There is a lot of discussion here trashing EU programs for startups and not a lot of specific details, which is disappointing. I will try to provide a more substantive critique.
My personal experience, having been involved with many startups in both the EU and US, is that EU government funding is completely useless for almost all startups. Why? First of all, you have to be part of the existing networks. If your business does not have university affiliations with people that get existing grants, or connections to EU bureaucracy, then you can forget about getting a dime. Then there is the risk aspect: if you are doing anything even remotely novel, or with any amount of risk, forget about it. This is not just my opinion, Mario Draghi, previous president of the ECB and Italian PM, said that the EU does not take enough risk to produce real innovation. And finally there's the timelines: from researching funding to cash in your bank account is always measured in years.
So, my expectation is that these funds will be distributed to members of the bureaucratic class and their network, for low-risk, low-reward projects, on a timescale too slow for most startups. I hope to be proven wrong, but the results of previous decades of EU funding programs do not make me optimistic.
Wow it’s so refreshing to know that other people can see this.
There is simply not enough private capital investment in Europe. The public money is inevitably passed through academic hands or other public sector bureaucrats. And it is simply an ineffective way to allocate capital. The money should be returned to private hands where it belongs and those individuals should be the ones to decide how to invest their own capital.
Why do so few Europeans get this? It’s like they just can’t stand the idea of a wealthy person investing their own money.
Funny enough, I don't actually think the money is quite the problem that people think it is.
Look at the early days of YC. Single digit millions a year was enough to stimulate the growth of a whole ecosystem of startups! Some startups are inherently capital-intensive but most don't need that much money to get to the point of basic viability. There are plenty of private individuals in Europe who could support a $10M a year incubator by themselves, not to mention the many institutions that could do this. And yet... there is no European YC and there never was.
I think it's cultural. Go talk to the top students at the top universities in the US and Europe and you will notice plenty of talent on both sides of the Atlantic - yet far different levels of ambition. Now run an experiment; pay ten of those students a hundred EUR/USD to tell everyone that they're dropping out and starting a startup. Watch the parents' reaction. Watch the professors' reaction. Watch the reaction from their doctor, their baker, their crush, their garbageman.
You already know the result, of course, it's obvious. That's your problem; and by comparison, the money hardly matters.
Instead of giving it all to a few people to spend buying real estate and mineral rights, you could tell the funding agencies that they're allowed to take risks, or give it to people's retirement accounts and let companies seek public investment.
I agree with everything except for one thing: I think their risk appetite is "u" shaped: low-risk is funded but they’d also fund insane-risk pie-in-the-sky academia dreams where many experts would immediately say that it will never work.
The stuff in between with sensible risk-reward ratios will indeed be ignored.
I disagree. The pie-in-the-sky academia dreams are not risk, they are safety. ITER and CERN and similar do fascinating research, and I don't mean to throw any shade their way, but they do not represent risk. There's not any possibility of failure. Things could go completely sideways and papers would keep getting written and no bureaucrat would lose their neck.
On the other hand, most startups have the ability to be total failures. If your social network, or your rocket company, or your new type of airplane collapses, it is a total loss. That is risk.
I cofounded a startup, trying to get innovation funding and I can say this is 100% my experience. Universities don't think a Software for managing dance and culture academies is innovative, but they are in the field.
That was one of the requeriments: to be certified by a university professor. That doesn't make sense: universities are research centers, but not the unique source of innovation (and in our country, not even a source in most fields).
Skimming the comments, this is pretty much what everyone is saying. And I'm sure it's true, but I'd like to also point out the amount of money in question. What was the investment amount for that toy project of Altman? Right.
I don't mean to say 70B is not a lot of money, of course it is. But perhaps that's part of the point: it's a lot of money to feed these technology partners of academia and other friends of friends you are talking about, it's also big enough to make the frontpage on HN, but when it's seen as a sudden huge investment into the whole market, it's kinda telling by itself that startups are not exactly thriving in EU. And also that money is cheap now.
They are also milked by companies, who re-designate pre-existing works (like software projects) as "innovation" and R&D. Its basically a hidden tax-refund with loads of busy-work bureaucracy.
I have been waiting for the Capital Markets Union for 11 years.
THe European blockchain infrastructure? Dead because only some universities can use it.
Eu is unable to fund innovation and it's not able to fund risky businesses. No VC culture either.
some Scandinavian countries have a little startup culture and government sponsored grants but the tax system drives startups that serve international audience away.
I would just add this, from my experience with Horizon 2020: we were working on an R&D project at the time. Applied for grant. We got €16,000, peanuts. (We needed a few hundred thousand....)
My point is that this type of EC/EU financing is distributed in a somewhat "social-democratic" manner, under the principle of "everyone should get something". Not mentioning the bureaucratic hell we went through to apply and get the funding.
> EIB President Nadia Calviño emphasizes the bank's willingness to take more risks, notably speeding up the venture capital financing process, which could be pivotal for startups in a fast-moving market
> The bank aims to process startup financing applications within six months, significantly improving from the current 18-month timespan.
That's part of the problem. 6 months is too long for an early stage venture to get capital unlocked.
And this rightfully causes a lot of us to worry that this foreshadows a significant lack of domain experience in the EIB's proposal (which btw hasn't been made public yet)
There are a lot of grants for universities because a) that's how universities are funded and b) to encourage technology transfer. But pure startup funding does exist, eg the EIC accelerator. If you want to get it there are companies like Inspiralia which specialise in navigating the process.
