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Obama-Endorsed VC Program Promises 6,000 New Startups
- cpr 16y agoYeah, with the government involved, there won't be any false incentives... </sarcasm>
- yoyar 16y agoSo you think the government might use their power to affect who gets the money and to try to buy influence and votes? Preposterous!
- nika 16y agoNot only that, but he implies that, if they're successful, this incentivizes making things worse for regular businesses so that they are more beholden to their "representatives". Absurd, I know!
- deleted 16y ago[deleted]
- watchandwait 16y agoSo policymakers have wrecked traditional capital markets through regulations on raising capital, interest rate distortions, twisted tax policy, patent law abuse, and anti-hiring labor policy, and now they are going to "fix" VC markets for us. Thanks. The feds can't even protect the border or catch Osama bin Laden and now they want to run some fascist incubator to give the political class even greater control over our society. This is the first step of course. As the program grows, Congress will start creating demands like set-asides for racial groups or veterans, and it will just so happen that a phone call from a politician will seal the deal.
- _pius 16y ago... now they want to run some fascist incubator ... Are you seriously calling this fascism?
- watchandwait 16y agoFrom Wikipedia: "An inherent aspect of fascist economies was economic dirigisme, meaning an economy where the government exerts strong directive influence, and effectively controls production and allocation of resources. In general, apart from the nationalizations of some industries, fascist economies were based on private property and private initiative, but these were contingent upon service to the state."
- silverbax88 16y agoNot to be flippant, but 'strong directive influence' and 'contingent upon service to the state' for the entire economy is a far cry from a tiny fund of money.
- nika 16y agoThe fund only backs businesses "contingent upon service to the state". Literally it is in the fact sheet that his money will go to "disadvantaged" (eg: politically connected businesses that can be counted on for electioneering) and to "clean energy", which is a category of businesses serving the political agenda. At the next election, Obama can talk about how he gave $2B to politically correct businesses (though he won't use that term) and he'll have lots of "high tech" plants to tour where he can say "they said we couldn't, but I say we can, and we did, build this company! Making clean energy solar cells for the future!" That's "contingent upon service to the state". He didn't say the "entire economy" was fascist, just that the fund was.
- yoyar 16y agoLet's call if corporatism. It means the same thing but people will whine less about the semantics.
- 16y ago
- nika 16y agoWhen this was first announced a couple weeks ago, I read the "fact sheet" posted. In it they talked about an emphasis on putting the money into "disadvantaged areas" and "focusing on innovative technologies like clean energy". So, your concern about investments being made more based on political pull than on merit is well founded. Over 50 years ago an environment of heavy government regulation and anti-competitive legislation (as you describe in the first part of your post) was posited by Ayn Rand in Atlas Shrugged. The argument being that it is in politicians interest to make business hard so that businesses are beholden to politicians. She called it the "aristocracy of pull". I like to point out that taking $2B out of the economy will prevent the creation of- in my estimation- 4,000,000 jobs over the next 10 years. The money must come from taxes or inflation, and that lowers the bottom line at the end of the year when business owners large and small are deciding whether to expand or not. The lack of expansion in the first year means the businesses lose out on the profits that would have come from it on the second year, and like compound growth the missed opportunity compounds as well. Better to let people allocate their own resources and capital. Central planning doesn't work, and inevitably leads to the aristocracy of pull.
- nkassis 16y ago"The money must come from taxes or inflation," that's not how gov economics work. You borrow that money, hence you only pay the interest (until you can't). Now this model can be sustained as long as the economy grows faster than the interest you have to pay. This is why deficits spending isn't in itself that bad, it's the size of the deficit that's the issue. (probably oversimplified the whole issue but that's what I got from second semester of macroecon)
- sskates 16y agoSorry, the government can't create wealth for free. If the government wants to allocate dollars, it must at some point come from taxes (pulling dollars in the economy back out of it) or inflation (printing more dollars and decreasing the value currently held dollars). Now, the economy may grow such that the amount of wealth in the future is much larger than the amount we have now, and therefore represents a smaller fraction of the economy, but the fact remains that the wealth comes from somewhere.
- ijuyhgtfrgth 16y agoYes it will distort the startup market slightly - but the people creating startups are smarter than the government! We started a company in "a special development area" = 30 years of high unemployment since the shipyards closed and a civil war didn't help. Every government department was queuing up to give money to create new entrepreneurial industries. Department 'A' required you to have less than 5 employees - no problem you just count the founders. Then Dept 'B' had a grant if you had created 10 jobs - no problem you just count every web designer and contractor. Dept 'C" gave you money if you worked in a green technology - no problem you just sign up another startup doing green stuff as a customer and do some work on their website. It actually did a fantastic job of creating an unofficial network of startups who all borrowed staff off each other and discussed the latest tricks to get the latest grant. Still cost less than having the army on the street,
- nika 16y agoSo, you're arguing against someone claiming that people will game the system by talking about how people gamed a similar system?
