3 ms·

Its easy to create spending bills with 1.7T annual budget deficit, harder to understand if there will be positive ROI from these spendings.

alephnerd 2y ago
I can safely speak for myself - the fund I was employed at had began rebalancing away from Cybersecurity and Biotech and funding Hardware, Energy Tech, and Defense Tech around 22-23 due to provisions in IRA and CHIPS. Plenty of peer funds did the same thing. Even if Trump wins in November, most of the provisions in the acts I mentioned will be retained, especially given that a Thiel and A16Z acolyte is Veep and an early MS alum is cabinet track.
- riku_iki 2y ago
  rebelancing funds don't guarantee future successful and competitive products
  - alephnerd 2y ago
    Before 2022 we weren't even entertaining the option of funding an early stage startup in the Hardware, Energy, or Defense space. This is a MASSIVE change in the VC/PE industry which has concentrated on various flavors of SaaS for the past decade+. An entire ecosystem of research grants, commercialization grants, and private sector deal flow has now restarted in the sectors above that hasn't been seen in the past decade.
    - riku_iki 2y ago
      I absolutely sure if there is few T of free money there will be "MASSIVE ecosystem of research grants, commercialization grants, and private sector deal flow". But I believe in market economy, and to me it looks like VC/PE didn't invest into hardware much because didn't believe in positive ROI in current condition.
      - alephnerd 2y ago
        > VC/PE didn't invest into hardware much because didn't believe in positive ROI in current condition Not exactly. It was because of the upfront cost and lack of deal flow. Before the various IRA and CHIPS provisions passed, you might get $200k at most from grants to commercialize research in the Energy or Hardware space. The rest would be fronted from the private sector so you're looking at an additional $800k-1M of private money at the pre-seed/seed stage. On top of that, deal flow was weak, so it's harder to fund later series or get good exits during an M&A event. This is a very high upfront cost so obviously SaaS made sense due to much higher margins. After IRA and CHIPS, you could expect to see an additional $300-500k in grants, which means my upfront cost in funding is lower. Furthermore, the government is providing tax credits and grants to private sector players to minimize the amount of upfront money they need to spend (say) building a Battery Recycling plant or a Chip Packaging factory. This means there is now much more money sloshing in these segments as a significant portion of my upfront risk has been subsidized by the US government. That money can now be deployed in either funding research projects commercializing into startups, re-investing in existing players to help their own M&A strategy, and funding additional research in the spaces above.
ajross 2y ago
> Its easy to create spending bills with 1.7T annual budget deficit Budget deficits have been smaller under Biden though.
- riku_iki 2y ago
  he didn't deal with covid economy shut down. But I don't buy the point that current president is good because he is not as bad as previous in spending.
  - RoyalHenOil 2y ago
    Compare Democrat presidents and Republican presidents in general. We routinely see less deficit spending and more economic growth under Democrats than under Republicans. Seeing as Trump is a Republican, and that his spending and economy were on brand for the Republican party, I see no reason to assume covid was the sole cause. (Is it your opinion is that Trump is a RINO who runs the country like a Democrat, and covid disguised that?) Given that the US economy has recovered from covid dramatically better than the economies of all other major nations, I am not inclined to assume that the US economy is currently in poor hands. On the contrary, it sure seems to be in the best hands that exist anywhere in the world.
    - riku_iki 2y ago
      > Compare Democrat presidents and Republican presidents in general. as I said I don't think checking historical trends is excuse for current policy. > Seeing as Trump is a Republican, and that his spending and economy were on brand for the Republican party, I see no reason to assume covid was the sole cause first two years of his presidency deficit was relatively low > Given that the US economy has recovered from covid dramatically better than the economies of all other major nations, I am not inclined to assume that the US economy is currently in poor hands. On the contrary, it sure seems to be in the best hands that exist anywhere in the world. this is a loaded question. Recovery was in expense of inflation, rise of debt. One would need to do some quantitative calculation to see if current situation is result of actual policies (and which policies: Trump's or Biden's), or just economy is flexible itself and if result could be better and if spendings were justified(or went to real estate market and stocks).

