Startups and job-creation

The PTI promised ten million jobs in its election campaign; but details have been scant and the clock is ticking. Now that the federal and provincial governments are firmly in the saddle, all avenues need to be explored for job creation. Since the bloated public sector cannot shoulder more burdens, the onus falls on the private sector. But even formal, corporate sector will have difficulties producing jobs that many.

Some in the startup community have suggested that “entrepreneurship” can provide a helping hand. Indeed, startups have the potential to not only create jobs, but also promote youth empowerment and reduce gender disparity. To meet the steep promise, though, one fails to visualize a scenario where a million+ startups will be up and running by the end of the government’s tenure.

Background discussions indicate that the country’s startup scene faces two major issues. One of them is ‘mentoring/handholding’ of the budding ventures. Some critics maintain that the so-called ‘incubator model’ has seen hype in recent years that is not proportionate with the low amount of success they have. While the success of this model is questionable, it also appears that it is not scalable to train thousands of entrepreneurs.

If incubators tend to dwell more on optics and fancy business ideas, then it’s a logical consequence that focus and resources will not be set on developing entrepreneurs’ capabilities for the challenging market environment out there. No wonder, incubators tend to overwhelmingly prefer startups that are ‘digital’ in nature, ignoring business ideas in the real, informal economy, where value-creation may be more rapid.

The other issue is of ‘financing’. Several startup founders have grumbled that there is too little amount of capital available for early-stage investment.

This leaves founders at the mercy of the few investors that are out there, naturally breeding a ‘shark mentality’ among some of them. Investor syndicates, however, complain that while investing in startups, they have to compete with government grants and operate in a low-trust environment.

In the last term, governments, in both the federal and provincial tiers, have had a role in creating those two issues – albeit their intent was noble when they set up their own startup incubators/accelerators and/or provided seed funding. It remains to be seen whether the PTI government will take a more private-sector view of the startup landscape or continue to have an active public role in it.

While the government should take targeted measures to harness individual ingenuity through startups, there is another approach that prizes “scale” – where collective talent in hundreds or thousands can shine under a large tent.

This is akin to creating national champions in select fields. Towards that end, one must remind the PTI of its promise, outlined in its digital policy, to create a Knowledge Economy Authority.

This body was to have the authority to implement government’s digital initiatives and related contracting, totaling $2 billion over five years, across the public and private sectors.

“As local IT and ITES companies compete for government contracts in a structured, transparent and progressive manner, they will, over time, grow their business, hire and train more people, and better compete abroad,” BR Research had earlier pointed out in its July 5 column, titled “On PTI’s digital policy”.

If in the next few months the hand of the government tilts towards real ‘austerity’, it will spell bad news for job creation as aggregate demand will start facing compression. Given the challenges, it will be interesting to see what kind of approach the government outlines in the coming months to widen the net of gainful employment.