This summer, HKS students are traveling to all corners of the world to work on policymaking, advise nonprofits or conduct research. The ‘Summer Snapshots’ is a portrait of these experiences in which students — in their own words — share their stories, musings and reflections.
Fernando Berdion del Valle is interning at a startup incubator in Mexico City called Venture Institute. He is following a class of entrepreneurs and researching public private partnerships between incubators in Mexico and the federal agency dedicated to supporting them, the Institututo Nacional del Emprendedor (INADEM). You can follow him on his blog Verano Startupero.
Are Startups a Public Policy Tool?
Public policymakers are technocratic and boring. They make decisions cost benefit analyses and care about p-values. Their ultimate goal is to build up the very type of stable systems that entrepreneurs would like to disrupt.
In the United States, at least, we are very comfortable separating these worlds. If we think of public policymakers at all, it is mostly to ensure that they are not intruding into free market mechanisms that drive innovation. Back in Boston, I asked a friend who works in venture capital what was the best thing government could do to promote entrepreneurial ecosystems. His (only slightly facetious) answer was: “Stay out of the way.”
Here in Mexico, the discussions about entrepreneurship and policy are much more closely linked. Government is not viewed as an impediment to growth so much as one of the primary resources that can help build an entrepreneurial economy. This year, the Peña administration has set up the National Institute for Entrepreneurship (INADEM) specifically to systematically support start-ups, incubators, and accelerators.
Recently, President Enrique Peña Nieto announced $9 billion pesos in additional support for small and medium enterprises (SME’s). Interestingly, the majority of private equity and venture capital funds in Mexico receive direct public support.
If anything, the conversations in Mexico revolve around how best to manage public involvement and how to prevent an over-reliance on government funding as theecosistema emprendedor matures.
Of course, with millions of dollars at stake in Latin America there is the obvious problem of corruption. (According to Transparency International’s Corruption Perception Index, Mexico ranks 105 – only a couple spots above Ethiopia and substantially lower than other Latin American countries like Colombia and Argentina). Even if corruption per se is controlled, there is always the threat that valuable public funds are being spent on low impact projects, either directly to start-ups that would not otherwise be viable or to ineffectively-managed incubators or accelerator programs that add only marginal value to entrepreneurs.
Still, it’s interesting to be in a place that sees start-ups as more than an investment vehicle, or a non-traditional way for twenty-something to kick-start their career (although they are those things as well).
Perhaps most importantly, the INADEM project is a kind of a laboratory for other nations looking to foster entrepreneurial ecosystems in their own economies. In the coming months we will have to see whether programs like the INADEM – and similar efforts like Startup Chile – will lead to an expanded role of public policy makers in the entrepreneurial world, or whether start ups are best left to the people with the purple-patterned socks.