Obama Announces $2B Fund for Startups

http://www.whitehouse.gov/the-press-office/2011/12/08/we-can-t-wait-obama-administration-announces-2-billion-resources-support?spMailingID=2405268&spJobID=34909673&spReportId=MzQ5MDk2NzMS1&spUserID=ODQ5NDAwOTg1S0

by aba_sababa • 15 years ago

239 164 15 years ago

whitehouse.gov

fleitz4• 15 years ago

$1 trillion for banks, $1 billion for startups, you can really see how important this administration feels startups are. Why not just tell banks, lend half the money we're giving you to startups, instead of using it to prop up your balance sheets.

shantanubala2• 15 years ago

The bailout was a mess, but I feel there's some truth to what Kissenger wrote a while back: basically, a leader will never be given credit for choosing between two evils (a possible crisis, or a poorly-executed bailout) because you will never be able to prove with certainty how bad the other option would have been. We have no way to truly know what things would be like without the bailout, and we really ought to think of long-lasting solutions. Like funding startups, right?

Frankly, your comparison doesn't make much sense. The administration is making an obvious effort, but there's a big difference between investing in startups and attempting to patch an economy that looks like it will collapse. Investing in startups is quite literally an investment for a future economy. The bailout was a bit of the opposite -- a quick-and-dirty patch up.

fleitz4• 15 years ago

Yeah, one is an accounting trick that penalizes everyone who saved money and the other has a serious chance of working.

If startups were important they could have just cancelled the V-22 Osprey program which eats $2.8 billion per year, or ballistic missile defense at $9.9 billion, or DHS at $60 billion.

$1 billion dollars over three years is probably less money than the gov't spends on toilet cleaning. It's equivalent to withdrawing from Iraq a week early. Sorry, if I'm unimpressed it doesn't look like effort, it looks like a PR campaign.

pjscott• 15 years ago

This is also the chronic PR problem of public health efforts to stop epidemics: if they succeed in stopping a plague before it gets huge, then it looks like they got all worked up over nothing.

HilbertSpace8• 15 years ago

Some clarity and contact with reality:

"The bailout was a mess"

The efforts of big gumment to get people who couldn't afford a house into one that blew a housing bubble that popped and created the worst financial and economic disaster since the Great Depression "was a mess".

The 'bailout', that is, the TARP program was not "a mess" at all but a grand success:

(1) TARP made money. All or nearly all the money has been paid back with very high interest, about 11% per year.

As far as I know, all the TARP money will be paid back without difficulty.

(2) The money was nothing like a 'bailout' but just loans to tell the world that the institutions would not go bust. So, TARP stopped 'runs' on the banks.

(3) TARP was not a 'bailout' but just to solve a short-term 'liquidity' problem, that is, as in 'runs' on the banks.

Note: A 'liquidity' problem is when you are worth $10 million but have only $500 in cash and suddenly have a traffic ticket for $600 and have to pay up or go to jail right NOW.

You have the money but just don't have it in cash right away; you can get the cash easily enough but will need some days or weeks to do so.

So to solve your 'liquidity' problem, you get a loan using some of your $10 million in assets as collateral. The loan is not really at risk; you pay your $600 bill; then a few weeks later you repay your loan with interest.

You are not broke. You are not begging for welfare. The loan is not a gift. The loan is not at risk. The loan is NOT a 'bailout'.

(4) Secretary Paulson called the nine bank CEOs to DC, sat them on one side of a table with a form in front of them, and told them all, "You WILL sign this form before you leave here today.". They all signed.

Goldman Sachs was one of the nine, didn't want or need the money, signed, took the money, but paid it back, with interest, as soon as Paulson would permit.

(5) Paulson's main point was just to tell the world that those nine banks were NOT bust and, thus, to stop 'runs' on those banks.

What Paulson did was fine. It was a good solution to a serious problem. The effort cost the taxpayers $0.00 and actually showed a nice little profit (11% was HIGH interest for such a loan).

To have not done TARP, we might have had cascading runs on all the major financial institutions in the US and all of the industrialized world and, then, been well into a second Great Depression, WWIII, global nuclear war, etc.

