First, this kind of thing has been going on for decades. It has been going on in the US with the govt, particularly the military, funding research. 3i, a relatively large PE/VC investors in Europe, started out as a govt-funded body in the UK (there were parallel bodies to the ICFC...I can't remember what they were). Scottish Enterprise is a huge VC investor (they were an early-stage investor in FanDuel).
Second, the concerns that people have are due to issues that are solveable. Controlling how the govt makes appointments, only investing in companies with matched investment from the private sector, etc. It can work. It does work.
Third, the issue that this is meant to solve is the fact that capital markets don't work all that well everywhere. This was the case in the US, it was the case in the UK (and is still the case in the UK), and it may be the case here. Either way, it is a fine and logical solution. If you have experience at the coal face, it is often very evident that investors are not good at this kind of thing (the situation that exists in the US where individuals will fund startups is totally unique, it occurs nowhere else).
Exactly. Silicon Valley itself has its roots in DoD funding. Then, there's a glut of highly-educated STEM people who can do research, and the VC funding. We now have all three in major cities around the world. Surprise, surprise, that's exactly where you would find startup ecosystems.
They clearly have no clue what an ecosystem is.
Governments that do this are either clueless or thugs. The market doesn't need their money, they need them to define a fair playground and that especially means defining how the state behaves.
See hogFeast's comment:
https://news.ycombinator.com/item?id=21165893
You've basically dissed the governments of the US, the UK and the EU, plus every country mentioned in the SCMP report that Malaysia feels it has to keep up with. Good job.
Maybe even in a place where things don't work very well the state can still manufacture startups because these companies will get the red carpet from every other institution. They are not representative of the overall economy.
Fair enough, that would explain your reaction. To be fair, Malaysia is more like Romania than some of the other countries I've mentioned.
>just excuses at spending money, badly
Yes, and funding startups is just about the perfect excuse, because new businesses often fail. However, the SCMP report also said the government has been giving grants to startups for some time now. Grants to small businesses is something that a lot of governments engage in: it's about trying to create jobs.
>Perhaps other governments are better at managing money
Nah. Other governments just behave better. Funding new businesses is always a "bad" way of spending money, in that most new businesses fail, and nobody has a good way of figuring out which ones will.
>the state can still manufacture startups because these companies will get the red carpet from every other institution.
They may get some prestige, but I'm sure a lot of startups fail eventually.
Yes, but you are underestimating the ways the state itself may "help" a company fail. Ever had all your accounts blocked for an accounting misunderstanding of $500? Had the state not pay back the money they owe you while they wait on the statute of limitations or companies suing them? Delay VAT refunding thereby reducing your cashflow?
>Yes, but you are underestimating the ways the state itself may "help" a company fail.
Yes, but this also undermines your point that government-manufactured startups will necessarily get red-carpet treatment.
Like I've said earlier, Malaysia is more like Romania, and the examples you've listed are peanuts compared to the kind of shenanigans you can get in Malaysia.
I mean, this is a country whose PM is a nonagenarian who's made a spectacular political comeback [0], after having defeated his protégé [1] and his former party [2], and who's known for sending another protégé to jail on sodomy charges.[3] It's also a multi-ethnic country where the privileged status of the majority ethnicity is constitutionally protected[4] and backed by active affirmative action policies.[5]
Which is why there's so much skepticism in this thread about the whole thing.
[0] https://en.wikipedia.org/wiki/Mahathir_Mohamad
[1] https://en.wikipedia.org/wiki/Najib_Razak
[2] https://en.wikipedia.org/wiki/United_Malays_National_Organis...
[3] https://en.wikipedia.org/wiki/Anwar_Ibrahim_sodomy_trials
[4] https://en.wikipedia.org/wiki/Article_153_of_the_Constitutio...
What about the US government funding of Palantir via In-Q-Tel?
In more ways than one would naively assume, I'm sure. Every time a government starts such initiatives to spend a lot of money, some officials will be making plans on how to benefit from it.
The sane, clean way to help startup funding is to incentivise it with tax benefits for investors.
The glut of capital and the conditions that shaped Silicon Valley will likely not be paired again for the foreseeable future. That won't stop governments from trying by supplying one part of that equation.
If you want to take a healthy startup scene to prove that your country has the 'correct economic, political and social conditions' then I'm in agreement with the exception of the word 'correct', they are not so much correct as unique and replicating those conditions will come at a price that very few countries and their inhabitants would be willing to pay.
Consider also that inside the United States many places have already tried to imitate SV and it didn't work there either, and yet, the economic, political and social conditions were identical.
Exactly, although the people you're describing are just the founders. There are people in the startup scene who're employees, and for them, getting and keeping a job at a startup for a couple of years, say, is a good enough launchpad for their careers in the industry.
And there's a surplus of such people that needs to be employed. We're experiencing a glut of highly educated people worldwide and academia simply doesn't have the capacity to absorb them. I think I've read on HN recently that there's more funding for startups than academia overall -- and of course I can't find it again -- but here's an actual comment from HN just two years ago:
https://news.ycombinator.com/item?id=15380625
>Of the cohort of PhD students I went through with, from a rough guess (I haven't taken exact count), the most common role is now "startup CEO", followed by "engineer at enviable company", followed only then by "teaching and research academic".
Startups are the new academia.
Aka risk taking. For SWEs clearly they've got job security, otherwise they wouldn't do it. Founders are usually well connected and have enough of a cushion to land safely if the startup crashes. Either way there's plenty of job security in SV.
> I'm in agreement with the exception of the word 'correct'.
I'll agree with you also! Unique is better.
> Consider also that inside the United States many places have already tried to imitate SV and it didn't work there either, and yet, the economic, political and social conditions were identical.
What? There's so much variance just between cities, let alone states. These things are not equally distributed across the US.
That makes no sense. Did Gordon Moore have insufficient job security at Fairchild, so be went and founded Intel? Startup founders are disproportionately from the upper middle class—people who have plenty of security in the US.
> Consider also that inside the United States many places have already tried to imitate SV and it didn't work there either, and yet, the economic, political and social conditions were identical.
Other places in the US can’t imitate SV because of freedom of movement. There are zero barriers to relocating from any part of the US to any other part. So people who want to do a certain kind of tech startup relocate to SV to maximize their chances. The economic and social conditions in the rest of the country don’t really matter. (Which is why government efforts to try and become the next SV are destined to fail.)
Why is American country music concentrated in Nashville? The musicians are from everywhere, (but they move to Nashville). The major record labels are in New York or LA, and so is the capital. What’s special about Nashville?
Silicon Valley and Nashville are best understood as markets. They’re markets for connecting capital to talent. If you want to sell your startup idea (or music act) to investors you go to where the biggest market is, for the same reason you sell your used laptop on eBay instead of somewhere else.
SV is all about critical mass, and you're pointing (probably not coincidentally) at the exact point in time where that ball started rolling downhill.
* strong intellectual property protection, be it patents, trademarks, etc.
* minority shareholder protections
* some reasonable liquidity structure, allowing employee compensation to have an equity component without excessive tax burden
* legal protections around embezzlements, self-dealing and various other self-gratifying schemes which can be employed by management with a large bank account at their hand
Those issues don't come up very often in the US, because the rules of the game are quite known.