Young technology companies may soon find it easier to raise capital -- not from private investors but from the federal government. After years of watching Washington dole out grants for basic science research mostly to academic scientists and engineers, the Obama administration wants to shift the focus and give a bigger boost to early stage technology firms. Officials see it as a way to spur job creation and push policy goals, such as advancing clean technology. The government is “looking at what they can fund that’s already off the ground but needs an additional push,” says Mark Heesen, president of the National Venture Capital Association (NVCA). “Many of these technologies will never see the light of day without that additional stimulus.”
The administration’s goal is to nearly double science budgets, from $10.7 billion in fiscal 2008 to $19.5 billion in 2016, for the National Science Foundation, the Department of Energy’s Office of Science and the National Institute of Standards and Technology.
There is plenty of opposition from those who don’t want the government involved with picking winners and losers in private industry. “I would be shocked if the government could find the next great semiconductor investment that people in the field missed,” says Adam Grosser, a partner at Foundation Capital in Menlo Park, Calif. “It’s sort of like trying to hit a mosquito with a sledgehammer.” Administration officials say that government backing would help protect new firms from sudden market swings. They point to successes at NASA and other government agencies that yielded industry benefits.
From just $107.88 $24.99 for Kiplinger Personal Finance
Be a smarter, better informed investor.
Sign up for Kiplinger’s Free Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
The government is also trying to fill a void as private money slows. Venture capitalists invested $12.2 billion in 1,910 deals in the first three quarters of this year, according to the NVCA. That’s well below the pace set in 2008, when the annual total came to $28 billion invested in 3,980 ventures, and is unrelated to the need for cash by start-ups with innovative ideas. “There is no reason why the macroeconomic climate affects new ideas,” says David Kirsch, associate professor of management and entrepreneurship at the University of Maryland.
Leading the push within the administration are several former venture capitalists. Sean Greene, associate administrator for investment and innovation at the Small Business Administration, and Julius Genachowski, chairman of the Federal Communications Commission, were both founders of technology incubator LaunchBox Digital. And for the first time, the administration has a chief technology officer, Aneesh Chopra, whose role is to find new ways to invest in technology to spur economic development.
-
What Services Are Open During the Government Shutdown?The Kiplinger Letter As the shutdown drags on, many basic federal services will increasingly be affected.
-
The Economy on a Knife's EdgeThe Letter GDP is growing, but employers have all but stopped hiring as they watch how the trade war plays out.
-
Banks Are Sounding the Alarm About StablecoinsThe Kiplinger Letter The banking industry says stablecoins could have a negative impact on lending.
-
Apple Readies for AI Upgrade with New iPhonesThe Kiplinger Letter The tech giant has stumbled when it comes to artificial intelligence, but a new batch of iPhones will help it make headway.
-
Japan Enters a New Era of Risk and ReformThe Kiplinger Letter Japan has entered a pivotal moment in its economic history, undertaking ambitious policy and structural reforms to escape from decades of stagnation.
-
How Consumers Are Tinkering with Cutting-Edge AIThe Kiplinger Letter Companies launching artificial intelligence tools are jostling for consumer attention. Some products are already building a deep connection with users.
-
After Years of Stagnant Growth, Hope Emerges for EU EconomyThe Kiplinger Letter Can a German fiscal push outweigh French political peril?
-
Small Businesses Are Racing to Use AIThe Kiplinger Letter Spurred on by competitive pressures, small businesses are racing to adopt AI. A recent snapshot shows the technology’s day-to-day uses.