> will be distributed to members of the bureaucratic class and their network, for low-risk, low-reward projects
a quick search at the comments (so far) yielded zero results on "data prot", "GDPR", "privacy", so let me bring those up.
GDPR is a _great_ tool for civilians
GDPR is a _horrible_ tool if you are a business and want to innovate, expand, 'exploit' (positively).
EU money will come with E(U) DP Supervisor and the many directives. There is no way someone can do a proper DPIA and find it 'clean' if you are honestly appraising processes x GDPR. And these people are fierce nay-sayers. I've worked in banks, and I've worked in the EU. Those EU folks shit their pants when the DPOs walk in the room. Say "Legal basis" to someone working in the EU and see them cry (ok I exaggerate).
US has been 'stealing' the talent from all around the planet, for decades (and good for both the US and the talents). Why would someone try hard and have regulations every step of the way, and not work for Google?
Many years now I've felt that US is 30 years back in "tech" and will never catch up. US companies are dominating the space, and for every 10 steps we do in the EU, they go 10 miles, so every last year was better gap-wise. And I fear it won't change.
> If your business does not have university affiliations with people that get existing grants, or connections to EU bureaucracy, then you can forget about getting a dime.
So, then simply get in contact with your local university.
It helps the university to get grants when commercial parties are involved, so this is a win-win.
I studied at an excellent Dutch university that's an EU funding darling and had plenty of connections. But because I had "just" a bachelor's degree from a top university, plus substantial relevant experience, nobody would take me seriously. Even with a master's, you will find most people think you are unserious in most "hard" fields. You often need a PhD. And then God help you if you choose to leave the existing ossified structures of academia and industry.
And then you still run up against the issues of risk tolerance (which is zero) and long timelines.
Look, the stated goal of this program is to compete with American venture capital, right? Then look at the founders who got American venture capital money. Look at how many don't even have a bachelor's! Count the number that participated in traditional structures of academia and grant-receiving corporations. Virtually none of those people would have ever gotten a dime of this money, let alone an offer to collaborate from a university.
I don't know what price you'd pay in your hypothetical scenario, but I would say that European universities often take a larger chunk of equity than US unis where spinouts are concerned [1]. Most US universities take between 0-5% equity, where EU could go to 10%, and UK unis up to 20-30%.
Yeah this, in fact forget local and just write to researchers in your field, or go through dedicated network events. Finding a university researcher with a common interest in a field who'd consider the opportunity to be subsidised for the next 3-4 years working on stuff they're interested in isn't the hardest hurdle deeptech startups will face on their road to commercialization, especially when the alternative people treat like it's some kind of meritocratic sieve is "get warm intros to a VC class so insular some of them write unironic LinkedIn posts about how it's impossible to be successful outside the Bay Area"
(Or just use one of the funding mechanisms that attach little or zero weight to academic collaboration)
Imagine a committee of 10 people granting funding to a firm to commercialise NFTs of digital fashion where the owner of the company is also a member of the committee. The company isn't even a real company but a general partnership without limited liability. Your inquiries into this affair under the public information act get stonewalled by a obscure law that where voted on as part of the budget of 2018. When members are asked about this incestuous relationship they react in an indigenous fashion saying there can not be a conflict of interest because they abstained from voting on their own project. You make some noice about this and you get ostracised. This is just one example.
A dutch sociologist has coined a term for this calling it network corruption, we had to invent a word for it because it is so prevalent, there isn't even a page about this on the English language Wikipedia: https://nl.wikipedia.org/wiki/Netwerkcorruptie
Personally I wouldn't call it corruption, at least not all of it. If you were to drill down into the individual grants, you would find a lot of things that are broadly useful but not revolutionary. There's 4M euros to produce a new additive for beeswax and 500k euros to research migratory snails and 6M euros to study some new roads and that sort of thing. There's certainly obvious corruption too, but it isn't the majority of grant money. Most stuff is just very boring and vaguely useful.
I think a more useful description: it is an ossified structure where you have to play by the rules. Much like, say, the Catholic Church. You're not going to get a grant for your startup, or become Archbishop of Salzburg, by having an idea and sending some emails. You're going to have to fully commit yourself to the institution over a period of decades, and then you're in, and you're respected, and you can do some things, as long as they're not too revolutionary. Is that good for innovation? No. But corruption? I think it's something else.
No, it's the result of the public's/politicians' pathologic risk aversion and swiftness in calling everything corruption
Since it'd be obviously bad (sarcasm) if public money were spent on projects that deliver nothing or the people receiving them used them for anything other than the narrowest interpretation of the goal then you absolutely (sarcasm^2) have to have 50 different layers of checks and plans and assessment to make sure the little money is spent on the entities that lie the best. But at least no opposition politician can complain someone bought a fancier watch than they'd like or didn't deliver enough
Anyway the EIB is a different kind of funding process than EU grants and should be more effective (even just because capital doesn't come out of the EU budget or member states directly), though how much I don't know
From a person who has dealt with the management of European research projects: these funds will go through the EU bureaucratic maze, don't even think they will be available directly to startups. There will probably be programs and sub-programs, projects and other craps like that to more difficult for people to access the money. It's how the EU works. That's why startups flee to US if they want serious financing.
oh, they are available to startups. Startups having the sole purpose of skimming funds by being the technology partner to some academic.
