Integration of Labour/Immigration services with DED and lower business setup costs will improve Dubai’s World Bank ranking
The Virtual Office concept should be extended beyond the free zones, if Dubai is to maintain its competitive edge and move up in the World Bank ranking, according to Jitendra Gianchandani, Managing Partner of Jitendra Business Consultancy.
1. Virtual office in Business centre
Gianchandani says the Department of Economic Development (DED) should launch a Business centre for investors looking for small offices and reduce the formalities for obtaining work visas. This has already been successfully in many free zones in other emirates, he said.
Alongside the Virtual Office, Gianchandani called for linking Labour and Immigration services with DED, lowering visa fees, conditional labour guarantees, multiple services license and an updated standard activity book.
“As UAE gears for increasing the foreign workforce from 49% to 70/80%, this will definitely boost cross-border investment, but bolder and more innovative measures would be needed to improve the investment climate and generate greater employment for UAE nationals,” said Gianchandani.
2. Issuance of Visa and cost adjustment
According to Gianchandani, employment visas should be approved without Labour office inspections, and the total number of visas for each license/office should be pre-determined, as in the case of the Free zones.
Further, Labour card and Immigration card should be issued along with the trade license. Currently, the process starts only after a license is issued and it takes two weeks of running from the labour office to the immigration, leading to delays in starting up business and wastage of office rental, which can be avoided if visas are approved instantly.
Reflecting the general feeling in the business community, mainly SMEs, Gianchandani said the exorbitant visa costs need to be reduced drastically if Dubai wants to remain competitive. Visa costs have skyrocketed from Dh. 1200 in 2001 to Dh. 6000 per employee. Today, 95% are the SMEs in the UAE are suffering due to high visa costs and losses due to visa cancellations.
Further, labour guarantee should be applicable for labour intensive business, such as hotels and restaurants, contracting and maintenance companies and companies having poor labour records.
Visa fees of employees who leave a company or are terminated within period of less than 6 months should be adjusted against the replacing employee, Gianchandani says.
3. Multiple service licenses
“A multiple services license, along the lines of the general trading license, should be issued for multiple services that are inter-related, in line with international standards. In the auditing profession, clients sometimes want us to recruit accountants or provide HR consultancy or IT consultancy, or supply/recommend good accounting software or assist in Banking facilities or feasibility study services. Though we have qualified professionals we cannot serve our clients due to the limited scope of the license.”
4. Controlling body and Educational institute
“Also, at present all expatriate professionals get a professional license without undergoing any training or examination, except for auditing and insurance licenses which are regulated by Ministry of Economy. But other consultancy services licenses, such as feasibility study or IT consultancy or HR consultancy or management consultancy, do not have any controlling body, on the lines of RERA which regulates real estate activity and has started Dubai Real Estate Institute. This will create more job opportunities for UAE nationals.”
5. Standard classification of activity book to be upgraded
Gianchandani also called for updating of standard procedures through a complete activity book. “Over the past five to six years, business in UAE, particularly in Dubai, has grown manifold, but present standard classification of activity book does not provide accurate information on procedures and documents required for setting up business and ministries regulating the activities, such as auditing, insurance, sports, tourism, transport and legal services. Due to this, the investors have to personally run from window to window, often to get conflicting information verbally, instead of official written official.”
“In many cases, changes in procedures are decided internally by the departments, without intimating experts like us through circulars or online channels, because very often we as experts are not aware of the changes and have to confirm the current procedure by visiting to DED, before advising investors,” added Gianchandani.
Source: Dubai City Guide
Sunday, November 1, 2009
Monday, October 26, 2009
Dubai LLC, What is it?
Dubai limited liability company or Dubai LLC is an excellent choice to use for entrepreneurs doing business in Dubai. Listed are overview of the advantages and disadvantages of incorporating a Dubai LLC.
Advantages of a Dubai LLC
1. A Dubai LLC offers unrivalled access to Dubai and the wider UAE economy. Through a Dubai LLC, international entrepreneurs obtain Trade Licenses from the Dubai government. There are few restrictions on the activities of a Dubai LLC, and it is possible to obtain a license for all activities with the exception of i) banking ii) insurance and iii) investment activities.
2. Through a Dubai LLC, investors obtain a strong physical presence in Dubai. Although cost effective office space is hard to find in Dubai Healy Consultants offers solutions to meet every budget and specifications, including our Dubai virtual office service.
