the number of studies on the key factors leading to success or failure of a business in Taiwan is rather limited, entrepreneurs are unable to consider their options based on research results.

Questions that they might need answers to are plentiful: Should one start a business right after graduation or after working for a while? If one does not have enough capital, what kind of partners should be sought and what positions should they be offered: chairman, chief executive officer or chief strategy officer? Is it better when team members’ roles overlap?

When rewarding employees for outstanding performance, should one provide stock or cash incentives? In terms of stock options, should one adopt “vesting conditions,” such as performance conditions that require employees to meet specific performance targets to receive stock options as rewards? When starting a business, should one employ specialists or generalists?

If research samples were large enough, there would be clear and definite answers to many of these questions, although some answers may depend on a company’s characteristics.

Harvard University offers courses that teach students about the possible pitfalls for start-ups. However, in Taiwan, most academics and experts rarely do research that could be instructive for start-ups, nor do government agencies carry out basic research. Once they set objectives and methods for a plan, they begin to implement it, hope to meet short-term key performance indicators quickly and disregard long-term development. With such guidance, company founders often lose their partners and their businesses fail. Many entrepreneurs encounter problems and even financial losses. Unfortunately, such poor guidance is also a waste of social resources.

If academia and the government really want to provide guidance for entrepreneurs, perhaps they should begin by conducting more research to help people avoid the pitfalls that commonly hinder start-ups.

Tu Jenn-hwa is director of the Commerce Development Research Institute’s business development and policy research department.

Translated by Eddy Chang