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Comment by londons_explore | Hacker News Reader

The EU really doesn't seem to do well with government funded expansion/research.

It seems that nearly every big EU funded investment program seems to have all the funds slurped up by companies that specialize in grant applications and doing as little as possible to get the government funding, while doing not much of any use to anyone.

If the EU can solve that, I think they'll do really well. Perhaps for example, they need to hire better experts to decide where to put the cash (ie. experts who can see companies or people who have a track record who build stuff just to get the funding, and then immediately close down operations when the funding ends).

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Which countries in EU/EEA and which segment of STEM R&D?

In pharmaceuticals and biotech, Denmark, France, and Switzerland are all significant R&D centers with a strong public-private relationship.

In aerospace, the EU has always been decently competitive.

Same thing in automotive R&D (EV notwithstanding).

If you're comparing with Electronics hubs like Japan, SK, and Taiwan, a lot of that is also due to a number of Electronics industry players being located out West and significant diasporas of Japanese, SK, and Taiwanese nationals ended up working in those industries in their heyday and were able to finagle FDI through a mix of diasporas networking within the US and the Old Country and some level of government involvement.

Similar things happened in the EU Pharma industry with a number of French/German/British educated scientists working in Boston+NJ and returning to their home country down the line.

One way to solve this is to announce that you will allocate funding after a task is completed, to those people and companies who most helped complete the task.

For example, the EU announces "We have €20B to be divided between companies who can make the EU have a 30% share in worldwide semiconductor production by 2030".

Then, in 2030, you see to what extent the goal was achieved, and if so, get every company to say how they helped achieve the goal. Then you have a bunch of experts vote to divide up the pie based on who contributed what.

Companies who do paperwork and nothing else will turn out to not be major contributors. Companies who churn out millions of useless chips which are outdated before they even hit shelves and end up in landfill will also not be seen as big contributors by the expert pool.

Obviously, companies need the investment upfront to go do the task - but investors will bridge the gap in most cases - ie. "I'll pay for this semiconductor factory now, as long as you give me the €4B that I expect you will probably be awarded when it turns out you produced half the semiconductors between now and 2030".

The obvious way to subvert this is by infiltrating the expert pool. Send in your own guys, who will vote to give all the money to you for inventing the critical retro encabulator[1].

I think the only defence is to make the expert pool large (ie. thousands of people), with a good chunk from academia, and have the expert pool anonymous, with the 'votes' of each expert also anonymous (so they can't go to their boss and show how they voted entirely for their own company). And finally, have some system to throw out the 20% highest and lowest votes before taking an average of the rest.

[1]: https://www.youtube.com/watch?v=RXJKdh1KZ0w

Isn't the point of the funding to be used to help achieve the goal in the first place

Investors will be willing to bridge the gap, if they know their investment will be repaid by the EU.

And investors will hopefully do a better job of making sure the company actually has useful outputs than a bunch of bureaucrats.

It's always been my understanding that VCs in Europe are extremely risk averse. The whole point of this EU funding is because the endeavor is so risky. So why would you withhold the funding with the expectation that VCs are going to pick it up in the meantime and then just give it to them later. It doesn't really make any sense. The funding is supposed to fund the research.

Well the risk is much lower if the EU government is the one promising to repay your investment, then a tiny startup...

So you are more likely to get money from risk averse investors.

The real problem is that in a high interest rate world, the EU will need to pay substantially more money later than they have to pay now for the investor to think it is a good plan.

Having worked in academia in the EU with various industry partners, I can confirm that is the case.

EU is funding research on green stuff? Let's just add that angle to our project even though we don't care about it one bit.

You'll also notice how the money always goes to the big ancient established corporations and never to start-ups.

One thing the U.S. does is put out grants to investigate some thing. They might want someone to do some preliminary research, or build a product, or whatever.

One of the stipulations of many of these grants is that some large percentage of funds have to go directly to costs associated with the research: paying employees, buying equipment, renting office space, whatever. I don't remember what the actual number usually is, but it's a pretty high percentage, something like 80 or 90%. It's fairly low risk because, if I understand correctly, you get paid even if the result isn't particularly useful. But if your company has a track record of good results, they're more likely to get more grants in the future.