3. It is easy to open global corporate bank accounts following Dubai LLC set up. Healy Consultants works with internationally-recognised banks such as HSBC, Standard Chartered and Citibank to provide corporate bank account services.
Disadvantages of a Dubai LLC
1. Incorporating a Dubai LLC is expensive. Along with high government fees, the minimum capital for a Dubai LLC is Dhs 300,000 (US$81,700), although investment companies have a capital requirement of at least Dhs 3 million. Share capital is payable prior to incorporating the Dubai LLC. Healy Consultants will arrange for the share capital to be lodged into a Dubai bank, which will issue a certificate confirming the same. This certificate is presented to the government as part of the Dubai LLC formation process. However, the share capital can be withdrawn once the company is incorporated.
2. In addition to government incorporation fees, investors setting up a Dubai LLC are required to pay to the government 5% of the annual lease rent of the office premises (and at the time of annual renewal an additional 5% of the annual lease rent for the manager’s residence also becomes payable).
3. Setting up a Dubai LLC is difficult. A Dubai LLC requires a minimum 51% shareholding by UAE nationals. However, profit and loss distribution can be mutually agreed, and the UAE national need not have a management role in the Dubai LLC. Healy Consultants will provide a local sponsor to fulfil this statutory requirement if required.
4. If the 49% shareholder in the LLC is a foreign corporate entity, the corporate documents of the foreign company (e g Certificate of Incorporation, Memorandum and Articles of Association, Board Resolution resolving to participate in a Dubai LLC and Power of Attorney in favour of the Dubai LLC manager) must be notarised and legalised in the country of incorporation of the parent company. In addition, these documents must then be legalised at the Ministry of Foreign Affairs in Dubai and then translated into Arabic. These requirements contribute to the complexity and costs of setting up a Dubai LLC.
5. Following Dubai LLC incorporation, a register of shareholders and directors is available for public viewing.
6. A Dubai LLC is required to annually submit audited financial statements to the Dubai government.
Advantages of a Dubai LLC
1. A Dubai LLC offers unrivalled access to Dubai and the wider UAE economy. Through a Dubai LLC, international entrepreneurs obtain Trade Licenses from the Dubai government. There are few restrictions on the activities of a Dubai LLC, and it is possible to obtain a license for all activities with the exception of i) banking ii) insurance and iii) investment activities.
2. Through a Dubai LLC, investors obtain a strong physical presence in Dubai. Although cost effective office space is hard to find in Dubai Healy Consultants offers solutions to meet every budget and specifications, including our Dubai virtual office service.
3. It is easy to open global corporate bank accounts following Dubai LLC set up. Healy Consultants works with internationally-recognised banks such as HSBC, Standard Chartered and Citibank to provide corporate bank account services.
Disadvantages of a Dubai LLC
1. Incorporating a Dubai LLC is expensive. Along with high government fees, the minimum capital for a Dubai LLC is Dhs 300,000 (US$81,700), although investment companies have a capital requirement of at least Dhs 3 million. Share capital is payable prior to incorporating the Dubai LLC. Healy Consultants will arrange for the share capital to be lodged into a Dubai bank, which will issue a certificate confirming the same. This certificate is presented to the government as part of the Dubai LLC formation process. However, the share capital can be withdrawn once the company is incorporated.
2. In addition to government incorporation fees, investors setting up a Dubai LLC are required to pay to the government 5% of the annual lease rent of the office premises (and at the time of annual renewal an additional 5% of the annual lease rent for the manager’s residence also becomes payable).
3. Setting up a Dubai LLC is difficult. A Dubai LLC requires a minimum 51% shareholding by UAE nationals. However, profit and loss distribution can be mutually agreed, and the UAE national need not have a management role in the Dubai LLC. Healy Consultants will provide a local sponsor to fulfil this statutory requirement if required.
4. If the 49% shareholder in the LLC is a foreign corporate entity, the corporate documents of the foreign company (e g Certificate of Incorporation, Memorandum and Articles of Association, Board Resolution resolving to participate in a Dubai LLC and Power of Attorney in favour of the Dubai LLC manager) must be notarised and legalised in the country of incorporation of the parent company. In addition, these documents must then be legalised at the Ministry of Foreign Affairs in Dubai and then translated into Arabic. These requirements contribute to the complexity and costs of setting up a Dubai LLC.
5. Following Dubai LLC incorporation, a register of shareholders and directors is available for public viewing.
6. A Dubai LLC is required to annually submit audited financial statements to the Dubai government.
Tuesday, October 6, 2009
Company Formation in Dubai
There are seven types of company referred to in the UAE Commercial Companies Law (Federal Law No. 8 of 1984 (as amended)) - general partnership, simple limited partnership, joint participation, public joint stock company, private joint stock company, limited liability company and partnership limited with shares.
