‘Ease of doing business’ is a phrase that one hears very often. The easier it is to do a business in a place, the likelier it is that it harbours an excellent startup ecosystem. The World Bank even has an index where it ranks countries on this parameter. And any country that wants to be seen as a great destination for businesses — and that includes startups too — does its best to push itself up the ranks in this index.
The ease of doing business index as created by the World Bank is based on ten subindices. I might start sounding like a Wikipedia article at this point, but bear with me, for it is necessary to talk about these ten subindices and the parameters that they measure, for me to make my point. So, let us list these ten subindices. First, there is a subindex that deals with starting a business. This subindex covers things like how much time, effort, and money it takes to start a business. The second subindex is about getting yourself a place to work in — construction permits and the sort. The third subindex is about how easy it is to get access to the power grid — after all, no business can function without electricity, and I hope this parameter gets expanded to look at access to broadband Internet access as well. The fourth subindex is about registering property. And the fifth one is about getting credit — no business can function unless it figures out how to get credit. The sixth subindex is about investor protection. Businesses will flourish best when high net-worth people or institutions with access to capital can limit the amount of risk exposure they face while putting in money into a business. The seventh is about taxes. The lesser taxes for a business, the better, of course. The eighth subindex is about trading across borders. The ninth is about how contracts are enforced. The tenth and final subindex is about resolving insolvency. This deals with what happens if a business goes bankrupt, and so on.
I don’t really fault the World Bank for any of those ten subindices. They’re thinking of businesses as a whole. But if we narrow our consideration to just startups, I have major issues with the tenth subindex. It seems to indicate that the only possible endgame for a business, apart from roaring success, is bankruptcy. It does not work that way for startups.
A lot of entrepreneurs need to quickly give up on ideas to pursue other ideas, to pivot their ideas into something else, and the trigger for this is almost never bankruptcy. For that matter, the trigger can oftentimes just be a hunch. Irrespective, it should be as easy for the entrepreneur to close a business and move on to something else, as it was to open one.
Much like in personal relationships, an entrepreneur needs to be given the best tools to move on, and this means that it must be as easy for him to close his business as it was to open one. And there definitely is a lot of merit in coming up with an index that can track this measure too.
In this weekly column, we discuss the startup workplace. Thejaswi Udupa heads product and technology for an online building materials marketplace