That's the best case. Then there is outright fraud:
https://cordis.europa.eu/project/id/101092295 - European dynamic provides some project management and a wordpress-page for the lump sum of 800k€ and of course there is always "SOCIAL OPEN AND INCLUSIVE INNOVATION ASTIKI MI KERDOSKOPIKI ETAIREIA" headquartered here: https://inclusinn.com/. Probably still in stealth mode, using the 4M€ to "promote innovation".
> Startups having the sole purpose of skimming funds by being the technology partner to some academic.
Is cynicism about motives necessary?
I believe most people have enough self-deception and denial, that we don't need to assume fraud or theft. Similarly charities often end up being self-serving leeches - but the people seem to believe they are helping. Maybe I'm just naive? It is possible that most people in New Zealand are not so focused on intentional theft and fraud?
In New Zealand I've watched our government burn fucktons of money trying to invest in university "innovation". Academics convince politicians that they have valuable ideas, and politicians want to believe universities produce value. However the government funding is horrifically managed (no business sense) and the startups lack the right genetics and fail (even if matched funding from private investors). New Zealanders lack an entrepreneurial learning environment (maybe EU is the same): founding is difficult and really difficult if you've never watched someone close succeed.
I believe the root cause is that academics are not business/financially oriented, so the startups fail because they are not businesses. Plus the organisations picking investments are academic heavy and are not run by good capitalists. Academics often have good valuable ideas. But academics tend not to be hyper-focused just on business outcomes or they are not money focused. Business founders need to focus on profit (not status hunting, and definitely not looking for academic recognition).
I wondered for a while whether the cause was my own selection bias (startups mostly fail so I saw them fail) but I don't think that was the cause.
Also the government investing organisations love heavy handed shitty governance (and legal overcontrol bullshit). The principals believe their advice and overview is valuable. The investors put in bad CEOs and also force the businesses to make poor decisions. I've seen private VC funding make the same mistakes.
It is really sad to see good ideas get murdered by people with government money: I'm sure they believe they are helping and that they are trying to help (I'm not that cynical about motivations).
Our current government has just announced another 100 million to go towards academic startups. I just fucking wish our government would spend the budget instead by removing unnecessary red tape and to improve tax incentives (in New Zealand the incentives to grow businesses or create export income are fucked in my personal experience).
Doesn't match my experience. I know of plenty of startups that received EU funding with relatively little hassle. It's not that hard. And if you are afraid of some mild levels of bureaucracy, you shouldn't be running a company. And it's not like the US doesn't have bureaucracy.
Both is true: a lot of money is lost to bureaucracy and startups get funding, although it's not that easy imho. And the amounts are laughable in my experience, that's the biggest problem. Yes, it's nice that I get a kickback on research costs or whatever, but the process takes weeks and the returns are dismal. YMMV tho
That's not my experience. I have multiple former colleagues who got got EU money for their startup and were able to leave their day job due to that funding. I only supported a bit as a software engineer but what I was involved in it was pretty straightforward.
I often read that EU is incredibly bureaucratic and risk averse. On the other hand, I also read stories how startups can successfully bootstrap themselves via generous support of the government, like tax deduction for small companies, unemployment benefits for founders, low-interest loans, venture investment, free mentorship by very experienced and connected executives, and etc. The stories about French and Denmark companies are especially impressive. So, I was wondering if there's a difference between the governments of individual countries in EU and the EU government.
> On the other hand, I also read stories how startups can successfully bootstrap themselves via generous support of the government, like tax deduction for small companies, unemployment benefits for founders, low-interest loans, venture investment, free mentorship by very experienced and connected executives, and etc.
I’m not seeing EU grants in that list. In general I’d say anything the bureaucrats can’t ruin with their gatekeeping, friendship corruption and overvaluation of social status is a positive. Anything they can ruin they will.
I know people who've taken money through these routes. The biggest surprise is the paperwork; since it's public money, everything must be fully transparent, and the government needs to justify why funds went to a specific person / entity.
In contrast, private investors have more discretion and fewer stakeholders to answer to.
You could go on unemployment and cost them for a year or two, and they instead subsidize you starting a business for 6-12 months to the same amount. Worst case, you fail, and they spent the same amount they would have nevertheless.
Low-interest loans you won't get without taking on personal liability for your business loan. It's low-cost capital, but it's also low risk.
Tax-delays/exemptions for small companies isn't a big bet, it's risking a fraction of a fraction of a percent.
Venture investments by the government is rare (for good reasons, it'd be a huge opportunity for corruption).
Most of the time the money goes to keep big inefficient European companies European CHIPS act mainly divided the money into smaller sub programs, and gave the money to big companies like ST, Infineon, NXP etc.
For start-ups they do a lot of online calls to ask "what do you need" though. When you say money, they are like, yeah but what do you need except money!?
I applied to a few different programs and got funding for industry research a few different times. It was some work, but still not harder than getting academic research funding...
most of the funding will go to incumbents too, not startups. EU values establishment over innovation. So you can think of German automakers, Airbus and others creating new innovation programs and that's where the bulk of many many billions will go to. Startups get the crumbles and are scrutinized more heavily.
I share your sentiment, I'm also very skeptical that this money will be wisely used, a good chunk of it probably sinks into the Treibsand of European bureaucracy. And significant amounts will go to shallow ideas of startups. Europe just doesn't have the right startup spirit. It's over regulated and risk averse. Both fatal for a fruitful development.
I haven't downvoted you, but I understand why some might have because every thread on Hacker News regarding Europe and software attract this exact comment almost as if written from a template. Doesn't make it right or wrong, but it gets a little stale.