Yet too many people want to leap to call TARP a 'bailout'. It was no such thing.

Lesson: Those sources that call TARP a 'bailout' you should realize are providing toxic sewage in place of information for a well informed citizenry. For such sources, you should put on a rubber suit, hold your nose, dump the swill, pull the chain, and call a toxic dump cleanup crew.

Why do these 'news' sources scream 'bailout'? Because they want to grab you by the heart and the gut so that your eyeballs will follow for their ads and know that to grab you they should scream versions of greed, corruption, danger, scandal, etc.

So, they spout glowing, fuming, bubbling, sticky, toxic nonsense.

If the newsies had actually informed us, then we wouldn't have gotten into the popped housing bubble nonsense in the first place. In Iraq, we would have known that there was no good evidence that Saddam had WMDs. If we invaded Iraq anyway, then we would have dumped the Saddam regime and gotten out in three weeks instead of staying for 10 years and losing 5000 dead, 50,000 wounded, and $1.5 trillion. If we had good information on Akrapistan, then we would have been out'a there years ago. With good information, China wouldn't have wiped out much of our textile, manufacturing, and other industries and been ripping off our intellectual property.

Meanwhile, back in the US, the media was telling us ALL about Brit, Paris, Lindsay, Kim, etc. BUMMER.

Bad information from the newsies, such as screaming 'bailout', is the worst and most dangerous problem facing civilization at present.

PG and HN don't like for me to criticize 'big media', but I do so anyway because the media nonsense is the most dangerous problem facing civilization at present. Sorry PG.

pchristensen• 15 years ago

Is money really the limiting factor for startup growth right now? I feel like it's skill and experience. Maybe if students or recent grads could get apply for student loan sized-stipend (~$6K at a time, renewable every 6 months, up to 3x total for $18K)? $1T would cover 50M students (or $1B would fund 50K students) and people would get a chance to work on something, learn, make stupid but risk-free mistakes, and either get something successful, learn that entrepreneurship isn't for them, make connections that would help them in a career, or who knows what. Wouldn't be the worst way the govt ever spent $1B.

mkramlich8• 15 years ago

good point. and I don't disagree with you, but I'd take your argument to the next level about education and say we can educate a heck of a lot more people, more cheaply, and do it on more useful topics, which build more useful, core, long-term, non-profession-specific skills, if we wanted to.

It doesn't necessarily require throwing more money, in aggregate, at the education space. May mean spending less, but smarter. Lots of free ways to learn between the Internet, public libraries, family, neighbors, the physical opportunities of the world around us, and life itself. Helping more people to have better focus and willpower, and better emotional balance, and health, would go a long way to improving a lot of other things with the economy, even if indirectly.

For example, given a choice between having 1 more fellow citizen become a scientist or engineer, or instead having 10 more fellow citizens not steal, hurt people, be lazy, lack the ability to think logically, be swayed by propaganda when voting, lack ability to manage their own money, lack ability to plan for their future and understand consequences of their choices, and understand the impacts of their choices on their children, family, neighbors, future generations, etc -- I'll take the second option, please.

More "higher" education? Good. Much better "lower" education? Ten times as good, I bet.

raldi• 15 years ago

Where do you get the "$1 trillion for banks" number? The xkcd "money" diagram has a good illustration of this:

http://xkcd.com/980/huge/#x=-10540&y=-4650&z=6

$700 billion was made available. "Only" $400 billion of this was actually spent. It was used to buy so-called toxic assets. Many of those assets were later converted back into cash: half of the $400 billion has already been repaid. Based on the value of the remaining assets, after they get sold and the money returned to the pot, it looks like the cost of TARP will be about $42 billion. That's a lot of money, but far from $1 trillion.

fleitz4• 15 years ago

The TARP money was just a payday loan until QE1, QE2, and now QE3 can take effect. Of course the banks paid the money back, they got the money from the discount window for free, which was printed by the gov't printing T-bills. Why stay on TARP when you can borrow money for free and pay TARP back?

http://en.wikipedia.org/wiki/United_States_public_debt Look at the debt expansion which is necessary to directly funnel the money to the banks.