Big corporations wouldn't touch this with a ten foot pool because they expect much higher profit margins than 10 or 20%. Unless it's funding something they were planning to do anyways, in which case it might make sense. I think the company that does the research is usually free to commercialize the tech if they want to.

Most EU grants require 100% go to R&D; marketing costs, managerial overhead etc aren't covered.

Maybe that percentage is too high? If they were to drop it down a little, they'd give industrious researchers some motivation to apply. Requiring 100% to go to R&D implies that the only companies who would ever apply are the ones who have some side business that allows them to profit from the results of the research. For basic research that's usually pretty hard.

Possibly you might get individual researchers as well even at 100% if the grant allows them to pay themselves a salary.

>all the funds slurped up by companies that specialize in grant applications and doing as little as possible to get the government funding, while doing not much of any use to anyone

Can confirm. Have worked at EU companies that do just that. No innovation comes out, just paperwork, and taxpayer money goes into the pockets of the system savvy and well connected entrepreneurs. There's also middle-men who will do the paperwork for you if you give them a cut.

It's basically a bureaucratic driven form of wealth transfer if you know how to play the game.

  It seems that nearly every big EU funded investment program seems to have all the funds slurped up by companies that specialize in grant applications and doing as little as possible to get the government funding, while doing not much of any use to anyone.

Yes! You don't have to look angry further than canada for how government funding completely corrupts incentives and destroys any possibility of innovation.

A great VC quote about a big Canadian startup in it's death throes:

  .the failure ... is indicative of Canada’s “nascent venture ecosystem,” which is racked by “incestuous” relationships stemming from extensive Crown institution involvement in the sector.
  “Canada needs to figure out how to get the politics out of its capital. It does feel cautious and political. You don’t want cautious and political in a crisis. 
  Decisions around the table felt like they were coloured by: ‘How we’re connected to this and who will think this and I don’t want blame for this.’ It caused people to sit on their hands.”

https://archive.md/Iyr6v

And that doesn't even get into the tax credit and granting regimes (superusters) that have completely corrupted how any corporate R&D gets done.

I get why the government would want to invest in fundamental research but... these government-owned corporations were planning to invest in a ... delivery app for hardware store supplies.

It's always interesting to see how embedded the government is in everyday lives for Canadians. They have a state owned and operated broadcaster over there, so I'm not surprised to see they would have bureaucrats playing VCs.

> And that doesn't even get into the tax credit and granting regimes (superusters) that have completely corrupted how any corporate R&D gets done.

We acquired something in Canada a while ago. This scheme is insane. The best accountants are paid a percentage of the tax credit they can get their client.

They can't hire experts to decide where to put the cash. Anyone who can truly know where to best put cash will become or be hired by a VC fund and make orders of magnitude more money than they'd be paid by the EU.

Perhaps a large pool of part time experts would be a better approach anyway.

Ie. "we will pay you to work for 3 saturdays to investigate these 5 companies and stack rank them on the question of 'contribution to increasing EU semiconductor exports between 2023 and 2030'".

I don't know if that would work. But it's definitely better than the current way we do things.

I know I'll sound kinda defeatist, but I just don't think it's possible to reliably setup a bureaucracy that's competent in funding innovative research. The incentives are just not aligned.

If you are truly investing in innovative companies. You'll inevitably spend taxpayer money on truly stupid stuff. The first time a major newspaper reports something like: "10 Million Euros spent on using bath sponges to desalinate water while people are living in the streets!" it's game over. The agency will be permanently risk averse.

IMEC is govt funded in the EU and is very successful. Many of the advanced semiconductor techniques are trail blazed there before being adopted by industry world wide.

They know. I got involved once, only slightly, and the theatre is appealing on all levels. The money is pretty good though and there is a chain effect we’re one “successful” project will lead to the next.

In terms of innovation there is nothing interesting happening. There no will to create anything resembling something that could become a product. That is by design, the EU literally pushes on that direction.

Airbus. Not government funded but guaranteed loans that was paid back. The way to do it IMHO.

> If the EU can solve that, I think they'll do really well.

It is a solved problem. It has been solved by free market economy. The EU is not into that.

DARPA seems to be able to achieve what market alone cannot. There seemingly is a way to do government funding right, it's just not implemented in the EU

Free market economy didn't create NASA, DARPA and any other numerous R&D government departments in the USA...

Free market absolutism is just a weird religion.

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