My roommates approached me this morning to settle a debate about the best country to start a business. One roommate, Drew, who is starting a company out of our living room in Washington, D.C., said it had to be the United States, since no other country has the same private investment energy or a comparable pool of insanely creative talent. My other roommate, Shyam, a Swiss citizen with a Masters degree from Georgetown and an H-1B visa to work for an international development company, said Scandinavian countries like Denmark and Finland were world-renowned for their low barriers to entrepreneurship.
Drew's argument sounded obvious. The U.S. has 16 of the to 20 best universities, and Silicon Valley and New York City are unrivaled in their access to venture capital and human capital. But Shyam's argument had the benefit of metrics. Denmark and Canada are the best places to start a business, according to the Wall Street Journal Small Business Report. In the Heritage Foundation's Economic Freedom Index, 12 countries including Denmark, Canada, South Korea and even Belgium ranked higher than the U.S. in simplicity of starting a business, obtaining a license, and winding down a company. Uncertain regulations and high labor and corporate taxes provide excessive burdens to start-ups, according to the article.
My first thoughts went to this graph [see right] of government and private R&D money. If you want to start a U.S. company in IT, or spin off ideas from college research in biosciences, you have the tailwind of massive public and private investment*. But if you want to start a company in green energy, you've got little more than your bootstraps. No carbon tax or national renewable energy standard means you'll have a hard time finding a market for your product against cheap fossil fuels. Even if you get off the ground, you might find that it's easier to move into the production stage in China or Europe, where green energy incentives are stronger and labor is cheaper.
So my answer was a totally unhelpful: It depends. If you want to start a public relations and marketing firm, no country has the service sector energy, experience, and intelligence as the United States. But if you want to start a manufacturing company, few countries have higher labor costs than the U.S. If you want to start an IT company, there's no better area code in the world than Silicon Valley, but if you want to start a B-to-B firm, maybe you should go to Denmark, where B-to-Bs make up 42% of start-ups.
I've never started a company. But some of you have. What am I leaving out, and what do you think?