The money goes from the Govt to the Fed who lends it to banks via the discount window, IIRC the rate for the discount window is still 0. The Fed still holds $2 trillion in assets which is up from $500 million pre-2008, there's the $1.2 trillion (and a bit more). The TARP verbiage is just a smoke screen because that's where people will look, so they moved it to the discount window.

I think the graphs over at ZeroHedge that come from Bloomberg terminals are a tad bit more accurate than XKCD, that's just my opinion though.

mrleinad• 15 years ago

The amount of money the central bank parceled out was surprising even to Gary H. Stern, president of the Federal Reserve Bank of Minneapolis from 1985 to 2009, who says he “wasn’t aware of the magnitude.” It dwarfed the Treasury Department’s better-known $700 billion Troubled Asset Relief Program, or TARP. Add up guarantees and lending limits, and the Fed had committed $7.77 trillion as of March 2009 to rescuing the financial system, more than half the value of everything produced in the U.S. that year.

http://www.bloomberg.com/news/2011-11-28/secret-fed-loans-un...

bokonist• 15 years ago

The real bailout happened in the shadows, while TARP was publicly paid back. Read: http://www.interfluidity.com/v2/2587.html

marcamillion5• 15 years ago

Because a) that would be wreckless and create more problems for the economy - i.e. handing out a few 10s of billions to startups, b) the banks DO need to prop up their balance sheets - we can argue about the reasons until the cows come home, but if they don't increase their capital, they will take down the entire financial system, and c) the last thing a startup (well, a 'startup' in the Valley/high-tech definition) needs is a loan from a bank.

I understand your frustration with the way the economy has performed (or not) in the last 2 years, and the seeming 'cronyism' that Obama has enacted - but the fact remains that if he didn't do what he did...we wouldn't even be having this discussion now. There is no telling what state the US would be in, after the rioting and such.

I know it's hard to envision, but believe me....rioting on a wide scale and massive police crackdowns (on a scale America has never seen) could not be ruled out.

gojomo4• 15 years ago

Let a thousand Solyndras bloom!

But seriously, exempting smaller firms and fundraising efforts from costly regulations is a good part of this initiative. Routing public funds through private investors, not so much.

While they're at it, they should completely eliminate the wealth tests for 'accredited investor' status. If some fig leaf of 'accreditation' is still needed, it should be experience-based or net-worth proportional. For example, everyone with certain business/economics/legal degrees or certifications (Series 7?) should be 'accredited' as knowledgeable enough for private investing. Or, anyone who has an equivalent amount of money in public investments or government-approved retirement accounts, should be able to invest that same amount with 'accredited' status in private investments.

kevinpet• 15 years ago

The problems with proportional would be twofold: 1. How can the company taking the investment verify that the investor doesn't have other Angel investments? Remember: this is most important from a startup perspective to make sure you're able to do clean funding rounds without dealing with the fallout of non-accredited investors. 2. There's nothing to stop people from repeatedly losing 10% (or whatever percent you allow) on stupid gambles.

I'm not convinced that academic credentials would be that useful either. I'd trust someone who's run a plumbing business for ten years far more to evaluate a startup investment than I would your average MBA. I thought it amusing that Swenson talks about university professors as if they are automatically financially sophisticated (one of the few points not backed up by data in Unconventional Success).

gojomo4• 15 years ago

There is nothing to protect someone who is reckless or gullible: they can lose all their money on currently-legal schemes, as well.

If an investor provides false/incomplete documentation that their investment qualifies (as an acceptable proportion of their net worth or other 'government approved' investments), then that fraud should be the investor's problem when things go south, not the receiving company. Current 'accreditation' is not verified by the government, but rather asserted to the company/lawyers with enough credibility to convince them.

Is someone who inherits a million dollars more qualified to invest $10K-$990K into a risky tech venture than someone who's actually earned $10K-$990K in the same field as that venture? Because that's the logic a dumb-money wealth test suggests.

paul3• 15 years ago

I don't recommend angel investing for anyone who can't afford to lose a fairly substantial amount of money, which pretty much excludes anyone who isn't already an accredited investor. Finding the next Facebook or Google is a lot harder than you might think, and even if you did, they probably don't want your money. You are better off investing in your own self (education and the like).