alephnerd 2y ago

I can safely speak for myself - the fund I was employed at had began rebalancing away from Cybersecurity and Biotech and funding Hardware, Energy Tech, and Defense Tech around 22-23 due to provisions in IRA and CHIPS. Plenty of peer funds did the same thing. Even if Trump wins in November, most of the provisions in the acts I mentioned will be retained, especially given that a Thiel and A16Z acolyte is Veep and an early MS alum is cabinet track.

riku_iki 2y ago
rebelancing funds don't guarantee future successful and competitive products
- alephnerd 2y ago
  Before 2022 we weren't even entertaining the option of funding an early stage startup in the Hardware, Energy, or Defense space. This is a MASSIVE change in the VC/PE industry which has concentrated on various flavors of SaaS for the past decade+. An entire ecosystem of research grants, commercialization grants, and private sector deal flow has now restarted in the sectors above that hasn't been seen in the past decade.
  - riku_iki 2y ago
    I absolutely sure if there is few T of free money there will be "MASSIVE ecosystem of research grants, commercialization grants, and private sector deal flow". But I believe in market economy, and to me it looks like VC/PE didn't invest into hardware much because didn't believe in positive ROI in current condition.
    - alephnerd 2y ago
      > VC/PE didn't invest into hardware much because didn't believe in positive ROI in current condition Not exactly. It was because of the upfront cost and lack of deal flow. Before the various IRA and CHIPS provisions passed, you might get $200k at most from grants to commercialize research in the Energy or Hardware space. The rest would be fronted from the private sector so you're looking at an additional $800k-1M of private money at the pre-seed/seed stage. On top of that, deal flow was weak, so it's harder to fund later series or get good exits during an M&A event. This is a very high upfront cost so obviously SaaS made sense due to much higher margins. After IRA and CHIPS, you could expect to see an additional $300-500k in grants, which means my upfront cost in funding is lower. Furthermore, the government is providing tax credits and grants to private sector players to minimize the amount of upfront money they need to spend (say) building a Battery Recycling plant or a Chip Packaging factory. This means there is now much more money sloshing in these segments as a significant portion of my upfront risk has been subsidized by the US government. That money can now be deployed in either funding research projects commercializing into startups, re-investing in existing players to help their own M&A strategy, and funding additional research in the spaces above.

ajross 2y ago

> Its easy to create spending bills with 1.7T annual budget deficit Budget deficits have been smaller under Biden though.

riku_iki 2y ago
he didn't deal with covid economy shut down. But I don't buy the point that current president is good because he is not as bad as previous in spending.
- RoyalHenOil 2y ago
  Compare Democrat presidents and Republican presidents in general. We routinely see less deficit spending and more economic growth under Democrats than under Republicans. Seeing as Trump is a Republican, and that his spending and economy were on brand for the Republican party, I see no reason to assume covid was the sole cause. (Is it your opinion is that Trump is a RINO who runs the country like a Democrat, and covid disguised that?) Given that the US economy has recovered from covid dramatically better than the economies of all other major nations, I am not inclined to assume that the US economy is currently in poor hands. On the contrary, it sure seems to be in the best hands that exist anywhere in the world.
  - riku_iki 2y ago
    > Compare Democrat presidents and Republican presidents in general. as I said I don't think checking historical trends is excuse for current policy. > Seeing as Trump is a Republican, and that his spending and economy were on brand for the Republican party, I see no reason to assume covid was the sole cause first two years of his presidency deficit was relatively low > Given that the US economy has recovered from covid dramatically better than the economies of all other major nations, I am not inclined to assume that the US economy is currently in poor hands. On the contrary, it sure seems to be in the best hands that exist anywhere in the world. this is a loaded question. Recovery was in expense of inflation, rise of debt. One would need to do some quantitative calculation to see if current situation is result of actual policies (and which policies: Trump's or Biden's), or just economy is flexible itself and if result could be better and if spendings were justified(or went to real estate market and stocks).