[HN Gopher] EU startup fund overwhelmed by high demand
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EU startup fund overwhelmed by high demand
Author : chewz
Score : 79 points
Date : 2021-06-28 17:52 UTC (5 hours ago)
(HTM) web link (www.politico.eu)
(TXT) w3m dump (www.politico.eu)
| ramboldio wrote:
| TL;DR "We were surprised by the demand for free cash."
| newguy886 wrote:
| TLDR cash has already handed out to some buddies. The rest gets
| a medal.
| newguy886 wrote:
| This BS is as corrupt as the SBIR system. Real money is in china.
| edrxty wrote:
| Can confirm, used to work for an SBIR farm. Good times...
|
| Wouldn't touch China with a ten foot pole though.
| newguy886 wrote:
| Well, China is an interesting place. With the right gov
| contacts it can be very productive. Much more open for me
| than sbir grants and Eu grants. And I know several people who
| got sbir 2 grants and they told me how they got it and told
| me not to waste my time applying.
| edrxty wrote:
| SBIR is doable, but a lot of rather sleazy people have made
| it their life's work to drain that particular program so
| the paperwork burden has become fairly high as a result. As
| such the contracts tend to go to people who understand how
| to get them which can make the system frustrating.
|
| China is absolutely _NOT_ an interesting place from the
| perspective of government contracts, particularly for US
| citizens that don 't want to end up in jail, however.
| Anything defense related will fall under ITAR and
| associated tech export bans (this includes just working on
| these programs, not just physical movement of goods).
|
| Additionally, if you're paid in Chinese currency it might
| as well be monopoly money to a foreigner.
|
| There's also the massive ethical dilemma of supporting a
| government that is actively engaged in ethnic cleansing
| (regardless of the whataboutism).
| pacman2 wrote:
| SBIR is in my experience done by
|
| 1. Companies that made a business out of doing SBIR
| grants (I think the previous poster may have meant the
| same with SBIR farms). They write one grant after another
| and do some BS research, write reports and in the end,
| trash the results and move to the next SBIR
|
| 2. Small Start-up that a basically linked to big military
| suppliers and since the big supplier is ineligible to
| appply, they apply for them and among the big big stack
| of applicants, they are selected for the SBIR. Must be
| really superior ideas I guess. Or huge luck :-)
|
| The SBIR grant was designed for neither, but blue sky
| ideas that VC don't want to fund. My experience with SBIR
| has been terrible. Especially
|
| A. Idiot reviewers. I can only tell you that an idiot and
| google are a very dangerous combination.
|
| B. Idiot management. One lady that is in charge of giving
| out the SBIR has emailed me that she has occasionally
| given SBIR to inexperienced (speak not having done an
| SBIR before) researchers. So she basically handles the
| grants to companies mentioned above under "1", the SBIR
| farms. She has no idea what she is doing. SBIR was not
| designed for that.
|
| In my opinion, and I may be wrong, SBIR were designed to
| be open to the best blue sky ideas that may be too risky
| or too early stage for regular VC. This already excludes
| the existence of SBIR farms.
| edrxty wrote:
| > 1. Companies that made a business out of doing SBIR
| grants (I think the previous poster may have meant the
| same with SBIR farms). They write one grant after another
| and do some BS research, write reports and in the end,
| trash the results and move to the next SBIR
|
| This was kind of my experience, though it isn't quite so
| malicious generally. The overhead in setting up the
| contract, while not ridiculous, is enough that once you
| get one, you usually end up getting another, and so on
| until you become an SBIR farm. The grants come in phases,
| Phase 1 being research and proposal, Phase 2 prototype,
| and Phase 3 basically being follow on contracts for
| production/continued development. You have to get them in
| order and if you only farm Phase 1 contracts you won't
| get super far. That said getting past Phase 2 is quite
| hard as the kind of stuff they generally ask for (weird
| one off fixes for various government procurement
| requirements) don't generally commercialize well.
|
| They're frequently moonshot type efforts for the size of
| businesses they're targeting and the ROI is low unless
| you're using them to build and pay a team for some other
| goal. That said, if your goal is to build a team/small
| facility and you know what you're doing, it's not a bad
| option. It just isn't really anything like what the rest
| of the software world's VC funding model.
| k__ wrote:
| I didn't even hear about it until now and the money is already
| gone?
| MattGaiser wrote:
| In the USA, are government grants for startups a big thing? As in
| Canada, it seems like half the startups are heavily built around
| them.
|
| In the US I would imagine they are drowned out of relevance by VC
| funding.
| gilbetron wrote:
| The US has (amongst other things) Small Business Innovation
| Research (SBIRs) Grants/Contracts, that the DoD plus various
| other gov orgs (NIH, NSF, NASA, FBI, etc) put out once or more
| a year that looks for research ideas for lots of things. I
| worked for a company for almost a decade and a half that dealt
| with them, and it lets you work on lots of fun stuff!