- wybo 16y agoI don't think this sounds that bad, to be honest. Traditionally, and for various reasons, some to do with bargaining-power in the market, some with (good, but patronizing) care for citizens, others with bureaucracy, gave benefits to large, international corporations (tax breaks, complicated regulations that keep small competitors out, and the occasional bailout...). And now startups get some support too. I see where most criticism here is coming from, but honestly, in the pragmatic scheme of things, this could actually help startups, and thus the economy, by leveling the playing-field (a bit) again...
- smokeyj 16y agoWhat the government is doing here is 'tinkering' with a process that doesn't involve them. When such tinkering occurs, societal and market distortions are introduced in unanticipated manners. How could the government, sponsoring a few thousand startups, be harmful to anyone? If they start competing with existing VCs, angels and incubators, they may become the ONLY source of funding. Look at the Dodd-Frank Act, they're already squeezing accredited investors out of the game. The State has an unfair advantage, they can assume any amount of risk and stay in business as long as they want. That's some steep competition.
- wybo 16y agoYes, but wheter you like it or not, the government is tinkering with the rest of the economy anyway. So it becomes a choice between anti-startup tinkering, or both pro- and anti-startup tinkering. I prefer the latter, but then I am no VC. (an additional thing to note is that the government is generally slow to respond to the economy, so if and when the tech economy goes into another winter, the government will at least be there like an old lady, putting out seeds in the snow, for startups to feed on :)
- smokeyj 16y agoThis is a debate about centralized vs decentralized resource planning. Being an entrepreneur, and not a Statist, I prefer the individual be empowered to direct his own resources as he sees fit.
- megamark16 16y agoThere's a big billboard here in KC for the Kauffman Foundation's Education Startup Funding program. I thought "heck, that would be awesome, to be backed by the Kauffman Foundation!". Then I looked into it, you pretty much have to live in the ghetto to be involved in the program. Well, my wife wasn't too keen on moving to the ghetto, so I guess I'll try somewhere else.
- jarin 16y agoThere are a lot of people who HAVE to live there. So just be glad you have a choice.
- megamark16 16y agoI am.
- hnal943 16y agoAnyone living in the ghetto currently also has a choice.
- _pius 16y agoThe nerve of them, trying to encourage entrepreneurs to come to "the ghetto." How dare they want to spur economic growth among those ... people!
- mymex1 16y agoEither way government money flows to VC's doesn't it? How would this be any different than say a pension fund who receives government money and invests that in a VC fund? It seems like this would almost be an American sovereign wealth fund, sort of like Singapore and the Temasek Holdings company. It's better that the money go to startups and innovation rather than buying more sub-prime mortgage securities.
- credo 16y agoI find it amusing that the top-ranked comment describes the program as "fascist" For decades, big corporations and venture capitalists (and their lobbyists) have used every trick in the book to get themselves special advantages. Huge loopholes mean that the effective US corporate is the fourth lowest rate in the OECD (though the official tax rate is the second highest in the OECD). This is a great example of dysfunctional government intervention, but one that won't go away (because cutting loopholes is demonized as "raising taxes") VC earnings (and for that matter long-term capital gains) are taxed at a much lower rate than W2 earnings of an employee. All of these things are due to government interventions (ostensibly to promote economic growth and create the "right" incentives) I'm not a fan of big government intervention and I don't know much about the "Obama endorsed VC program". So I'm open to legitimate criticism of the program. However, if folks are going to describe it as "fascist", I'd be interested to know why they haven't described the current system (with all of its tax loopholes and incentives) as fascist
- anamax 16y ago> Huge loopholes mean that the effective US corporate is the fourth lowest rate in the OECD (though the official tax rate is the second highest in the OECD). Many corps actually do pay the official rate. Advocates of higher taxes and higher US govt spending point to western european countries and say "look at all the great services they get from govt". The problem with that argument is that the US govt currently collects about the same amount of money per capita as those countries. (It collects more than Canada.) In other words, the US govt already has the revenue to provide those services. Since it doesn't ..... http://www.themoneyillusion.com/?p=4626 http://www.themoneyillusion.com/?p=4626
- deleted 16y ago[deleted]
- steveklabnik 16y ago> I find it amusing that the top-ranked comment describes the program as "fascist" > For decades, big corporations and venture capitalists (and their lobbyists) have used every trick in the book to get themselves special advantages. Congratulations! You're on the way to understanding the viewpoint of the far left. (and I mean a generic 'you', I'd say your last sentence implies that you actually understand this.) The idea (which I'm partial to, but this is just my opinion, etc, I'm still reading a lot, yadda yadda yadda) is that that's the inherent way that these things trend, unchecked. You're watching it unfold before your very eyes. It's much harder to see historical events happening as they're happening. (disclaimer: I also think that describing this as 'facist,' while good intentioned and kinda correct, suffers too much from the emotional response to the term 'facism' to really be effective.)
