EU startup fund overwhelmed by high demand

https://www.politico.eu/article/eu-startup-fund-overwhelmed-by-huge-demand-digital-economy/

by chewz • 5 years ago

84 95 5 years ago

politico.eu

ramboldio• 5 years ago

TL;DR "We were surprised by the demand for free cash."

newguy8863• 5 years ago

TLDR cash has already handed out to some buddies. The rest gets a medal.

newguy8863• 5 years ago

This BS is as corrupt as the SBIR system. Real money is in china.

edrxty3• 5 years ago

Can confirm, used to work for an SBIR farm. Good times...

Wouldn't touch China with a ten foot pole though.

newguy8863• 5 years ago

Well, China is an interesting place. With the right gov contacts it can be very productive. Much more open for me than sbir grants and Eu grants. And I know several people who got sbir 2 grants and they told me how they got it and told me not to waste my time applying.

andai2• 5 years ago

Having run out of cash, an EU fund meant to boost promising tech companies will hand out certificates instead.
Companies who are left without any money will get a "seal of excellence," meant to tell private investors that the EU likes the company.

bitL• 5 years ago

This must certainly be a joke, right?!

qaq4• 5 years ago

Strongly reminds me of USSR

yohannparis4• 5 years ago

I found this better than the nothing.

spoonjim2• 5 years ago

Using the government as social proof

karmasimida• 5 years ago

I prefer EU to just say 'We give up' LOLL

duxup• 5 years ago

What the heck is that 'seal of excellence' supposed to mean?

That they applied for something?

andai2• 5 years ago

As best as I can tell it means "we would have funded this company if they had been a bit higher up in the stack of applications and we reached them before we ran out of money."

qwertox• 5 years ago

TÜV Rheinland approves this message.

nom• 5 years ago

Looking up company details on an Excel sheet and selecting the correct mail template is a hard and complicated job, not everyone can do that.

Apocryphon• 5 years ago

Ah, digital dividends from the government.

https://www.youtube.com/watch?v=Ei9iM_zzzQk

mrweasel• 5 years ago

They should have issued them as NFTs.

cpach• 5 years ago

Now this is cringeworthy for sure.

As someone living in the EU, this makes me embarrassed. We should be able to do better than this.

estaseuropano3• 5 years ago

Easier to top up than to have a pot available and no one using it... Its a new instrument so I guess they couldn't get a good estimate what was needed. Also better if you can select rather than fund everything.

I suppose they will pitch in other funds, e.g. they have encouraged countries to use some of the funds under the Recovery and Resilience Facility to fund projects that got these certificates of quality.

stanlarroque• 5 years ago

My startup received this "seal of excellence". It hurts because I'd rather have the money instead of a piece of paper, but hopefully we might be selected for the next round. They do this startup selection every 6 months or so.

c-c-c-c-c• 5 years ago

I dont think politico articles are a good fit for the HN crowd.

dang• 5 years ago

On HN we try to go by article quality, not site quality. Sites that mostly produce bad and/or offtopic articles for HN sometimes still produce good and ontopic ones sometimes.

https://hn.algolia.com/?dateRange=all&page=0&prefix=false&so...

We do put a standard downweight on major media sites, though, especially ones focused on politics. politico.com has had that for years, but politico.eu didn't. I've done that now.

https://hn.algolia.com/?dateRange=all&page=0&prefix=true&que... doesn't look so bad though!

visarga• 5 years ago

Isn't the investment too small? I think 1B or even 4B are pocket change when you want to boost a whole economy sector.

lnsru• 5 years ago

I share your opinion. Printing money and giving it to Lufthansa isn’t better in any way.

ben_w2• 5 years ago

Yes, but the EU as an institution is (ironically) exactly the sort of small hands-off interstate-trade-focused organisation that the American right wish the USA federal government was.

Total GDP for the USA and the EU was fairly similar before Brexit, but the 2019 EU budget was €148.2 billion in both revenue and expenses compared to the USA federal budget of $3.5 trillion revenue and $4.4 trillion expenses.

Most of the budget and power is in the hands of member states.

dr_dshiv• 5 years ago

Nice analysis!

hef198984• 5 years ago

Which means you should include member state budgets, as the EU has no social systems, militaries etc... to find. Comparing EU member states to US states is just plain wrong.

tester756• 5 years ago

I don't think

let's remember that decent EU SE salary is 3-5k USD

Except Zurich, London hubs.

bidirectional• 5 years ago

Meanwhile in Silicon Valley, single companies can raise the same amount of money in one round of funding. It's quite pathetic in its lack of ambition.

barbazoo• 5 years ago

From the government though?

yohannparis4• 5 years ago

In the Silicon Valley it's mostly private money, this is a government fund. Not the same thing.

azinman2• 5 years ago

Who do you think in part supplies the cash for SV VCs :)

BobbyJo5• 5 years ago

The larger point is: you can't replace a healthy investment ecosystem with grants. A government fund is itself representative of a lack of ambition. If the EU actually wants its own SV, they're going to have to address regulation, not throw money around.

