http://paulgraham.com/inequality.html
"People start startups in the hope of becoming much richer than they were before. And if your society tries to prevent anyone from being much richer than anyone else, it will also prevent one person from being much richer at t2 than t1."
If you want to become much richer than before, the more rational approach for most people is likely to be to work harder, live frugally, and invest everything they possibly can set aside.
I'm not so sure we'd be worse off without those few people whose only motivation for a startup is that they care so much about the potential payoff that they'd not start a company if they couldn't strike it big.
In reality, there are a number of intangible benefits to starting a business that will overpower any reduction in startups due to higher taxes. Autonomy, excitement, and having a large impact all contribute in the decision to take the risk. Additionally, starting a business is still one of the only ways to strike it rich (unless you get lucky in the athlete/musician/actor department). So for most people with sizable ambitions, a reduction in rewards due to higher taxes will not have any meaningful impact on their decision.
There will be far more individual entrepreneurial efforts in a society which does a better job of insuring that: 1) People have the basic needs reliably met independent of wage-labor arrangements, reducing the incentive to choose wage labor of entrepreneurship, and, 2) Marginal taxes are kept low for those who have not yet acheived above average wealth, increasing the ability to acheive moderate concentrations of wealth and for people other than the excessively wealthy to self-fund entrepreneurial efforts.
These may tend to be more "lifestyle businesses" than "startups", but I don't see any reason to see the latter as having greater social value than the former.
In any case, startups are more constrained by opportunity than desire. Many people have both the ability and desire to bootstrap a startup, but have to work a regular job because they have to provide for their kids, and can't afford the risk. In more equal societies, these people have an easier time quitting their jobs and starting a company.
I would absolutely start that Lhasa Apso matrimonial site I've always dreamed of.
"This argument applies proportionately. It's not just that if you eliminate economic inequality, you get no startups. To the extent you reduce economic inequality, you decrease the number of startups."