

Obama-Endorsed VC Program Promises 6,000 New Startups - thankuz
http://hothardware.com/News/Obamaendorsed-VC-program-promises-6000-new-startups-25000-jobs/

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watchandwait
So 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
_... now they want to run some fascist incubator ..._

Are you seriously calling this fascism?

~~~
yoyar
Let's call if corporatism. It means the same thing but people will whine less
about the semantics.

~~~
jbooth
But it's not corporatism or fascism, or socialism, it's a frickin seed program
that may be a small waste of money. The government funds basic research all
the time, with a pretty good track record.

Fascism is telling Volkswagen to make tanks.

~~~
anamax
> The government funds basic research all the time, with a pretty good track
> record.

Maybe, but this isn't basic research.

> Fascism is telling Volkswagen to make tanks.

This is saying "we'll fund {you} to make {whatever}" when folks spending their
own money don't believe in the combination of {you} and {whatever}.

Synfuels anyone?

Which reminds me, what fraction of the US govt-seeded/assisted solar biz
haven't moved much of their operations to China?

The decision will be made on a political basis. That's how govt always works.

~~~
jbooth
Good god, man, you can't be defending this tripe.

Fascism has a definition, and it involves getting all of the biggest
corporations on the same page with the government to create a totalitarian
state. (Communism differs in that the government is the whole deal).

We've been funding energy research for decades, and there are a lot of reasons
for the government to try and kickstart green energy. This is an experiment
with the funding mechanism, people complain about the grant system all the
time, silicon valley works, so someone said hey let's give this a shot. It's
not fucking fascism.

If it was under the DARPA line item would you be more ok with it?

~~~
anamax
> Fascism has a definition,

Yes, but I didn't mention fascism. I merely described what the program in
question is actually doing.

> We've been funding energy research for decades,

Yes we have. Is it unreasonable to ask whether said funding has been worth
what it cost? Is it unreasonable to ask whether proposed funding will be worth
what it costs?

Or, are you claiming that the decision to fund synfuels obligates us to fund
every alt energy proposal?

> and there are a lot of reasons for the government to try and kickstart green
> energy.

Unless you think that said reasons justify any and all things that one can
call "kickstart green energy", that statement isn't all that useful.

You don't get to assume "we're going to have good results" in the abstract.
You need to show that the specific proposal is likely to work. Surely
experience is relevant - if something has failed before, why will this time be
different?

> silicon valley works

Actually, silicon valley doesn't work in the sense that is required by your
argument.

The part of silicon valley that works is folks risking their own money and
they don't agree on winners before the race. Govt programs lack both of those
features.

Also, VC model actually doesn't work that well. The average is fairly low
which means that the standout funds mask a lot of horrible performance by the
vast majority. What are the odds that govt will be like Kleiner and not the
typical fund?

> If it was under the DARPA line item would you be more ok with it?

No, but it's nice of you to try the ad hominem slam.

I'm happy to concede that I'm a bad person and you're a good person. However,
that doesn't change the fact that these sorts of programs have been a
disaster.

I suspect that you place a lot of weight on "good intentions". Are those
intentions really all that good when they consistently have bad results?

~~~
jbooth
The program might be a minor league failure. Approximately 90% of research
spending consists of minor league failures. Drawing a comparison to fascism,
oblique or not, is ridiculous.

The DARPA comment was serious. There's a huge military component to getting
green energy moving.

~~~
anamax
> Approximately 90% of research spending consists of minor league failures.

The program in question isn't research. It's startup funding.

> Drawing a comparison to fascism, oblique or not, is ridiculous.

Surely you're not arguing that if it isn't fascism, it's good?

While you're vehemently insisting that it isn't fascism, you haven't responded
to the fact that it is a close cousin, corporatism....

> The DARPA comment was serious. There's a huge military component to getting
> green energy moving.

So what? The military does lots of dumb spending. It also has different needs.
So, even if green energy makes sense for certain military applications, that
doesn't imply that funding it for general applications is a good idea.

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credo
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.

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
> 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>

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cpr
Yeah, with the government involved, there won't be any false incentives...
</sarcasm>

~~~
yoyar
So you think the government might use their power to affect who gets the money
and to try to buy influence and votes? Preposterous!

~~~
nika
Not 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!

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mconnors
I 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
It doesn't have to be corrupt to be a bad idea. Why should taxpayers
underwrite the risk of the founders of your startup?

~~~
mconnors
Because 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.

~~~
anamax
> 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.

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wybo
I 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
What 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
Yes, 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
This 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.

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marcamillion
No 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.

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mymex1
Either 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.

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megamark16
There'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
There are a lot of people who HAVE to live there. So just be glad you have a
choice.

~~~
hnal943
Anyone living in the ghetto currently also has a choice.

~~~
EGreg
and what is that choice

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jarin
Oh, it's not really that hard. Just eradicate drugs and gangs, fix the
educational system, and create jobs. Then go back in time and grow up again.

~~~
EGreg
oh yeah, why didn't I think of that. Man those slackers!

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sskates
As 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#adminis...](http://www.whitehouse.gov/startup-america-fact-
sheet#administration)) certainly sounds like a win for startups:
"Administration Will Propose Permanent Elimination of the Capital Gains Tax on
Certain Small Business Stock"

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juddlyon
Cool! I'd rather the gov blow money on this than about 100,000 other things.

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EGreg
Why 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
_Why 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
How 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?

~~~
kiba
You don't need to pour any money into energy research since the high cost of
oil will incentivize research into energy!

Until then, it's unnecessary spending of money that could be productively
diverted to area where they desperately need more research such as anti-aging.
If we can cure aging, that will allows us to maintain the knowledge and
experience contained within the elderly, not to mention that we effectively
save lives several times over.

