Should startup public funding be randomly distributed?

Since 2011, Nigeria has decided to fuel entrepreneurship by distributing public funding. Nothing surprising, but their strategy: lowering the barrier of entry as much as possible by distributing funding to anyone with a small business and a « readable » business plan.

With all due caution to the transferability of such a process, it’s past time we discuss how governments use public funding to fuel innovation and entrepreneurship. Do we need innovation boards, offices, and committees to decide who will be the « best » at entrepreneurship? Or do we spare this time and this (large) amount of funding to give it directly to entrepreneurs?

Admitting that entrepreneurial innovation is stochastic, pleads for spreading the funding around, not trying to bet and target who are the « best » entrepreneurs.

Admittedly, when a government distributes public funding, it’s understandable that it wants to be smart about it. But in our field, « being smart » is not really possible. It might be painful to admit it, but no one was smart about AirBnB or even Amazon before they started to be successful.

Following this, I must confess that I was not even getting frustrated or upset anymore when I saw that France recently published a list of the most promising startups in 2020. They will fund and help them above and beyond « normal » startups, believing that yes, public offices will foresee entrepreneurial success… Because of course, « they » know better:

You can safely predict that most of them will have disappeared three years from now or just demonstrated a plain old lack of market fit.

As much as I discuss innovation culture in large corporations, there is no question that in 2020, the public part of the ecosystem should also try to update its playbook.

If you want to know more about the Nigerian model of funding entrepreneurship, you can find the research paper from David McKenzie right here.