The most common form adopted by foreign companies is the limited liability company and set out below are certain of the key issues to be considered in relation to such entities.
Company name - The name of the company should be derived from its objects or the name of one or more of its partners, although this is not mandatory. It is possible to obtain the approval of the relevant authorities to a particular name prior to proceeding with an application for registration.
Local shareholding - The law provides that at least 51% of the total shareholding in a limited liability company must be held by a UAE national (or a company wholly owned by UAE nationals).
Minimum share capital - The current minimum share capital required for limited liability companies is Dhs. 300,000 (if registered in Dubai) or Dhs. 150,000 (if registered in any other emirate). Share capital must be fully paid up and deposited with a locally registered bank. Contributions in kind are permitted under certain conditions.
Profit and Loss - The profits and losses of a limited liability company can be distributed between the shareholders in, subject as mentioned below, whatever proportions they agree in the Memorandum of Association. The ratio does not need to reflect the shareholding and indeed often differs in order to dilute the mandatory 51% UAE national shareholding. It is not however permissible for the parties to express a profit share in the Memorandum of Association which purports to entitle the local shareholder to less than 20% of the profits.
Transfer of shares - In the event that any of the shareholders wishes to sell its shares, notification must first be given to the other shareholders who have an automatic right of preemption in relation to those shares. Only if those preemption rights are not exercised is the seller permitted to transfer the shares to a third party. Where federal approval is required for the establishment of the company, such federal approval is also required for the transfer of shares in that company. Note that a transfer must not result in the 51% UAE ownership being reduced.
Management - Limited liability companies should be managed by at least one but not more than five managers. The manager(s) may be an individual or a company. The role of the manager(s) may be compared to that of directors in other jurisdictions. The powers of the manager(s) and manner of appointment and dismissal should be specified in the Memorandum of Association (and possibly additional documentation, such as a separate management agreement). If the number of shareholders exceeds seven, it is also necessary for the shareholders to establish a "Board of Supervisors" comprising at least 3 of the shareholders. This Board is responsible for supervision of the managers/management of the company and has powers of inspection of financial and other documentation, supervision of the budget, preparation of the annual report and the distribution of profits. The Board or Supervisors reports to the shareholders.
General Meetings - A limited liability company must convene at least one general meeting of the shareholders during the four months following the end of the company's financial year. In addition, the manager(s) must call a general meeting if so requested by the Board of Supervisors or by a number of shareholders holding not less than 25% of the share capital. Detailed notice provisions apply in each case. All shareholders are entitled to attend general meetings in person or by proxy with the number of votes held being represented by the number of shares owned.
Shareholders Resolutions - Any amendment to the company's Memorandum of Association or change in its share capital must be approved by shareholders representing at least 75% of the share capital. The company's Memorandum of Association may however provide for a greater majority. Except for the foregoing, resolutions in general meetings are validly passed if approved by shareholders representing at least 50% of the share capital although again a greater majority may be specified in the Memorandum of Association.
Statutory reserve - It is obligatory for all companies to allocate 10% of their annual net profits to create a statutory reserve. Contributions to this reserve may be suspended in the event that the value of the reserve reaches half that of the company's share capital.
For more information and inquiry, visit Dubai Company Formation or call +971 4 332 5777.
The most common form adopted by foreign companies is the limited liability company and set out below are certain of the key issues to be considered in relation to such entities.
Company name - The name of the company should be derived from its objects or the name of one or more of its partners, although this is not mandatory. It is possible to obtain the approval of the relevant authorities to a particular name prior to proceeding with an application for registration.
Local shareholding - The law provides that at least 51% of the total shareholding in a limited liability company must be held by a UAE national (or a company wholly owned by UAE nationals).
Minimum share capital - The current minimum share capital required for limited liability companies is Dhs. 300,000 (if registered in Dubai) or Dhs. 150,000 (if registered in any other emirate). Share capital must be fully paid up and deposited with a locally registered bank. Contributions in kind are permitted under certain conditions.
Profit and Loss - The profits and losses of a limited liability company can be distributed between the shareholders in, subject as mentioned below, whatever proportions they agree in the Memorandum of Association. The ratio does not need to reflect the shareholding and indeed often differs in order to dilute the mandatory 51% UAE national shareholding. It is not however permissible for the parties to express a profit share in the Memorandum of Association which purports to entitle the local shareholder to less than 20% of the profits.