Eliminating the wealth test would mainly benefit scammers.

gojomo4• 15 years ago

I wouldn't 'recommend' it either. But there's a difference between 'not recommending' and 'effectively prohibiting via a wealth test'.

We don't prevent people from spending their entire net worth, and then some via loans, on poker or state lottery tickets. Nor do we include wealth tests against investing in public stocks, derivatives, real-estate, or dubious collectables – all of which can also 'go to zero' quite quickly, especially with easy access to leverage.

Is private investing, especially in things like friends/family/personal-expertise-related startups, so much more treacherous than these other things that it alone needs special protections?

mkramlich8• 15 years ago

> You are better off investing in your own self (education and the like).

agreed, and wise. my attitude towards eating and exercise changed significantly once I looked at it as a form of investment. Only one that didn't take much money to do, mostly a little time and making different choices. A little life hack.

_dps• 15 years ago

What is "fairly substantial" here? $10k? $20k? $100k? I certainly know people willing to risk the first two but not the third (primarily early 30s professionals). $20k is plenty to participate in the seed round of a software startup. It seems silly to forbid people to invest an amount smaller than they would spend on a car (a guaranteed-depreciating asset over the next 10 years).

mkramlich8• 15 years ago

> Let a thousand Solyndras bloom!

lots of alt energy companies? you bet. risky? of course. will some fail? always. do people make mistakes? yes. would you prefer instead that a thousand new Wall Street firms bloom? a thousand new oil companies? And Solyndra's cost to taxpayers, and impact on debt, is a tiny tiny drop in the bucket compare to what's been spent on Iraq and Afghanistan, or the Bush tax cuts for the richest Americans. put things in perspective, sorting by amounts, at the very least.

I think we do agree on the idea that we should make it easier, or more meritocratic, to invest. And less bureaucracy. No arguments there. And there's a bill going through Congress now, I believe, and which Obama supports, to help do just that.

Androsynth• 15 years ago

I would rather the govt fund the research being done by the phds to develop the technology, then let them start their own companies.

The US (especially the valley) has no shortage of funding for startups.

DaniFong2• 15 years ago

The biggest problems the government should be solving with energy are fixing the messed up regulation of the electric grid, and reducing subsidies for energy/oil.

Currently, utilities have zero incentive to take any risks, and zero incentive to save money. They only act under duress -- essentially, when the PUCs force them to do something.

politician• 15 years ago

$2B, right? So, that'd be 4 Solyndras.

steins• 15 years ago

"Specifically, the President has called for increasing limits on “miniofferings,” allowing “crowdfunding,” and phasing in some requirements for small firms as they go public."

They are going to ruin a good thing.

jdavid2• 15 years ago

you read this wrong. they were going to open up crowd sourcing of funds and make it easier to legally start a company from 'crowd sourced' funds.

wilschroter• 15 years ago

It's going to be interesting to see how companies themselves deal with the concept of having a slew of shareholders (fiduciary duty, reporting, etc.)

beatle• 15 years ago

Obama should've done this on the first year of his presidency. And I agree, $2B seems like a low number compared to the bank bailout.

9085• 15 years ago

If they want to help entrepreneurs then they should give contractors more tax relief. 1099 tax payers get shafted.

3pt141592• 15 years ago

Laissez faire, telle devrait être la devise de toute puissance publique, depuis que le monde est civilisé ... Détestable principe que celui de ne vouloir grandir que par l'abaissement de nos voisins! Il n'y a que la méchanceté et la malignité du coeur de satisfaites dans ce principe, et l’intérêt y est opposé. Laissez faire, morbleu! Laissez faire!!

