For tech’s sake, get out of our way [Opinion]

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Last October we found out the royal court wanted some major changes to reawaken Jordan’s technology sector.

This was no surprise to those of us in the tech startup ecosystem: the sector produced less than a handful of viable businesses recently and those few have started feeling the enormous barriers to growth and relocated elsewhere.

We knew the situation sucked.

We also knew the king was dissatisfied with the speed of progress over the past five years and that Jordan has taken several steps back relative to other hubs in the region: Beirut, Cairo, obviously Dubai, and even Abu Dhabi.

We needed someone to shake things up.

Sweeping changes?

A week later the action began: then-Prime Minister Abdullah Ensour issued sweeping changes to tax laws, affecting companies working in software development, mobile apps, website portals, outsourcing, digital content and electronic games, IT training and e-learning.

I’ll assume they just forgot the other emerging tech that will shape the future of our earth: drones, 3D printing, food tech, biotech, and so on.

This was aimed at promoting Jordan as the best place to launch and grow a tech business, attract more capital, create more jobs, and reverse the startup drain.

The highlights of these changes are:

  1. Sales tax and customs exemptions

  2. Reduce income tax rate by 30 percent for 10 years

  3. End the 50,000 Jordanian dinars (US$70,500) minimum buy-in for foreign investors

The first two help established businesses keep more money, not help startups to actually ‘start up’ and grow.

The vast majority of tech startups don’t make a single penny in the first year of operation: with Jeeran it took me one year to start up and find a cofounder, followed by two years of figuring out the product, three years to start making money and grow the team. From that point it took four years to close our first round of VC funding in 2007.

In total: 10 years before we hit the stage where those changes could have helped us.

On the third, I have mentored and advised a lot of startup founders and have never heard anyone complain about the 50,000 dinar minimum.

This shows how disconnected legislators are from startups if they think it’s a big win for them.

Jordan needs to start making changes if it wants to get back on top
of the regional startup market. (Image via MEED)

My proposals

We have a new PM now and hopefully he is excited enough about this space to make meaningful changes.

Here’s what I suggest:

1. Abolish the trade licenses requirement for tech startups. The only thing this requirement is achieving is preventing us from legally hiring Jordanians.

Why can’t entrepreneurs hire Jordanians? Because employees need a legitimate salary history and get paid not by check or cash but from a corporate bank account.

Startups can’t get a corporate bank account unless they get a trade license, and they can’t get a trade license without an office lease, and they can’t get an office lease without wasting a good chunk of that 10,000 dinars seed money we talked about.

Startups of five people or less should be able to open bank accounts by which they can pay salaries and receive payments, and be allowed to work anywhere they like without a trade license, period.

2. We need a law for coworking spaces.

Today in Jordan, when you rent an office in order to get a trade license, the latter has to state the business practiced at the former. It means you can’t register a business at a space that isn’t itself registered as an office, or turn an office into a coworking space and rent out desks - under Jordanian law each rentable unit would have to registered separately.

Yet coworking spaces worldwide have become startup hatcheries.

Startups can grow, shrink, and pivot at any point: it’s usually one founder, then another joins, and then a friend decides to help out, and before you know it you’re a team. Having the option to scale the workspace up or down ‘on-demand’ is important.

Starting a coworking space for startups should be as easy as throwing a few desks in a room and giving them power, internet, and coffee.

3. Make company social security payments optional for founders and team members who own shares.

If founders had been seeking financial security they wouldn’t be doing the crazy startup thing in the first place.

The monthly 20 percent social security fee on two founders’ salaries could employ two people.

4. Lower personal income tax for all workers in VC-backed tech startups.

You say you don’t want to tax startups, but in reality you are triple taxing them: corporate income, personal income, and naturally personal spending.

Let employees keep more of their paychecks. This will incentivize more people to work in startups and help get them off the ground. It will also improve Amman’s competitiveness compared to other cities where cost of living and income tax are much lower.

5. Get out of the way. Once you’ve approved these four items don’t go back on your word.

Don’t let future governments undo those gains. We will shut down our Jordan offices and move to Dubai, hire engineers from East Europe on UpWork, and then who will create jobs for Jordanians?

Entrepreneurs do the country a favor by creating jobs, bringing cash into the economy, and eventually pay lots of taxes when we move all that money around.

Jordan needs change now

The world is more flat today than it has ever been, especially for startup founders. All countries are competing to build up their startup ecosystems.

Accelerator programs in Europe and the US are making themselves very accessible, and they strive to attract the best entrepreneurs in the world.

Governments are also making their immigration laws more entrepreneur friendly in order to suck the best talent from countries like Jordan.

The government of Jordan needs to get its head out of the sand and look around. Big dreams require big changes.

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