Transfer of shares - In the event that any of the shareholders wishes to sell its shares, notification must first be given to the other shareholders who have an automatic right of preemption in relation to those shares. Only if those preemption rights are not exercised is the seller permitted to transfer the shares to a third party. Where federal approval is required for the establishment of the company, such federal approval is also required for the transfer of shares in that company. Note that a transfer must not result in the 51% UAE ownership being reduced.
Management - Limited liability companies should be managed by at least one but not more than five managers. The manager(s) may be an individual or a company. The role of the manager(s) may be compared to that of directors in other jurisdictions. The powers of the manager(s) and manner of appointment and dismissal should be specified in the Memorandum of Association (and possibly additional documentation, such as a separate management agreement). If the number of shareholders exceeds seven, it is also necessary for the shareholders to establish a "Board of Supervisors" comprising at least 3 of the shareholders. This Board is responsible for supervision of the managers/management of the company and has powers of inspection of financial and other documentation, supervision of the budget, preparation of the annual report and the distribution of profits. The Board or Supervisors reports to the shareholders.
General Meetings - A limited liability company must convene at least one general meeting of the shareholders during the four months following the end of the company's financial year. In addition, the manager(s) must call a general meeting if so requested by the Board of Supervisors or by a number of shareholders holding not less than 25% of the share capital. Detailed notice provisions apply in each case. All shareholders are entitled to attend general meetings in person or by proxy with the number of votes held being represented by the number of shares owned.
Shareholders Resolutions - Any amendment to the company's Memorandum of Association or change in its share capital must be approved by shareholders representing at least 75% of the share capital. The company's Memorandum of Association may however provide for a greater majority. Except for the foregoing, resolutions in general meetings are validly passed if approved by shareholders representing at least 50% of the share capital although again a greater majority may be specified in the Memorandum of Association.
Statutory reserve - It is obligatory for all companies to allocate 10% of their annual net profits to create a statutory reserve. Contributions to this reserve may be suspended in the event that the value of the reserve reaches half that of the company's share capital.
For more information and inquiry, visit Dubai Company Formation or call +971 4 332 5777.
Where to go for a Company Formation in Dubai?
The Links Group of Companies was founded in Dubai in 2002. It is a company formation in Dubai the helps any individual or company wishing to establish a Legal Commercial presence would be well advised to take advantage of the Links Group proposition. Links has an unrivaled network of corporate services provided, all operating within strict terms of corporate excellence, to assist in the company formation process.
For more info on setting up business in Dubai, visit www.linksdubai.com or call +971 4 332 5777.
For more info on setting up business in Dubai, visit www.linksdubai.com or call +971 4 332 5777.
Friday, August 21, 2009
More Pakistani firms set up shop in UAE
Dubai: Despite the global economic recession, the biggest-ever Pakistan Business Directory was launched in Dubai Thursday with at least 600 new entries.
"We were sceptical about compiling our eighth edition of the Pakistan Business Directory for fear of low response and negative comments from people, but we were amazed by the tremendous response of 600 new entries from Pakistani companies and businesses opened in the UAE recently," publisher Atif Malik said.
The director contains more than 6,000 entries of Pakistani companies from all over the UAE including their telephone numbers, business categories, e-mails and addresses.
He said that his team shunned all the negative propaganda about a business slowdown and found out during data collection that more Pakistani companies are starting up in the UAE and there has been an increase in business activities.
Dr Saeed Mahmond, Consul General, who launched the directory, said that the UAE has emerged as the single largest foreign investor in Pakistan as well as the second biggest trade partner after the United States.
"Bilateral trade between the two countries stands at $7 billion (Dh26 billion) in financial year 2008-2009," he noted.
He said the UAE has also become the second biggest source of foreign remittances through banking channels.
In 2008-09, Pakistani expatriates remitted $1.2 billion from the UAE compared to $850 million in 2007-08.
Source: Gulf News
"We were sceptical about compiling our eighth edition of the Pakistan Business Directory for fear of low response and negative comments from people, but we were amazed by the tremendous response of 600 new entries from Pakistani companies and businesses opened in the UAE recently," publisher Atif Malik said.
The director contains more than 6,000 entries of Pakistani companies from all over the UAE including their telephone numbers, business categories, e-mails and addresses.
He said that his team shunned all the negative propaganda about a business slowdown and found out during data collection that more Pakistani companies are starting up in the UAE and there has been an increase in business activities.
