BE
Startup
Manifesto

The Startup, Inc status

• Founder-owned for at least 50%+
• In business less than 5 years
• With a maximum of 10 employees
• With a revenue under €2 million
• In a company comprised of at least 2 persons

Unique to startups, however, is the aptly-named “Valley of Death,” the period from when a startup begins (usually with substantial debt) until it earns recurring revenue—a period when nine out of ten startups fail. The cause is often not the startups’ quality or product, rather the lack of access to the customers, funding, or skills needed to grow.

Given these limitations, during the Launch phase, Entrepreneurs would benefit from concentrating solely on product/market fit. We propose creating a specific “Startup, Inc.” status coupled with a set of exceptions to standard legal or tax conditions that decrease as profits increase. Once startups reach a certain level of business viability, they can be reclassified as regular SMEs and follow normal regulations.

The Startup, Inc. status confers a gradual number of advantages including:

• Startup, Inc.

  Registering the name, the founders, and agreement between the founders, requires no in-depth business plan but confers the ability to exist legally and to issue and pay invoices on the startup’s behalf. Closing the startup could be performed online or via “recommandé.”

• Hire/Fire Fast

  Startups require agile teams. Specific skills are deployed according to need, but usually spread across a number of co-founders, freelancers and mentors. Traditional payroll employment often proves too risky; the cumbersome and costly nature does not empower Startups during the fragile and volatile growth stage. Many founders avoid hiring altogether; they fear the financial consequences of a skill or personality mismatch in an ever-shifting business with fast targets. Startup teams would benefit from the ability to hire and fire fast. That way, Startups can adapt to the changing (globally) competitive conditions and the need for specific skills.

  During the Startup, Inc. Launch stage, authorizing the following is necessary to ensure competitiveness:

  • Clear and easy hiring & firing process
  • Shortened termination notice, e.g. only 2 weeks

• Startup Tax Shelter

  Tax shelters reduce taxable income, which likewise reduce tax payments to the state and federal governments. Tax shelters proved effective for the Belgian film industry, and for the tech sector in the UK (see the UK’s SEIS/EIS model) and are now widely suggested as a measure to generate more funds for angel and early-stage investments in startups here.

  With over € 250 billion in their saving accounts, Belgians–as individuals and as part of companies–can make tax-deductible investments in startups. Capital will flow back into the economy–specifically into innovation-driven business–solving the lack of funding critical to new and growing companies. Financial investment in startups and innovation can be readily stimulated with a +100% tax deduction.

• No Profit/No State Charges

  Currently, startups pay taxes as soon as they launch, even though it can take 18 to 36 months (even–or especially–when performing very well) to earn recurring revenue. At a point when all capital resources (human and financial) are needed to focus on product-market fit to ensure growth, startups should not bear additional burdens, particularly when the revenue for the government is negligible. Paying taxes before entrepreneurs generate profit in the first years hinders growth and detracts. Startups should be taxed on the capital gains once there are sales or liquified assets.

• Tax on Capital Gains

  Belgium is one of the few countries without a capital gains tax. Given the importance of the “Pay It Forward” ethos within the entrepreneurial community, startups are more than willing to pay taxes, once revenues appear or the company has sold.

  If startups receive the necessary tax and social charge exemptions in the Launch phase, we propose aligning the exemptions with the implementation of a capital gains tax by assessing entrepreneurs when they make money. Losses, too, should be fiscally deductible.

  It’s about aligning interests of the government with the interests of the startups. It should be in the government’s interest to make sure that the startups are as successful as possible.

On top of the immediate economic benefits, the advantages for government, large corporations, SMEs, nonprofits, and individuals, include:

• Increased Innovation: cutting edge ideas stem largely from startups, think AirBnB, Kickstarter, Stripe and from our own soil, Sparkcentral or Sign2Pay.
• Faster Response: given startups agile nature and familiarity with fast-changing environments
• Less-Expensive Solutions: thanks to the lean startup structure

Enabling startups to easily sell to governments would require new procurement procedures. Extensive projects would have to be portioned into smaller, focused assignments. Cutting most–if not all–of the red tape that comes with procurement procedures is equally essential; the bureaucracy in multi-million government deals typical of large corporations should differ for startups with engagements that net €50K.

Government should embrace the risk as the gains outweigh the losses.Labyrinthian bureaucracy is toxic to a startup; that’s why startups refrain from participating in big research and innovation programs—programs that could bring efficiency, cost-savings and innovative breakthroughs.

Rather than funding numerous, overlapping mentoring programs or subsidizing individual startups–both are expensive options–we prefer that budgets switch to large-scale “Buy from Startups” directives instead.

Startup entrepreneurs do not wait for invitations or permission or exceptions and loopholes to be closed. We focus on growth by implementation and experimentation, improving as we go. In short, we learn by doing.

Inevitably, sometimes we fail. We expect sharpened measures and criteria; that’s an integral part of innovation, too. Failure is statistically more likely with a fast-growth enterprise, however, gains from the successful startups–as well as the failures–outweigh the risk. Certain responsibilities remain with the entrepreneur, but there should not be permanent consequences to failure; founders already shoulder heavy personal and financial investments.

Entrepreneurs in the startup community have developed a culture of mentoring. Strong believers in “Pay It Forward,” they are willing to share expertise and experience.

Startup entrepreneurs want to collaborate across sectors and allow ideas and skills to cross-pollinate. The Pay It Forward mentality goes to the very heart of what startups hope to accomplish, creating a tight network that can be leveraged to enable others.

In this Manifesto, we encourage Belgians to:

• BE Proud!

  Recognize the impact and potential of our work; reflect on the courage and new knowledge (failures included) instead of being silent or modest.

• Testify!

  Share stories. Step up. Take the stage and publicize your achievements (as well as the hardships and lessons learned)

• Share!

  Journalists–highlight startups in features and in-depth interviews. Entrepreneurs–mentor aspiring new students or startups. Friends, families and community members–ask us how we can help each other.

To all our fellow Belgians, we encourage you to:

• Develop your digital skills—and ask your loved ones to do the same.
• Embrace the sharing culture and collaborative learning that comes with our new economy and the Open Source and Open Data initiatives that come with it.
• Provide a stage for entrepreneur success and failure stories, throughout our (business & personal) conversations, events, media and education systems.
• Increase Your Network and share your connections.