Yes we all know this, this is nothing new. But its the movement in right direction, especially now, rather than literal burning money on globally-abandoned green deal. Perfect being enemy of good and all of that
Why not finance a more wide tax break for tech companies, including small companies?
I have seen first hand, one of my classmates from high-school, whom I didn't consider to be too bright, receive a 100k EUR grant to build an esports platform that ended up being a styled-up wordpress blog. He had zero interest in tech, never programmed, the works...
He had no interest nor knowledge relating to tech, but managed to somehow get that grant. Meanwhile, I was paying taxes on hard earned freelancing dev money. We were both 23 years old at the time and it was really jarring.
I'd rather they cut taxes for already profitable small companies. The taxes in EU are astronomic.
Tax breaks is not going to do much, because that is not where the real problem is. Imo EU is being underestimated. The EU is really competitive at boring high tech that bootstrap themselves like cars, civilian air planes and tooling, so the business and innovation climate is not bad.
What's different from the EU and US is that the US has single capital market with more unified regulations where it is much easier to pool infinite VC money into an idea. Contrary to popular belief it's actually the LACK of EU regulations that makes the EU less competitive, because a company has to deal with 20+ regulatory bodies.
In short, the EU should focus on more market integration.
Yep, so much this (and Draghi concurs). It's kind of bizarre that the EU needs to do what it's biggest critics fight the most: integrate it's markets and eliminate cross-member bureaucracy.
> that bootstrap themselves like cars, civilian air planes
A civilian airplane manufacturing business takes decades to get off the ground, and is practically impossible to start without heavy government involvement. Cars are not that far behind. How did you pick these as businesses that "bootstrap themselves"? Bootstrapping requires a non-capital intensive business model. These are the opposite. These are businesses running on decades of momentum and government support.
You mean the cars whose manufacturing has to be stopped because they don't know how to use one chip in pace of another, while Tesla was chugging in numbers because they were the only ones who knows how to program a new chip.
Because investment is often tax-deductible anyway now-days with modern policy trying to encourage this via huge tax-discounts on capex. Therefore tax-breaks on profits just allow existing owners to cash out cheap. The companies that need the help need capital, not tax discounts. Further to this the companies that are profit-generating, still require capital for growth, the small tax on profits isn't enough to make a difference in the scale of things for investment required since corporation tax rates are often so low.
Can the EU directly regulate the details of the tax regulations of their member states? That would be extremely surprising to me and, even if done, would likely be seen as a sever overreach.
It's quite simple. The EU can't tell member states how much to tax and even if you cut out all of its budget you'd save maybe a percentage point or two in taxes
On the other hand the EIB (which is anyway not directly controlled in their executive actions by the EU) can grant funds since it's kind of it's role as an investment bank
In Norway, you can get 25% tax break on R&D costs. It can be combined with other softfunding up to 70% for small companies doing research, and 50% for larger companies doing development.
but how does that work? The money you pay on taxes, is on income - that money is now yours. On the other hand I'd assume a grant is the property of the company, not your friend. Where they able to just leach it all away as personal income?
Calviño is the wrong choice to lead this. Why not tap a few people from Mistral if they care about AI? Spotify if they care about more generic tech?
Funding will not fix the fact that euro salaries are not even remotely competitive especially after tax. Maybe it’s better to be poor in europe than America but MLEs at large AI labs and bigtech SWEs are definitively not.
Plus, capital is somehow still more risk-averse in the EU despite the ECB's policy rate consistently running >200bps lower than fed funds. And of course the process of getting funds from the EIB remains agonizing even with this change.
I hear these salary comparisons a lot, but when I was studying at the most popular Dutch technical university none of the future SWEs I talked to where even considering moving to the US (this was back when there was an excess of swe jobs everywhere). There's not much of a braindrain of engineers as far as I can tell, European engineers are not vastly less impressive than their American counterparts, and the people running succesfull startups in the US do not posess any particular brilliance.
All of which is to say, I don't think lack of Software Engineering talent is the problem.
>There's not much of a braindrain of engineers as far as I can tell
Not in your bubble: top university in the tax heaven EU country with some of the most US companies. Of course those grads can just stay and get FANG jobs there but not everyone comes from the NL.
>the people running succesfull startups in the US do not posess any particular brilliance
Their advantage is easier access to more capital than those in the EU. Capital helps with success even more than skills. Hence why the US has more big successful companies than Europe.
The cost of living is smaller in most countries in the EU, though. Also, most get free healthcare and free higher education, so it evens out considering these benefits
This isn't the point. More knowledgeable people at lower levels can help. But when leadership lacks domain expertise it's very hard to know what to do or not do, what will help and won't. She could be smart and lean heavily on industry experts but that still makes her the wrong choice to lead it when one of them could have done so better.
This is the equivalent of private equity installing someone who knows nothing but MBA material at a biotech company or a ML research company or anything else where domain expertise can actually help.
The EU is actually better at bringing in bits of "technocracy" to let industry experts lend their expertise. I don't know why they are doing that here. I think it's the wrong call.
You don't see why it might not be a good idea to give leaders in for-profit companies like Mistral or Spotify the keys to billions of dollars in funding?
It's a much better idea to give it to people who actually have experience turning financial investment into a valuable technological product than giving it to bureaucrats with no such experience.
These initiatives always end up the same way: bureaucrats distributing taxpayer money to the socially focused careerists at the top of large companies and academic institutions (perhaps after they’ve left and founded a startup). It’s just so engrained in the European way of thinking that you need to ”be someone”, not ”understand something” or ”be able to do something”. It’s sad, but that’s how it is.