Dr Saeed Mahmond, Consul General, who launched the directory, said that the UAE has emerged as the single largest foreign investor in Pakistan as well as the second biggest trade partner after the United States.
"Bilateral trade between the two countries stands at $7 billion (Dh26 billion) in financial year 2008-2009," he noted.
He said the UAE has also become the second biggest source of foreign remittances through banking channels.
In 2008-09, Pakistani expatriates remitted $1.2 billion from the UAE compared to $850 million in 2007-08.
Source: Gulf News
Monday, August 10, 2009
Setting Up a Company
Even if you have a business plan and the financing all in order, you still have to go through the motions of actually setting up the company, registering it, and making it official. Many people might consider paying someone for a service, but if you are a do-it-yourself kind of person and you want to save a lot of money you can do it yourself. All it takes is an afternoon and a little bit of patience.
1. Why Incorporate?
The biggest advantage to setting up a company is incorporation. Unlike an unincorporated business, corporated businesses are a separate legal entity. The company will have its own name. You should incorporate even if you are just running a one-person home business. You can also sell your company later if the need arises if you incorporate.
2. Limited Liability
By far, the biggest advantage to incorporating, however, is getting what is known as limited liability. Let's say for the sake of argument that someone sues your business. As a separate legal entity, the worst that can happen is that you lose everything you invested into starting up the company - collectors are not able to force you to sell your car, home, etc. This isn't the case with an unincorporated business - your liability is unlimited and your personal finances in addition to the finances of your company are at stake.
3. Step 1 - Select A Name
In order to start a business, first, you must apply for a registered name. You will want to do research beforehand to see if any businesses in your community currently are already using the name you are thinking about naming your business. Try and choose a name that is unique, memorable, and distinguishes your business as belonging to a particular industry. For example, Acme Industries isn't as good as Acme Autobody. Likewise, Acme Autobody can be made more origional and memorable - Speedy Autobody. It might also help to add your town or city onto the end, for example, Speedy Autobody Seattle. This is just an example of what separates the sheep from the goats. You might also want to put your name in the company name, for example, Johns Autobody Shop.
4. What Type Of Company Should You Choose
As was gone over earlier, chances are you will want your company to be incorporated, meaning you are not personally liable for your business. Other than that, you can choose to have your company privately or publicly owned. Unless you are huge and intend to be listed in the stock market you should stock to the private variety.
5. Your Obligations
Once your business name has been approved, you will be provided with a company registration number. It is then up to you to fill out another, second form to register for an income tax number for your business. You are also likely going to be required to have your place of business inspected to make sure that it adheres to the requirements of a building code - proper fire extinguishers should be a minimum requirement. Lastly, you may want to put up a small sign for your business and you will also want to display your licence in an inconspicous place on the premises.
By: Trevor Marshall
1. Why Incorporate?
The biggest advantage to setting up a company is incorporation. Unlike an unincorporated business, corporated businesses are a separate legal entity. The company will have its own name. You should incorporate even if you are just running a one-person home business. You can also sell your company later if the need arises if you incorporate.
2. Limited Liability
By far, the biggest advantage to incorporating, however, is getting what is known as limited liability. Let's say for the sake of argument that someone sues your business. As a separate legal entity, the worst that can happen is that you lose everything you invested into starting up the company - collectors are not able to force you to sell your car, home, etc. This isn't the case with an unincorporated business - your liability is unlimited and your personal finances in addition to the finances of your company are at stake.
3. Step 1 - Select A Name
In order to start a business, first, you must apply for a registered name. You will want to do research beforehand to see if any businesses in your community currently are already using the name you are thinking about naming your business. Try and choose a name that is unique, memorable, and distinguishes your business as belonging to a particular industry. For example, Acme Industries isn't as good as Acme Autobody. Likewise, Acme Autobody can be made more origional and memorable - Speedy Autobody. It might also help to add your town or city onto the end, for example, Speedy Autobody Seattle. This is just an example of what separates the sheep from the goats. You might also want to put your name in the company name, for example, Johns Autobody Shop.
4. What Type Of Company Should You Choose
As was gone over earlier, chances are you will want your company to be incorporated, meaning you are not personally liable for your business. Other than that, you can choose to have your company privately or publicly owned. Unless you are huge and intend to be listed in the stock market you should stock to the private variety.