The real problems startups face in the EU are labor and tax laws. Companies can't use equity as compensation (which is a big lure for talent) and it's extremely hard to fire people (which makes pivoting or dealing with general market changes impossible for small companies). Pro-employee policies are necessarily anti-employer. Smaller, more innovative, companies have a harder time surviving such policies. So long as there is greater risk in EU companies, investors will take their money elsewhere.

onion2k• 5 years ago

The only funding that's equivalent to the EU's $1.1bn this year has been GoPuff's $1.2b series G round, in a company that's been going for 8 years and has absolutely proved its market. Last year there were some bigger ones, Rivian's $2.5bn round for example, but even that wasn't exactly in a startup considering they'd already raised $3bn before. The VC funds in SV are definitely bigger and better than anything on this side of the Atlantic, but even in SV they're not exactly throwing huge bundles of cash at seed rounds any more. I wish they were. It was fun when people got a couple of mil to prove an idea. Reading the daft things that founders did (on Fucked Company) was a good laugh.

jiofih4• 5 years ago

Crazy times when a company with zero revenue and no products launched is “not a startup” because of their funding…

estaseuropano3• 5 years ago

Isn't that the problem? SV has too much cash going around so lots of bullshit is funded or companies run for decades on VC with the single mission to drive out all competitors and then hike prices.

SV has given the world a lot but what actually usually innovation has come from there in the past 10 years (not companies that moved there for easy money, but rather actual innovation creation)?

debarshri• 5 years ago

I might sound a bit naive, but what is the vetting process for distributing funds? This sounds more like a grant than traditional VC funds.

Raising capital from a good VC firm is hard. period. If you do not have track record, you have to go through a lot of due diligence, it is selective. I can also understand why, because it is some LP's money so you want to invest in a startup that is risk-aversed.

mytailorisrich• 5 years ago

Companies can ask for a grant of up to €2.5 million, or a combination of a grant with an equity investment, ranging from €500,000 to €15 million, with returns on the investment to go back into the program. "The huge demand clearly shows the interest of the community for this kind of support," a Commission official said.

You bet. 2.5 million in free money is bound to attract interest...

k__• 5 years ago

I didn't even hear about it until now and the money is already gone?

MattGaiser• 5 years ago

In the USA, are government grants for startups a big thing? As in Canada, it seems like half the startups are heavily built around them.

In the US I would imagine they are drowned out of relevance by VC funding.

paxys2• 5 years ago

The best thing the US government does for tech startups is completely staying out of their way. There is, however, a Research and Development (R&D) Tax Credit which pretty much every company makes use of.

lostlogin• 5 years ago

Except when they could do with getting in the way, but then don’t.

Remembering recent stories there have been problems with adtech, spyware (same thing?), tech monopoly behaviour, privacy violations, treatment of workers, dubious automation etc.

arcturus17• 5 years ago

In the EU however we think that shelling out a billion - peanuts in the grand scheme of things - and then some certificates which amount to a big thumbs up (“Ursula von der Leyde and 25 others like this”) will create a vibrant startup ecosystem.

I’ve been extremely supportive of the EU all my life but I’m starting to wonder if politicians are in any way connected to the ground-level reality of business and personal life.

cgearhart• 5 years ago

That might be true for consumer tech startups, but they do have programs to help startups. SBIRs, STTRs, FAST, and other programs (not to mention funding from agencies like DARPA) are all run by the federal government. It’s just that they typically invest in things that likely wouldn’t be funded by VCs due to high risk & limited market (e.g., advanced technology development for the military or space).

fny• 5 years ago

Yes. Certain businesses qualify for grants from the small business administration in the US: https://www.sba.gov/funding-programs/grants

sethhochberg• 5 years ago

It depends a lot on what you're doing. Things genuinely close to the bleeding edge of technology often get DARPA funding, and the list of DARPA alumni companies is pretty long - even for stuff that at face value might not have military applications. But what most people think of when thinking about the "startup scene" is mostly private VC funds. There are various other small business grants from federal and state governments, but they're generally dwarfed by the private investors.

ecshafer• 5 years ago

There are grants for Defense related start ups.

gilbetron• 5 years ago

The US has (amongst other things) Small Business Innovation Research (SBIRs) Grants/Contracts, that the DoD plus various other gov orgs (NIH, NSF, NASA, FBI, etc) put out once or more a year that looks for research ideas for lots of things. I worked for a company for almost a decade and a half that dealt with them, and it lets you work on lots of fun stuff!