(Trans: "Leave it be, that should be the motto of all public powers, as the world is civilized ... That we cannot grow except by lowering our neighbors is a detestable notion! Only malice and malignity of heart is satisfied with such a principle and our (national) interest is opposed to it. Leave it be, for heaven's sake! Leave it be!")

rayiner5• 15 years ago

There have been developments in our knowledge of the market since 1680 (when that quote was uttered).

anamax10• 15 years ago

> There have been developments in our knowledge of the market since 1680

Yes, but the argument for regulation is that said regulation provides more benefits than the incurred costs.

Considering how badly regulated markets do....

Remember, regulation is systemic risk.

3pt141592• 15 years ago

I was going to respond with something along the lines of "how's that working out for you" but really Alan Greenspan is still a staunch capitalist that would more or less agree with the quote above. If anyone has had the benefit of studying the market since that time it would be him.

Edit: After a minute of posting this I've realized I've committed a logical fallacy, Appeal to Authority. Granted I was responded to a comment based on a logical fallacy (Appeal to Time?) but I would like to expand my thoughts.

The best way to allocate resources is to have knowledgeable parties commence in free exchange. The role of government is to ensure that force and fraud are absent from the marketplace. If there is any further goal of the government it could possibly be encouraging the spread of information, although that is rife with conflicts of interest.

Even if Obama's fund nets a positive return, the cost at which it does is unknown. Pumping money into sectors of the economy mis-aligns investment. The free market is the best allocator of wealth.

orblivion• 15 years ago

The statement is very general though. I think it suffices. The economy is not a zero sum game. To deny that today, I think, is to lack sophistication, not gain it.

paul3• 15 years ago

Fixing the immigration and patent systems would be infinitely more helpful (i.e. stop getting in the way).

westbywest• 15 years ago

Agreed, but that would likely cost more than $2Billion in terms of legislators' time elapsed and hot air expelled. Although I do believe the supply of hot air is near infinite.

anigbrowl8• 15 years ago

Congress has to do that, the executive branch can't. To the extent that the executive branch is streamlining the existing immigration system, they're being derided as amnesty-offering traitors by the xenophobic know-nothings that want Berlin Wall 2.0.

rbanffy• 15 years ago

Just as a side note, you really don't want an executive branch that can do that (fixing the immigration and patent systems).

edit: sorry if it didn't end up as clear as it should

twoodfin2• 15 years ago

You might want to reconsider broadly slurring a bunch of your fellow citizens as "know-nothings" while writing a comment seemingly ignorant of the fact that the Berlin Wall was designed mostly to keep people in.

corkill• 15 years ago

Strongly Agree.

protomyth• 15 years ago

At some point the realization by a politician that Mexico is a separate problem from immigration in general might be a nice touch.

timjahn3• 15 years ago

Throwing $2B at startups isn't going to create a new generation of entrepreneurs.

1. Fix the healthcare system. Right now, you're punished if you don't work for a large company in the sense that you're charged up the wazoo for health insurance. Work for a large company and it's close to free.

2. Fix student loans. One could argue don't go to college but I think we can agree there's some value to good schools.

3. Educate tomorrow's would-be entrepreneurs. A lot of America is taught to go to college and get a job at a large corporation after. Let's shift the perspective. Let kids know that starting your own business is a possibility and not something to be ashamed of.

lowglow• 15 years ago

Fix student loans, please. That system is so corrupt it makes me sick.

stanley• 15 years ago

I wholeheartedly agree with your first two points.

On that last note, I think we're already far ahead of the curve when it comes to entrepreneurship. We're encouraging our kids to take chances, but giving them little when it comes to financial education. I think that alone contributes to the large amount of debt per capita in this country.

But since we're on the topic of entrepreneurs, good ideas don't succeed on their own, nothing new here. To elaborate on that, you can't execute without having the capital to get yourself from idea to prototype. That said, I can't tell you how many times I've seen talented individuals hold themselves back from following through on great ideas because they don't know how to set aside money that would later provide them with the time to focus on those great ideas.

