Pulling out of recession

Most of the developed economies are facing a slow down if not a recession. Mark Cuban has described his method for pulling an economy out of recession. I broadly agree with his idea but I think that with an addition it address the biggest issues facing startups.

Startups (and small business as well) face two major hurdles or barriers to entry. The first is regulatory and the second is capital. Mark Cuban's plan address the regulatory barrier to entry and some of the capital issues (not paying taxes improves a companies cashflow). But it only goes so far. Not paying taxes is moot point if you don't have any revenue to support yourself.

To address the capital barrier, governments should implement a HELP-style business loan scheme. In this case the government would provide an initial loan that covers a single person's wage for a year. The loan could be renewed for a 1 year extension. The idea is that the load allows a small company to meet salary for initial employees during the launch phase when little to no revenue is available and other sources of funding are not useful.

The loan is then paid back through the tax system. The scheme would have several limits such as being limited to the average yearly wage and a company would only be allowed to ever have 5 employees use the scheme. Individuals would also need to be limited in the number of these loans that could be taken out within a time period (say once in a 5 year period).

The scheme is designed to allow people to take the plunge and spend that all important first year to get of the ground. It is very similar in intent to Ycombinator fund.

With Mark Cuban's plan addressing the regulatory burden faced by startups and small business the loan scheme addressing the initial capital requirements, people will find it easier to start a business and get it through that all important first year.

Economy, Mark Cuban, Finance, Policy

Intersection of the web and tangible objects (manufacturing-as-a-service)

MIT's Technology Review have an interesting article examining the rise of web services that allow users to design and make objects via the web. These services have the potential to disrupt traditional manufacturing. While at an early stage its useful to consider what disruption these services could lead to.

This disruption potential comes from two different causes. The first is the rise of micro-businesses around manufactured products (I am excluding already existing craft companies which simply use the web to sell their products). One example company would allow users to find and order fittings such as taps and facets that are no longer being made by the original manufacturer. The company creates and ships the taps and facets on demand to the user. Think printing-on-demand but for products.

Manufacturing based web services open the long tail of manufactured products. Suddenly, manufactured products never really stop being made just like books now never really go out of print with print-on-demand services from Amazon et al.

The other cause of the disruption is the way these web services change the economics of manufacturing and how this ties into increasing conciousness of energy/carbon cost of manufactured products. Why buy simple products like plates, pots, pans etc. that are made in China and shipped half-way around the world when you can purchase the same products at roughly the same price that is shipped from someone down the road?

Carbon concerns will change the economics of manufacturing by making smaller factories closer to large markets more economical than large centeralised factories. Web services based around manufacturing will further erode the economics of large scale factories by removing the need for companies to purchase or rent expensive manufacturing machines. These companies are the first of manufacturing-as-a-service.

Manufacturing-as-a-service removes the equipment and capital barrier to entry for new product companies. These companies can focus on product design and building the community around the product and leave the operation of the manufacturing hardware to manufacturing-as-a-service guys.

There will be a range of responses to manufacturing-as-a-service. Some manufacturers and factories will ignore it only to be over taken by the tide. Others will embrace it and will aim to become the Amazon Web Services of manufacturing-as-a-service. What the response will be is largely going to be determined by the DNA of the company.

Manufacturing-as-a-Service, Web Applications, Trends