https://www.sbir.gov/sbirsearch/topic/current

There are some startups that actually launch using them, but they are relatively rare because when you are a startup you want to focus on finding your product or service, and not spend a lot of time filling out grant proposals and progress reports and going to governmental meetings. So they can be a big distraction. Still, it is an option.

holoduke• 5 years ago

The problem with these EU funds in Europe is that when you apply you need to spend half of the funds on enormous application papers which contain heavily regulated requirements for you to implement in the company. In many cases it just doesn't add up. Too much effort.

secfirstmd• 5 years ago

Agreed. Have applied for EU projects before and it's a costly mess.

cookiengineer• 5 years ago

That's why when you look up who received the funds you'll immediately see a pattern where large scale enterprise corporations have 100% owned subsidiaries that do nothing more than receive state funds, live for like 2 years without hiring any talent that is specific to their "research" area, and then get declared insolvent because the managers got themselves a big payout.

Most of the funds don't go to startups, and that's exactly what I hate about this paper pushing goldberg machine.

The big consultancy companies like accenture are also heavily involved in this scam. Founding AI startups without a single data scientist or engineer is what they seem to do for a living.

mtrovo• 5 years ago

Any data to back your claim here.

If not straight corruption this would be a clear case of bad allocation of EU resources.

reader_mode• 5 years ago

There are agencies who do nothing else but deal with bureaucracy of applying for these funds and they are a justifiable expense when looking for funds... Next level job creation right there

marto12• 5 years ago

It's also just plain bad business that leads to loads and loads of corruption. It's come to the point where a lot of people apply to essentially get a boost to their own spending power while parading to be entrepreneurs and then go back to usual with no repercussions.

This is also the small kinds of financial swindles. There are others that are much worse and involve already established companies.

jiofih4• 5 years ago

Did they just hand out cash freely? 2000 companies is A LOT to do due diligence on.

raverbashing• 5 years ago

Grants are limited (even with a budget of 1Bi EUR). News at 11

Being overwhelmed by applicants is a good problem to have (as opposed to having few applicants. That would have been worrying)

spoonjim2• 5 years ago

EU creates $1 billion startup fund. China's government probably invests that every day.

detritus• 5 years ago

Without even reading the article -

"Good!". "Now increase the size of the fund".

andrewtbham• 5 years ago

the EU needs stock option tax reform.

https://www.notoptional.eu/en/

jiofih4• 5 years ago

these companies simply can’t afford to pay the higher wages of more established businesses.

HAHAHA. Right after news of a $400M funding round.

What exactly is the problem - the letter doesn’t mention it?

isbvhodnvemrwvn• 5 years ago

Taxation is not competence of the EU, just the member states.

streamofdigits• 5 years ago

Green and digital are the major pillars of the EU vision. Its a genuine and positive vision, certainly distinct from the US/Chinese versions. There is some skepticism that the vision will ever translate to an alternate proposal. Politicians jumping on bandwagons, talking a good talk, distributing some funds in scatter gun fashion and hoping something will stick... In the end the innovation and breakthroughs will come probably more on the green than the digital side. There is very strong engineering tradition whereas digital somehow was always basically outsourced to the US.

Aerroon2• 5 years ago

Neither sound genuine to me. If anything, they sound like a cover for everything else the politicians want to do.

Think about the results the EU has achieved in digital. They've managed to:

* create pop-ups on almost every website

* screwed over regional pricing so that Bulgarians have to pay the same price as Belgians. Somehow region locks still exist though.

* tried implementing a system where all ISPs had to save all traffic of their users users

* recently the EU adopted a new copyright directive that will force digital platforms to pay money to copyright holders because a user might upload copyrighted content

* implemented a digital VAT system that screwed over microbusinesses, because the politicians couldn't be bothered to implement a minimum threshold (they eventually did... After a few years)

On the green front more has been done. But I'm not quite thrilled that they banned straws and strong vacuum cleaners. Neither do I like that they seem to be trying to make sure that we end up stuck with confusing USB cables.

estaseuropano3• 5 years ago

A few of your points seem right but several are just wrong or misleading. E.g. GDPR is a great tool just maliciously implemented by companies that have an interest to do so - 90% of the banners you see are purposefully designed to be annoying and delivered by a small group of ad networks. The aim is to grind you down and make you just click anything to get rid of them. But it has also given us Google/Facebook takeout and the right to actually delete your accounts.

acchow• 5 years ago

Is a government handout more likely to do good than harm?

EU startup fund overwhelmed by high demand

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