Regardless of how one views our educational system, we aren't doing enough to teach the fundamentals of managing money. It's both surprising and depressing how many people don't comprehend the basics of credit cards, loans, insurance, bills, etc..

timjahn3• 15 years ago

You're spot on with your last point. More financial basics education is needed.

ryanackley• 15 years ago

fix student loans

I put myself through school on a student loan. I was very grateful for it. I was charged a reasonable tax deductible interest rate. So I'm curious about what is actually broken?

andrewpi• 15 years ago

Massive inflation in tuition in the last 20-30 years.

estevez• 15 years ago

The lack of bankruptcy protection comes to mind.

anamax10• 15 years ago

> 1. Fix the healthcare system. Right now, you're punished if you don't work for a large company in the sense that you're charged up the wazoo for health insurance. Work for a large company and it's close to free.

No, it's not "almost free". It's paid for by the company.

And yes, paying yourself is tax-deductible in many circumstances.

I've actually paid for health insurance out of pocket as an "older american". Rent was more expensive.

That said, healthcare could be a lot less expensive, but since much of that expense comes from govt involvement, it's unclear why anyone would think that even more govt involvement would help.

For example, there are a lot of procedures for which I don't want coverage, but thanks to govt requirements, I can't opt out and pay less.

> 2. Fix student loans. One could argue don't go to college but I think we can agree there's some value to good schools.

Student loans are one way to pay college costs. The method of payment doesn't actually affect the costs much.

Increased student aid seems to increase college cost.

rabidsnail• 15 years ago

Being cheaper than rent is a pretty low bar.

eli• 15 years ago

> I've actually paid for health insurance out of pocket as an "older american". Rent was more expensive.

I think you were very lucky. As a "young & healthy american," that was not my experience.

Retric3• 15 years ago

The US and Canadian government spend the same amount per person on healthcare but Canada has universal health care. On average the US and Canadian healthcare systems provide vary similar outcomes on average.

So, clearly more government involvement is an option. But, so is less the US could save a ridiculous amount of money if we could stop wasting it on end of life care that proves little to no benefit. Healthcare is an endless money sink and because the US government agrees to hand over money with little veto power we have are left with the worst healthcare system money can buy.

Just think about this for a second would you rather have an extra 250,000$ to spend when your young, or have a 50/50% shot of spending an extra 2 months on your death bead in a semi lucid state?

MikeMacMan• 15 years ago

No, it's not "almost free". It's paid for by the company.

You are correct, but large companies get dramatically better rates and better coverage than small companies. My family's small business has seen healthcare premiums increase more than 20% each year for the past few years. We have had to cut benefits (increase deductibles and copays, etc). It's a sad state of affairs that employees of large companies are insulated from (for now).

specialist2• 15 years ago

> healthcare could be a lot less expensive, but since much of that expense comes from govt involvement

Citation please.

(In other words, you're wrong. And you know it.)

mkramlich8• 15 years ago

I'm doing my part to help with #3. If more people would take direct action, in large numbers, we can move the needle. Identify bureaucracy/obstacles? Route around them.

ps. well said. and extremely agree on #1.

timjahn3• 15 years ago

Exactly. If each person does a little bit to advance us forward and educate our youth, that needle will move.

geori• 15 years ago

On #2, Obama has had a pretty big impact.

A) The democrats pushed through Student Loan reform alongside the healthcare bill last year. "The new law will eliminate fees paid to private banks to act as intermediaries in providing loans to college students and use much of the nearly $68 billion in savings over 11 years to expand Pell Grants and make it easier for students to repay outstanding loans after graduating."

http://thecaucus.blogs.nytimes.com/2010/03/30/obama-signs-bi...

B) A month ago Obama announced a plan to allow college graduates to cap federal student loan repayments at 10 percent of discretionary income starting in January, two years before the cap was due to take effect under federal law.

http://www.washingtonpost.com/blogs/44/post/obama-administra...

twoodfin2• 15 years ago

> A month ago Obama announced a plan to allow college graduates to cap federal student loan repayments at 10 percent of discretionary income starting in January, two years before the cap was due to take effect under federal law.

Explain to me why this is a good thing for entrepreneurship. It seems to leave students free to party for a few years and rack up loans for degrees of dubious market value.