> you need to ”be someone”, not ”understand something” or ”be able to do something”
This very succinctly describes the entire management class here in Sweden... The public sector is run by incompetent people who have to buy consultants to do anything and the private sector is led by the same kind of people to the point where actually competent people avoid going into management. I wonder how long we can keep this up.
The public sector isn't allowed to hire people and do things that could be perceived as competing with the private sector, which drives paying consultancies for things like software development as soon as the result could work as a product (i.e. more than one government body would want an instance).
Procurement ("lagen om offentlig upphandling"), one of the big wins for the right, is also fundamentally broken in that a lot of the public servants involved are fresh graduates that soon gets poached by private corporations and the organisational response is to sign long term contracts with huge corporations that supply many different things and are also allowed to bring in subcontractors for the things they don't. This effectively destroys any possibility of commercial competition.
It's purposefully designed this way by conservatives.
Leave Sweden is the solution for people like you who don't appreciate how things are arranged. You can be much more successful in a more mature economy where there is a better connection between productivity and career opportunities / renumeration.
Very nicely put! I have been in discussions with these type of people, several times, to start a company in semiconductors and quantum computing. I was often the only one who can "do" things and it was not appreciated. Academics didn't have the time or will to start a company (and had no industry experience), but wanted to have more than 50% of the shares because the government or EU gave the money to them, in return the university wanted 30% cut because they bring "a prestigious name", bug companies forced on you by EU funds did't want shares but they wanted control (board seat) and IP rights. All these were for <500k seed fund which would barely cover couple of engineers salary for a year!
That’s the typical racket, yes. 20 years ago I saw it as an unfortunate consequence of policy mistakes. But now I’m more inclined to see it as the intended purpose of these systems. ”It’s not a bug, it’s a feature.”
It is not like this is the first time the EU has flushed enormous amounts of money into a non-existing sector. The results, especially when compared to US venture capital are abysmal at producing actual products, especially products which could feasibly rival the US tech sector.
I don't recognise this description. To me it seems rather easy to just grab some cash off EU or swedish public investment campaigns by having a credible business plan and a project description that fits the campaign.
Research departments at large corporations with the right contacts can get campaigns designed for them, more or less, which I disagree with but it's not like it fits the picture you give.
The EU also does relatively much of "startup" funding through public credit, which is nice, because bad business ideas are killed fast if they can't beg their way into years and years of burning someone else's money, which we due to the private investment sector also had some of until the 2022 invasion of Ukraine and the rate hike.
> Research departments at large corporations with the right contacts can get campaigns designed for them, more or less, which I disagree with but it's not like it fits the picture you give.
Not sure what you mean... It fits perfectly with the picture I’m trying to convey.
I was primarily referring to EU initiatives. But the national ”innovation system” here in Sweden is pretty much the same. It’s a cultural issue, not an organizational one, IMHO.
It's really tiring to see the same handful of arguments on HN every time anything related to Europe or the EU is posted on here. Yes, some things the USA is doing better than Europe, but far from everything and depending on your political leanings (or rather social position) even most.
In this case, it's not hard to make the argument that you can't have one without the other.
If you're always going to lean into risk aversion and safety nets, you will lose to the player who is willing to make more risks. This involves the losers losing bigger, but the winners winning bigger.
That's what the US is compared to Europe. The winners are better off, but the losers are worse off.
Everything is a trade off. But it's highly unlikely you can have best of both worlds in the long run.
“The bank aims to process startup financing applications within six months, significantly improving from the current 18-month timespan.”
Oof.
The right way to do this would have been to match private financing so the EIB is providing capital but not gatekeeping. (That or commit to giving the first N companies to reach some milestone a bunch of cheap capital.)
Matching private funding brings the decision making lever to private funders, creating a mechanism to extract tax dollars with minimal government discretion and would be a process ripe for abuse by those with significant capital.
One person's gatekeeping is another person's stewardship and due diligence
In comparison to just giving money today? Just look at the number of failed green projects in the EU where somehow the executives got rich and nothing got built or if built failed to deliver. At least with matching the private sector has to put a eur down for each it receives and the fund would own participations in ventures.
Another model would be for the EIB to commit money to an investment fund and then run a tender process to select a private sector firm to manage the fund. At the individual investment level, give that manager the usual discretion to invest and manage that VC funds have and pay them a market rate with an appropriate fee structure to do it.
You could also insist on the manager raising a certain minimum amount of matching private sector money to "keep them honest".
> The right way to do this would have been to match private financing so the EIB is providing capital but not gatekeeping
Israel did this with Yozma back in the 2000s, China recently with Guidance Funds, and the US with he IRA and CHIPS Acts, so it is a model that does work.
That said, the EIB press release is very vague [0], and it appears to be a proposal right now, and still needs to be approved by EIB's Board of Governors.
Realistically, we wouldn't get a true picture of this until mid-late 2025 at the earliest (notorious European summer season is about to kick in), so there's no point speculating about this until the final version that is passed by the Board of Governers
Europe is going to have a hang-over from resting on it's laurels for the past 20-30 years. I don't know if people will be able to tolerate the changes needed to totally stand independent.
If Europe wants to copy the powerhouse tech industry of the US, it's going to have to become more like the US.
Meaning the EU should stop being so risk adverse, stop having 27 different regulatory bodies for the same thing and the list could go on.
People here talked about Israel: the Shekel is not a currency anybody except them use, but they churn out successful startups at an incredible pace. They use their tech talent very well and are not encumbered by a myriad of regulations.
