I've come across this point before, during my MBA studies. It's worth bearing in mind that the great bulk of start up businesses are tiny - often people setting out a stall as a merchant, contractor or roaming service provider. The break-even point here is very low, as are the start up-costs. However, what it does involve is sweating some kind of personal asset - typically a house as a premises, office, or storage depot, or a car as combined office and transport and tool storage. The effect of welfare means that people can pledge all their personal assets to a business without literally starving, and that they generally don't have to keep supporting dependents out of their own pocket.
Obviously we're talking someone starting out as a rat catcher, private detective, delivery service or mail order conduit, not someone trying to set up a factory.
A friend of mine recently set up as a pole-dancing instructor, also doing hoop, aerial silks, and so on. But it's pole that keeps her in business, with a combination of bored housewives, curious students, and even the odd person wanting to go pro. She ran classes out of her flat in a local housing estate, and now rents a room over the pub. She never would have made it without unemployment benefit - it kept her going during the six months between deciding to take the plunge and do it, and getting actual revenue in.