And leave the taxpayer (read: responsible students and entrepreneurs) with the bill.

jdavid2• 15 years ago

I don't think you read the article.

it's $1Billion of tax payers money, the other $1billion is in private services, fees, and software provided. This is like the Microsoft BizStarts program.

this also includes funds to reshape american schools, to include entrepreneurship programs for k-12.

finally this looks like Obama is finally trying to reinvent SBA loans which are great for restaurants to start up, but not great for tech startups that are creating a massive number of new jobs.

useful2• 15 years ago

Nice to see a website I worked on finally get on HN. http://www.startupamericapartnership.org/

brc• 15 years ago

Egads - having filled out the application forms for government export grants, I can only imagine all the strings attached, hoops to jump through and everything else.

Use the money to pay down the debt and just relax the regulations on capital formation and hiring and let the private sector do the work. And work some type of internet freedom into the constitution alongside freedom to have guns.

feralmoan• 15 years ago

$2 Billion is probably all that can be afforded until the bigger political battles can be won - ie: the 1% issue and getting corporate tax back into the public coffers. Quite a gamble to take however that the next generation of public funded Delaware startup corps will realize their longer term tax potential.

mmphosis• 15 years ago

Meh.

Who needs the new economy? http://news.ycombinator.com/item?id=3336286

gallerytungsten• 15 years ago

If you google the "Early Stage Innovation Fund" this is the first result:

Early Stage Innovation Fund - COMING FY 2012 | SBA.gov www.sba.gov/node/15261 Early Stage Innovation Fund - COMING FY 2012. Earlier this year, the President announced the launch of "Startup America," an initiative to support high-growth ...

http://www.sba.gov/node/15261

If you go there, you get:

<title>Access denied | SBA.gov</title>

Seems rather fitting for a government effort. Further digging shows that these funds are really only open to VC firms with $20 million in funds already. http://www.sba.gov/inv/earlystage

jszielenski2• 15 years ago

What a sham. Obama fail yet again. I can't believe I voted for this guy.

CrazyInu3• 15 years ago

Maybe Obama should stop "investing", we've seen how that turned out with Solyndra, Light Squared, Fisker Automotive, etc.

Maybe Obama and the Federal government shouldn't be in charge of "fixing" economic aspects of society, as that is not what the founding fathers of this country intended, and that is not really within the authority of Congress.

Government picking winners and losers is a proven way to eradicate innovation and destroy wealth.

No thanks.

mkramlich8• 15 years ago

> Maybe Obama and the Federal government shouldn't be in charge of "fixing" economic aspects of society, as that is not what the founding fathers of this country intended, and that is not really within the authority of Congress.

demonstrably not true. think the US federal postal service, department of treasury, the patent system, right to regulate and tax trade. All of which helps to both "fix", promote and tax economic activity throughout the nation. Also keep in mind that those same founding fathers whose "intent" you seem to want to honor, birthed a country where neither women or black people (for the most part, as slaves) were not allowed to vote. So unless you agree with that original state of affairs, clearly their intent can be wrong or evil, in some cases. And therefore just citing their intent is not sufficient to win an argument.

droithomme• 15 years ago

Oh great so now rather than compete with other entrepreneurs on a level footing we have to compete with companies that are partially owned and funded by the federal government.

sentinel• 15 years ago

His own money, right?

andyl• 15 years ago

Let the startup fund be paid for by a tax on patent trolls.

goodweeds• 15 years ago

Here's my idea, up that to $2T by ending our current wars, forget start-ups, and instead invest it all into installing gigabit fiber to every home in the country. This would assure America's competitive infrastructure edge, and create more market opportunity than we can currently fathom.

jaysonelliot• 15 years ago

I'm disappointed by the amount of political commenting on this post, as opposed to what I was hoping to find—discussion of how the fund will actually work and how to take advantage of the various elements of the initiative.

I'm trying to make sense of the press release, but finding it difficult. It's full of announcements, but seems to be missing any calls to action.

There's more information at the SBA - http://www.sba.gov/startupamerica

It contains this promising paragraph: "…the gap is particularly acute in the so called “Valley of Death” for financing rounds between $1-4 million. Over the past 4 years only 6% of all venture capital has been deployed in that stage … The Innovation Fund will target this gap, providing a 1:1 match to private capital raised by early stage seed funds."

