How a Basic Income Impacts Entrepreneurship

An Education and Entrepreneur Basic Income (EEBI) will not just allow individuals to quit their job and start businesses. Suppose you are a recent programming boot camp graduate and you want to start a business, Company X. Your product is a very cool mobile game app. Great, so because you’re a programer you can start working on the app. You soon realize you need help so you ask a friend you went to the bootcamp with to help. Because they like the game and you offer equity they agree to help you, you don’t need to pay them because they are able to tap into EEBI. You’re able to do the same thing for a few more people who help you with UI/UX, business and marketing all with EEBI. You then launch your app on the app store and become the next flappy bird game. This story is much easier than having to raise funds to hire people. 

Labor is typically 1/3 to 2/3 of your capital raise, depending on the type of company. Assuming the above example of an app development company, about 58% of the resources needed are going to labor. With this comes payroll taxes and income taxes making the take home much less than $1,000 per month, more like $750. With an EEBI system the individual will make more, and the company won’t need to pay payroll taxes. Finally, raising $70,000 is much easier than raising $166,000 and requires giving up much less equity. 

Input12 Month Cost Without EEBI12 Month Cost With EEBI
Team salaries (team of 8 @ $1K per Month)$‎ 96,000$‎ 0
Other Operating Expenditures$‎ 50,000$‎ 50,000
Capital Expenditures$‎ 20,000$‎ 20,000
Funds Required$166,000.00$70,000.00

Obviously there are concerns about abuse, what qualifies as a startup, how long can someone keep going at a venture before a return is expected. My hope is that these potential issues can be alleviated by having a governing agency to ensure funds are going to people who are devoting their time to education or entrepreneurship.  

Countries with natural resources often create sovereign wealth funds to manage the capital generated by those resources. Saudi Arabia ($600M) and Norway ($800M) both have vast energy resources and the funds gained from those resources enable the countries to strategically invest to grow that wealth.  

The USA can create a sovereign wealth fund for human capital and entrepreneurship. We are the most innovative country in the world with two different trillion dollar companies. If the government gave seed stage companies funds to pay their team in exchange for equity then if the venture becomes successful and exits the returns can be reinvested into the program. The government already gives research grants, but for some reason doesn’t receive equity in return. Just in San Diego, a federal grant paid over $1 billion to extend the trolly about 11 miles. That $1B could have given 10,000 startups $100,000. If the government got 10% of the ventures of ten-thousand companies and 1% were successful with an average exit of $500M, assuming no dilution, you’d have a 5X ROI.

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