On startups and safety nets

Thejaswi Udupa 18 December 2018 15:17 IST
Updated: 18 December 2018 15:17 IST

Solidifying your startup’s future has a lot to do with pro-entrepreneurship policy

Tunisia is not the first or even the tenth country that comes to anyone’s mind when they are trying to list startup hubs across the world. The Tunisian government wanted to change that, and earlier this year, passed a Startup Act aiming to make the North African country a hotbed of startups.

It defines a startup as a company that is less than eight years old, has fewer than a hundred employees, and a balance sheet of fewer than six million dollars. More importantly, the company has to have “an innovative business model and significant growth potential.” The discretionary bit of the definition is decided by a committee that is a mix of bureaucrats and those key stakeholders of the startup ecosystem, venture capitalists.

The bulk of the measures in the act are on expected lines. It includes tax breaks to entrepreneurs and the enterprises, access to financing, access to markets, and so on — the sort of things a government trying to encourage entrepreneurship and increase the ease of doing business will enact. There was, however, one set of measures that completely stopped me in my tracks when I first read about it.


First up, employees who wish to found a startup can apply for a ‘startup leave’ that is a year long and can be extended by another year, and employers are bound by the act to grant such a leave. Secondly, up to three co-founders of a startup will be eligible to receive a stipend that is commensurate with the income that they were making when they were employed.

The reasoning behind this move is obvious enough. Starting up is fraught with risks. Especially the monetary kind. There is almost never any line of sight to when an entrepreneur can start making money for himself. This is the reason why a majority of startups the world over are founded usually by people who are privileged enough to afford financial risks. This is the reason why if people are in a steady job, even if they have a brilliant idea for a startup, they do not usually go through with the idea of founding one, because they do not want their dependable monthly salary to stop. And also, they have no assurance that they can get back to their salaried job if the startup fails. So the startup leave and startup stipend that the Tunisian government offers completely negates those risks, allowing people to found companies knowing that there is a safety net in place in case the startup fails.

However, an argument can also be made that the assurance of a safety net may mean that the startup founders may get complacent and may not chase success for the startup, with the same desperation that entrepreneurs often do. So, until a couple of years roll by and some stories of startup successes and failures come out of Tunisia, the jury is still out on the idea of startup leaves and stipends.

The author heads product at a mid-sized startup in the real estate space