There's something magical about California and New York (another tech powerhouse).
NYC has this vibe of "getting stuff sone, no BS" kind of mindset. California has this relaxed vibe but at the same time the sky is the limit. I think it has something to do with how the sun shines there and the ocean. You feel like just working and things are going to be OK.
I am always more productive in NYC or LA. And I have no real explanation for that.
I don't think becoming even more neoliberal is going to solve anything for the EU, you people know one button so you all you ever want to do is press it harder to solve any problem, it's hilarious.
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My personal experience, having been involved with many startups in both the EU and US, is that EU government funding is completely useless for almost all startups. Why? First of all, you have to be part of the existing networks. If your business does not have university affiliations with people that get existing grants, or connections to EU bureaucracy, then you can forget about getting a dime. Then there is the risk aspect: if you are doing anything even remotely novel, or with any amount of risk, forget about it. This is not just my opinion, Mario Draghi, previous president of the ECB and Italian PM, said that the EU does not take enough risk to produce real innovation. And finally there's the timelines: from researching funding to cash in your bank account is always measured in years.
So, my expectation is that these funds will be distributed to members of the bureaucratic class and their network, for low-risk, low-reward projects, on a timescale too slow for most startups. I hope to be proven wrong, but the results of previous decades of EU funding programs do not make me optimistic.
There is simply not enough private capital investment in Europe. The public money is inevitably passed through academic hands or other public sector bureaucrats. And it is simply an ineffective way to allocate capital. The money should be returned to private hands where it belongs and those individuals should be the ones to decide how to invest their own capital.
Why do so few Europeans get this? It’s like they just can’t stand the idea of a wealthy person investing their own money.
Look at the early days of YC. Single digit millions a year was enough to stimulate the growth of a whole ecosystem of startups! Some startups are inherently capital-intensive but most don't need that much money to get to the point of basic viability. There are plenty of private individuals in Europe who could support a $10M a year incubator by themselves, not to mention the many institutions that could do this. And yet... there is no European YC and there never was.
I think it's cultural. Go talk to the top students at the top universities in the US and Europe and you will notice plenty of talent on both sides of the Atlantic - yet far different levels of ambition. Now run an experiment; pay ten of those students a hundred EUR/USD to tell everyone that they're dropping out and starting a startup. Watch the parents' reaction. Watch the professors' reaction. Watch the reaction from their doctor, their baker, their crush, their garbageman.
You already know the result, of course, it's obvious. That's your problem; and by comparison, the money hardly matters.
I'd phrase it a bit differently -- local (country) regulations, taxes and fees stifle startups in the crib.
This is not a meaningful statement
‘Returning money in private hands’ does not result in more startup investment, it’s not in the culture to do this.
The money will be put into real estate, bonds, or whatever.
Look at London - it has as much wealth as NewYork or LA but all the money just piles up in real estate or Fintech.
But outside those niches? Good luck getting a farm-tech startup funded, no-one will take a punt.
So it falls to the government to try and kickstart something. As flawed as it may be.
Then they put together a competition for funding that basically feels like a school exam
Giving it to academia can 10x the result, but yes research is risky, that's why it's important it is founded externally.
Companies that profited from research in academia are very happy.
Overall I agree, the current European strategy is not optimal, for both Industry and academia.
Dead Comment
The stuff in between with sensible risk-reward ratios will indeed be ignored.
On the other hand, most startups have the ability to be total failures. If your social network, or your rocket company, or your new type of airplane collapses, it is a total loss. That is risk.
Just out of curiosity, can you throw a couple of examples?
That was one of the requeriments: to be certified by a university professor. That doesn't make sense: universities are research centers, but not the unique source of innovation (and in our country, not even a source in most fields).
Your comment is pretty on point!
I don't mean to say 70B is not a lot of money, of course it is. But perhaps that's part of the point: it's a lot of money to feed these technology partners of academia and other friends of friends you are talking about, it's also big enough to make the frontpage on HN, but when it's seen as a sudden huge investment into the whole market, it's kinda telling by itself that startups are not exactly thriving in EU. And also that money is cheap now.
Eu has great plans but unable to fulfill them.
I have been waiting for the Capital Markets Union for 11 years.
THe European blockchain infrastructure? Dead because only some universities can use it.
Eu is unable to fund innovation and it's not able to fund risky businesses. No VC culture either.
some Scandinavian countries have a little startup culture and government sponsored grants but the tax system drives startups that serve international audience away.
I would just add this, from my experience with Horizon 2020: we were working on an R&D project at the time. Applied for grant. We got €16,000, peanuts. (We needed a few hundred thousand....) My point is that this type of EC/EU financing is distributed in a somewhat "social-democratic" manner, under the principle of "everyone should get something". Not mentioning the bureaucratic hell we went through to apply and get the funding.
> EIB President Nadia Calviño emphasizes the bank's willingness to take more risks, notably speeding up the venture capital financing process, which could be pivotal for startups in a fast-moving market
> The bank aims to process startup financing applications within six months, significantly improving from the current 18-month timespan.
And this rightfully causes a lot of us to worry that this foreshadows a significant lack of domain experience in the EIB's proposal (which btw hasn't been made public yet)
a quick search at the comments (so far) yielded zero results on "data prot", "GDPR", "privacy", so let me bring those up.
So, then simply get in contact with your local university. It helps the university to get grants when commercial parties are involved, so this is a win-win.