- mconnors 16y agoI sense a little cynicism here. I currently work for a startup and most of their capitol was NIH funded. We are currently releasing 3 or 4 commercial products this year. We are hiring like crazy. I understand a certain distrust of government but I think there is a disservice to assume everything government touches is corrupt (or at least 100% corrupt) You really don't have to look further than the scientific community. The limitations I've seen from NIH funding most people would agree with, like we can't share private data specifically about users.
- hnal943 16y agoIt doesn't have to be corrupt to be a bad idea. Why should taxpayers underwrite the risk of the founders of your startup?
- mconnors 16y agoBecause its paid for by taxpayers doesn't make it automatically a bad idea either. Many things you use on a daily basis are thanks to government / taxpayers, including the internet you are using to read this.
- hnal943 16y agoYou didn't answer the question. Every expenditure of taxpayer money needs to be viewed through this lens. That doesn't mean that the answer is never to spend the money.
- anamax 16y ago> Because its paid for by taxpayers doesn't make it automatically a bad idea either. If it was such a good idea, how come folks won't fund it voluntarily? > Many things you use on a daily basis are thanks to government / taxpayers, including the internet you are using to read this. Actually, very little internet funding came from govt. Yes, govt funded the basic research, but the infrastructure came from private investment.
- nika 16y agoThis is an expression of the broken window fallacy illustrated by Fredric Bastiat (I believe). You see the advantages to your company in the economy as a result of the program, but you do not see the damage to the economy that the program cost. Plus its worth noting that only priviledged groups and politically correct businesses will be getting this money (according to the fact sheet)... so it isn't even going to be allocated based on merit. Neither of these are evidence of corruption, they are just the nature of both economics and political influence peddling and electioneering.
- sskates 16y agoAs much as we like to slam government backed programs, at least it looks like they're partnering with the right people. The TechStars guys certainly know what they're doing when it comes to early stage funding. I'm interested to see how this turns out. While I'm not a fan of government dollars invested in companies, some of the other stuff in the initiative (http://www.whitehouse.gov/startup-america-fact-sheet#administration http://www.whitehouse.gov/startup-america-fact-sheet#adminis...) certainly sounds like a win for startups: "Administration Will Propose Permanent Elimination of the Capital Gains Tax on Certain Small Business Stock"
- EGreg 16y agoWhy are so many people angry about this? Lots of our country's wealth and jobs comes from companies started recently (e.g. Apple, Google). And we have to develop alternative energy sources to break our dependence on oil (which is coming to an end sooner than the foreign oil cartel will let on). Not only that, but if we can end America's retarded policy of running around in the deserts of the middle east -- a policy largely fueled by oil money -- we can shave a lot of the ridiculous $800 billion/year defense budget ... which is higher than THE NEXT 15 COUNTRIES COMBINED (yes and that includes China and Russia). I think that is worth the government investing a few billion dollars into startups to help spur innovation. If anything it's a great image booster for entrepreneurism in America. The president has long talked about his focus on America out-innovating the rest of the world. Now he is putting $ where his mouth is. And if I heard right, they will be cutting capital gains taxes for startups to 0. I can't imagine that those of you who are running a startup are upset about that. It's a nice move, why tax startups so much in the beginning for actually growing and making money -- taking less now will make them bigger later, create more jobs, and create more taxable income later. As for the government picking the winners ... well, first of all they are MATCHING the VCs and working with the TechStars network, secondly you don't HAVE to take government money. They are just spurring innovation. All in all I think this is a good approach.
- kiba 16y agoWhy are so many people angry about this? Lots of our country's wealth and jobs comes from companies started recently (e.g. Apple, Google). And we have to develop alternative energy sources to break our dependence on oil (which is coming to an end sooner than the foreign oil cartel will let on). Just let the energy market do its damn job. Once oil become cheap, nuclear and solar energy looks damn good.
- EGreg 16y agoHow is attracting more startups to certain industries by improving the conditions for them, preventing the energy market from doing its job? What is its job?
- 16y ago
- marcamillion 16y agoNo No No No No. This is wrong. If you get rid of the 'Valley of Death' all you are going to do is fund more hobbies, and WASTE $2B of Taxpayer dollars. sigh The incentives are not aligned right. I am sure the VCs are happy about this, because their 2 & 20 has not changed. But this is BAD news for the health of the startup community. Why on earth would TechStars even encourage/be involved with this ? sigh I am not even a US taxpayer and I feel the pain of wasted taxpayer dollars. I am all for boosting innovation, but I don't think throwing money at it is the right way at all. They need to fix IP/patent laws, lower the tax rates and get out of the way. The valley is going through a 'debateable' bubble all by itself, without Washington's help. Oh..and don't get me wrong. I am an Obama fan. I just think that this policy is misguided on MANY levels. Especially when things are heating up in the valley. I see NO upside coming from this.
- juddlyon 16y agoCool! I'd rather the gov blow money on this than about 100,000 other things.