Does this mean that access to money in this fund is only through existing VC firms? Or does it mean something else?

If anyone can extract the actionable information from all this static, please do share.

It would be great to know if new funding methods were actually opening up, or if this is just an infusion of cash to VCs.

temphn• 15 years ago

  It's full of announcements, but seems to be missing any 
  calls to action.

Ok. Here is the call to action: hire a lobbyist or ex-Congressman who will get you in front of Startup America. Preferably a large bundler like George Kaiser. They will get you sweetheart loans and endorsements from the President and Vice President.

We've seen this dozens of times before when "free money" is available. Scarcity requires an allocation mechanism. In the case of the very similar Qualifying Therapeutic Discovery Tax Credit (QTDTC) from last year, those who lobbied were those who got the bling.

  http://www.bizjournals.com/sanfrancisco/blog/2010/10/winners_losers_in_race_to_biotech_tax_credits.html

  Clearly somebody — probably a few thousand somebodies — 
  are going to lose out.

  ...

  The takeaway for those biotech companies that miss out on 
  the tax credit, according to Eisenberg: Tell your member 
  of Congress to extend and expand the program.

And as with the QTDTC there will be a catch. Failure is criminalized. The failure of Solyndra prompted an FBI raid. What did the executives know and when did they know it? All government "grants" are like this. For example, to get the biotech "Qualifying Therapeutic Discovery Tax Credit" from last year, you had to essentially submit to an IRS audit.

  http://www.irs.gov/newsroom/article/0,,id=224505,00.html

  Q5. What type of documentation and records related to the 
  application should applicants maintain in order to satisfy 
  IRS requirements in the event of a future audit of 
  “qualified investment” claims?

  A. Documentation and recordation should include 
  information sufficient to verify and explain costs treated 
  as qualified investments, e.g., detailed work papers and 
  invoices.

Translation: embarrass us and we will retroactively find your definition of "qualified investment" to be at variance with that of the IRS. Bottom line, it is unlikely this program will be substantively different from those preceding it.

electic• 15 years ago

Death of SOPA > $2B Dollar Fund

Achshar• 15 years ago

But will they accept foreign startups? Also where can i apply? startupamericapartnership.org does not seem to accept foreign applications.

wavephorm• 15 years ago

$7 Trillion for the banking cartel and $2 Billion for job creators? Explain that one to entrepreneurial voters next year.

jszielenski2• 15 years ago

So how do I apply? Where is a link to the application?

useful2• 15 years ago

http://www.startupamericapartnership.org/get-registered

afaik it basically gives you access to this: http://www.startupamericapartnership.org/search/content?f[0]...

inaworldofideas• 15 years ago

Making helicopter drops is destroying the economy not helping, they think innovation comes from the printing press.

DaniFong2• 15 years ago

I am so frustrated with these government programs that supply hyperactive, startups (Solyndra! Argh!) with too much funding, then crash and sully the reputation of entire fields with their profligate spending and successive failures.

The scientific grant system is even worse! With the rate of grants being accepted at 5%, everyone becomes extremely conservative. Many professors spend most of their time fundraising, not doing science. There is a good case that science would be progressing faster with no government funding at all.

There are obvious things the government could do to improve entrepreneurship. Like simply not kicking our entrepreneurs out! Stapling a green card to our graduate's diplomas -- the fact that we invest nearly a quarter million dollars in each STEM PHD and then don't let them stay has been a known absurdity for more than decade, yet they still don't fix this problem.

Or how about taxing oil and gas like everything else! Even ignoring the trillions of dollars spent policing the persian gulf region, the tax policies surrounding oil amount to an enormous subsidy, making it cheaper in the US than almost anywhere in the world. Simply taxing it would save the budget and dramatically improve prospects for green energy.

The list goes on. I'm stunned by the collective incompetence of the government in stimulating startup growth. Maybe there are good, structural reasons for inaction in the short term, but these issues have been around for years!

Obama Announces $2B Fund for Startups

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