I studied at an excellent Dutch university that's an EU funding darling and had plenty of connections. But because I had "just" a bachelor's degree from a top university, plus substantial relevant experience, nobody would take me seriously. Even with a master's, you will find most people think you are unserious in most "hard" fields. You often need a PhD. And then God help you if you choose to leave the existing ossified structures of academia and industry.
And then you still run up against the issues of risk tolerance (which is zero) and long timelines.
Look, the stated goal of this program is to compete with American venture capital, right? Then look at the founders who got American venture capital money. Look at how many don't even have a bachelor's! Count the number that participated in traditional structures of academia and grant-receiving corporations. Virtually none of those people would have ever gotten a dime of this money, let alone an offer to collaborate from a university.
[1] https://www.spinout.fyi/data
(Or just use one of the funding mechanisms that attach little or zero weight to academic collaboration)
A dutch sociologist has coined a term for this calling it network corruption, we had to invent a word for it because it is so prevalent, there isn't even a page about this on the English language Wikipedia: https://nl.wikipedia.org/wiki/Netwerkcorruptie
I think a more useful description: it is an ossified structure where you have to play by the rules. Much like, say, the Catholic Church. You're not going to get a grant for your startup, or become Archbishop of Salzburg, by having an idea and sending some emails. You're going to have to fully commit yourself to the institution over a period of decades, and then you're in, and you're respected, and you can do some things, as long as they're not too revolutionary. Is that good for innovation? No. But corruption? I think it's something else.
Since it'd be obviously bad (sarcasm) if public money were spent on projects that deliver nothing or the people receiving them used them for anything other than the narrowest interpretation of the goal then you absolutely (sarcasm^2) have to have 50 different layers of checks and plans and assessment to make sure the little money is spent on the entities that lie the best. But at least no opposition politician can complain someone bought a fancier watch than they'd like or didn't deliver enough
Anyway the EIB is a different kind of funding process than EU grants and should be more effective (even just because capital doesn't come out of the EU budget or member states directly), though how much I don't know
Dead Comment
So leave me be very skeptical about this news.
That's the best case. Then there is outright fraud:
https://cordis.europa.eu/project/id/101092295 - European dynamic provides some project management and a wordpress-page for the lump sum of 800k€ and of course there is always "SOCIAL OPEN AND INCLUSIVE INNOVATION ASTIKI MI KERDOSKOPIKI ETAIREIA" headquartered here: https://inclusinn.com/. Probably still in stealth mode, using the 4M€ to "promote innovation".
Is cynicism about motives necessary?
I believe most people have enough self-deception and denial, that we don't need to assume fraud or theft. Similarly charities often end up being self-serving leeches - but the people seem to believe they are helping. Maybe I'm just naive? It is possible that most people in New Zealand are not so focused on intentional theft and fraud?
In New Zealand I've watched our government burn fucktons of money trying to invest in university "innovation". Academics convince politicians that they have valuable ideas, and politicians want to believe universities produce value. However the government funding is horrifically managed (no business sense) and the startups lack the right genetics and fail (even if matched funding from private investors). New Zealanders lack an entrepreneurial learning environment (maybe EU is the same): founding is difficult and really difficult if you've never watched someone close succeed.
I believe the root cause is that academics are not business/financially oriented, so the startups fail because they are not businesses. Plus the organisations picking investments are academic heavy and are not run by good capitalists. Academics often have good valuable ideas. But academics tend not to be hyper-focused just on business outcomes or they are not money focused. Business founders need to focus on profit (not status hunting, and definitely not looking for academic recognition).
I wondered for a while whether the cause was my own selection bias (startups mostly fail so I saw them fail) but I don't think that was the cause.
Also the government investing organisations love heavy handed shitty governance (and legal overcontrol bullshit). The principals believe their advice and overview is valuable. The investors put in bad CEOs and also force the businesses to make poor decisions. I've seen private VC funding make the same mistakes.
It is really sad to see good ideas get murdered by people with government money: I'm sure they believe they are helping and that they are trying to help (I'm not that cynical about motivations).
Our current government has just announced another 100 million to go towards academic startups. I just fucking wish our government would spend the budget instead by removing unnecessary red tape and to improve tax incentives (in New Zealand the incentives to grow businesses or create export income are fucked in my personal experience).
I’m not seeing EU grants in that list. In general I’d say anything the bureaucrats can’t ruin with their gatekeeping, friendship corruption and overvaluation of social status is a positive. Anything they can ruin they will.
* If the result is good and useful, the credit goes to the member state.
* If the result isn't good, it's the fault of the EU.
Similarly how good Champaigne can only come from one place ;)
In contrast, private investors have more discretion and fewer stakeholders to answer to.
You could go on unemployment and cost them for a year or two, and they instead subsidize you starting a business for 6-12 months to the same amount. Worst case, you fail, and they spent the same amount they would have nevertheless.
Low-interest loans you won't get without taking on personal liability for your business loan. It's low-cost capital, but it's also low risk.
Tax-delays/exemptions for small companies isn't a big bet, it's risking a fraction of a fraction of a percent.
Venture investments by the government is rare (for good reasons, it'd be a huge opportunity for corruption).
For start-ups they do a lot of online calls to ask "what do you need" though. When you say money, they are like, yeah but what do you need except money!?
My cynical side says that it will just be politicized, so some factions can say EU/state bad, while others jump through hoops to defend it.
Dead Comment
I have seen first hand, one of my classmates from high-school, whom I didn't consider to be too bright, receive a 100k EUR grant to build an esports platform that ended up being a styled-up wordpress blog. He had zero interest in tech, never programmed, the works...