5. Your Obligations
Once your business name has been approved, you will be provided with a company registration number. It is then up to you to fill out another, second form to register for an income tax number for your business. You are also likely going to be required to have your place of business inspected to make sure that it adheres to the requirements of a building code - proper fire extinguishers should be a minimum requirement. Lastly, you may want to put up a small sign for your business and you will also want to display your licence in an inconspicous place on the premises.
By: Trevor Marshall
Wednesday, August 5, 2009
Starting a business in Recession
Though we all know that Dubai has been hardly hit by recession, and I myself was affected by it. Now the question, is a recession a good time to be an entrepreneur?
From econsultancy:
Silicon Valley veteran Guy Kawasaki believes the answer to both is "yes".
From econsultancy:
Silicon Valley veteran Guy Kawasaki believes the answer to both is "yes".
In a post on Building43, he argues that there are new economics of entrepreneurship:
- Talent is free or cheap. Thanks to the ills of the recession, Kawasaki writes "If there was ever a time to get great people for free or cheap, this is it".
- Tools are free or cheap. Citing open source, Kawasaki says "You’d really have to work at it to spend a lot of money for the tools to build something these days".
- Storage, bandwidth and servers are free or cheap. Thanks to cloud hosting services, "you can get more storage, bandwidth, and servers for $1,000 a month than you’ll be able to use".
- Marketing is free or cheap. Twitter is "the single best way to market your product or service" and Facebook "is a close second". Both, of course, are free.
Having started a number of online businesses over the years and being in the midst of starting a couple of news ones during this recession, I disagree with Kawasaki. Here's why.
Talent isn't free or cheap.
There are plenty of good people who are unemployed or under-employed right now but that doesn't mean that most of them are willing and able to work for a pittance. Furthermore, from what I see in my network, the best people don't have any shortage of work.
But whether or not you can find decent worker bees at little cost is besides the point in my opinion. Trying to use "free or cheap" labor is not a good long-term strategy for attracting and retaining talent. As they say, you get what you pay for, recession or no recession. When the people you hire feel like they're being taken advantage of and aren't invested in your success, don't be surprised when they fail to deliver what you expected. And don't be surprised when they drop you like a bad habit once they find an opportunity that compensates them fairly.
Tools are cheap but that doesn't mean building a skyscraper is.
Open source solutions are great and can significantly reduce your costs. But if they're not put in the hands of competent, talented developers, they're worthless. If you give a monkey a hammer, don't expect him to build you a house; if you give a novice developer PHP and MySQL, don't expect him to build you a scalable web application.
Open source, in my opinion, is a double-edged sword for this reason. While lots of people know how to build applications that seem to work with the free tools that exist, a much smaller number know how to build applications that work at scale. You can easily find someone who can build you a database-driven website with reasonably complex functionality; it's much harder to find someone who can build a database-driven website that won't go down for the count when you get slammed with a few hundred thousand visitors in a few hours.
Storage, bandwidth and servers can be cheap but true scalability requires investment.
When Kawasaki says "you can get more storage, bandwidth, and servers for $1,000 a month than you’ll be able to use", he may be right. That's because most sites don't need $1,000 worth of storage, bandwidth and servers. For a heavily trafficked site with hefty database interaction, trust me: you're not going to throw your web application onto a "cloud" VPS and survive.
A couple of observations:
- Many of the startups that tout the advantages of cloud hosting and its benefits don't have enough usage to speak credibly. Most would get along just fine with a dedicated server or two.
- To the extent that cloud hosting convinces startups that they don't need to worry about building scalable applications, this is folly. Any startup that thinks the cloud will solve the challenge of scalability is missing the point. Caching, database query optimization and the use of high-performance/lightweight HTTP servers, for instance, result in better applications and better architectures and are things that every startup should look at.
Real marketing isn't free.
Twitter and Facebook can be great marketing tools depending on the type of business you run. But how many highly-successful and profitable startups can you name that relied solely on Twitter and Facebook to market themselves?
If you limit your marketing efforts to services that are free, you're probably missing your greatest opportunities. Kawasaki himself notes that his startup, Alltop, isn't exactly taking over the world despite the fact that he's been "evangelizing" it on Twitter for 18 months. Clearly something is not working here and Kawasaki should probably consider that if Alltop is going to succeed, he needs to do more than tweet.
Conclusion
The message here is that there are no new economics of entrepreneurship. Starting a web-based business can be done cost-effectively but that doesn't mean that the most important components are free or "cheap"
Finally, Kawasaki neglects to note the single greatest cost an entrepreneur will incur: opportunity cost. The economics of that never change.
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