He had no interest nor knowledge relating to tech, but managed to somehow get that grant. Meanwhile, I was paying taxes on hard earned freelancing dev money. We were both 23 years old at the time and it was really jarring.
I'd rather they cut taxes for already profitable small companies. The taxes in EU are astronomic.
What's different from the EU and US is that the US has single capital market with more unified regulations where it is much easier to pool infinite VC money into an idea. Contrary to popular belief it's actually the LACK of EU regulations that makes the EU less competitive, because a company has to deal with 20+ regulatory bodies.
In short, the EU should focus on more market integration.
A civilian airplane manufacturing business takes decades to get off the ground, and is practically impossible to start without heavy government involvement. Cars are not that far behind. How did you pick these as businesses that "bootstrap themselves"? Bootstrapping requires a non-capital intensive business model. These are the opposite. These are businesses running on decades of momentum and government support.
You mean the cars whose manufacturing has to be stopped because they don't know how to use one chip in pace of another, while Tesla was chugging in numbers because they were the only ones who knows how to program a new chip.
On the other hand the EIB (which is anyway not directly controlled in their executive actions by the EU) can grant funds since it's kind of it's role as an investment bank
Because then these communists wouldn't get to choose who gets the money.
Funding will not fix the fact that euro salaries are not even remotely competitive especially after tax. Maybe it’s better to be poor in europe than America but MLEs at large AI labs and bigtech SWEs are definitively not.
Plus, capital is somehow still more risk-averse in the EU despite the ECB's policy rate consistently running >200bps lower than fed funds. And of course the process of getting funds from the EIB remains agonizing even with this change.
All of which is to say, I don't think lack of Software Engineering talent is the problem.
Not in your bubble: top university in the tax heaven EU country with some of the most US companies. Of course those grads can just stay and get FANG jobs there but not everyone comes from the NL.
>the people running succesfull startups in the US do not posess any particular brilliance
Their advantage is easier access to more capital than those in the EU. Capital helps with success even more than skills. Hence why the US has more big successful companies than Europe.
Will Calviño be picking and choosing the grantees?
This is the equivalent of private equity installing someone who knows nothing but MBA material at a biotech company or a ML research company or anything else where domain expertise can actually help.
The EU is actually better at bringing in bits of "technocracy" to let industry experts lend their expertise. I don't know why they are doing that here. I think it's the wrong call.
This very succinctly describes the entire management class here in Sweden... The public sector is run by incompetent people who have to buy consultants to do anything and the private sector is led by the same kind of people to the point where actually competent people avoid going into management. I wonder how long we can keep this up.
No, this is just the definition of state corruption. They could have competent people, if they wanted to.
Procurement ("lagen om offentlig upphandling"), one of the big wins for the right, is also fundamentally broken in that a lot of the public servants involved are fresh graduates that soon gets poached by private corporations and the organisational response is to sign long term contracts with huge corporations that supply many different things and are also allowed to bring in subcontractors for the things they don't. This effectively destroys any possibility of commercial competition.
It's purposefully designed this way by conservatives.
Research departments at large corporations with the right contacts can get campaigns designed for them, more or less, which I disagree with but it's not like it fits the picture you give.
The EU also does relatively much of "startup" funding through public credit, which is nice, because bad business ideas are killed fast if they can't beg their way into years and years of burning someone else's money, which we due to the private investment sector also had some of until the 2022 invasion of Ukraine and the rate hike.
Not sure what you mean... It fits perfectly with the picture I’m trying to convey.
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By “these” do you mean anything European, or something specific to this structure?
If you're always going to lean into risk aversion and safety nets, you will lose to the player who is willing to make more risks. This involves the losers losing bigger, but the winners winning bigger.
That's what the US is compared to Europe. The winners are better off, but the losers are worse off.
Everything is a trade off. But it's highly unlikely you can have best of both worlds in the long run.
Dead Comment
Oof.
The right way to do this would have been to match private financing so the EIB is providing capital but not gatekeeping. (That or commit to giving the first N companies to reach some milestone a bunch of cheap capital.)
One person's gatekeeping is another person's stewardship and due diligence
One person’s stewardship and due diligence is another’s person’s definition of fraud wealth transfer and crime.
You could also insist on the manager raising a certain minimum amount of matching private sector money to "keep them honest".
Israel did this with Yozma back in the 2000s, China recently with Guidance Funds, and the US with he IRA and CHIPS Acts, so it is a model that does work.
That said, the EIB press release is very vague [0], and it appears to be a proposal right now, and still needs to be approved by EIB's Board of Governors.
Realistically, we wouldn't get a true picture of this until mid-late 2025 at the earliest (notorious European summer season is about to kick in), so there's no point speculating about this until the final version that is passed by the Board of Governers
[0] - https://www.eib.org/en/press/news/president-calvino-tech-fir...
Dead Comment
If Europe wants to copy the powerhouse tech industry of the US, it's going to have to become more like the US.
People here talked about Israel: the Shekel is not a currency anybody except them use, but they churn out successful startups at an incredible pace. They use their tech talent very well and are not encumbered by a myriad of regulations.
NYC has this vibe of "getting stuff sone, no BS" kind of mindset. California has this relaxed vibe but at the same time the sky is the limit. I think it has something to do with how the sun shines there and the ocean. You feel like just working and things are going to be OK.
I am always more productive in NYC or LA. And I have no real explanation for that.