|
| https://www.sbir.gov/sbirsearch/topic/current
|
| There are some startups that actually launch using them, but
| they are relatively rare because when you are a startup you
| want to focus on finding your product or service, and not spend
| a lot of time filling out grant proposals and progress reports
| and going to governmental meetings. So they can be a big
| distraction. Still, it is an option.
| paxys wrote:
| The best thing the US government does for tech startups is
| completely staying out of their way. There is, however, a
| Research and Development (R&D) Tax Credit which pretty much
| every company makes use of.
| lostlogin wrote:
| Except when they could do with getting in the way, but then
| don't.
|
| Remembering recent stories there have been problems with
| adtech, spyware (same thing?), tech monopoly behaviour,
| privacy violations, treatment of workers, dubious automation
| etc.
| arcturus17 wrote:
| In the EU however we think that shelling out a billion -
| peanuts in the grand scheme of things - and then some
| certificates which amount to a big thumbs up ("Ursula von der
| Leyde and 25 others like this") will create a vibrant startup
| ecosystem.
|
| I've been extremely supportive of the EU all my life but I'm
| starting to wonder if politicians are in any way connected to
| the ground-level reality of business and personal life.
| cgearhart wrote:
| That might be true for _consumer_ tech startups, but they do
| have programs to help startups. SBIRs, STTRs, FAST, and other
| programs (not to mention funding from agencies like DARPA)
| are all run by the federal government. It's just that they
| typically invest in things that likely wouldn't be funded by
| VCs due to high risk & limited market (e.g., advanced
| technology development for the military or space).
| fny wrote:
| Yes. Certain businesses qualify for grants from the small
| business administration in the US: https://www.sba.gov/funding-
| programs/grants
| sethhochberg wrote:
| It depends a lot on what you're doing. Things genuinely close
| to the bleeding edge of technology often get DARPA funding, and
| the list of DARPA alumni companies is pretty long - even for
| stuff that at face value might not have military applications.
| But what most people think of when thinking about the "startup
| scene" is mostly private VC funds. There are various other
| small business grants from federal and state governments, but
| they're generally dwarfed by the private investors.
| ecshafer wrote:
| There are grants for Defense related start ups.
| andai wrote:
| > Having run out of cash, an EU fund meant to boost promising
| tech companies will hand out certificates instead.
|
| > Companies who are left without any money will get a "seal of
| excellence," meant to tell private investors that the EU likes
| the company.
| duxup wrote:
| What the heck is that 'seal of excellence' supposed to mean?
|
| That they applied for something?
| andai wrote:
| As best as I can tell it means "we would have funded this
| company if they had been a bit higher up in the stack of
| applications and we reached them before we ran out of money."
| [deleted]
| [deleted]
| qwertox wrote:
| TUV Rheinland approves this message.
| nom wrote:
| Looking up company details on an Excel sheet and selecting
| the correct mail template is a hard and complicated job, not
| everyone can do that.
| Apocryphon wrote:
| Ah, digital dividends from the government.
|
| https://www.youtube.com/watch?v=Ei9iM_zzzQk
| [deleted]
| stanlarroque wrote:
| My startup received this "seal of excellence". It hurts because
| I'd rather have the money instead of a piece of paper, but
| hopefully we might be selected for the next round. They do this
| startup selection every 6 months or so.
| mrweasel wrote:
| They should have issued them as NFTs.
| bitL wrote:
| This must certainly be a joke, right?!
| qaq wrote:
| Strongly reminds me of USSR
| raverbashing wrote:
| Whenever someone does this comparison it's a good sign I
| can ignore pretty much anything they say afterwards
| qaq wrote:
| I guess I will have to stop reflecting on my life in USSR
| now to make sure it does not raise any flags :)
| andai wrote:
| I think downvoters assumed you were American and that
| your knowledge of USSR came from propaganda.
| dominojab wrote:
| its been at least the last 10 years like this, since the
| last economic crisis.
| wues wrote:
| So you think that in USSR there were startups and private
| investors? Interesting.
| mc32 wrote:
| No but they had two kinds of money. Rubles and accounting
| Rubles.
| qaq wrote:
| No they liked to reward regular people with non-material
| things.
| Chyzwar wrote:
| You mean experience is gulag is truly priceless for
| entrepreneur.
| qaq wrote:
| Well that was for very low key entrepreneurs. More
| serious ones generally got death sentence if caught
| qaq wrote:
| They did have startups and private investors, but it was
| obviously black market and was punishable by death.
| yohannparis wrote:
| I found this better than the nothing.
| pdpi wrote:
| "I liked them, but not enough to find a way to fund them"
| isn't the best endorsement ever
| paxys wrote:
| I doubt that. No VC or other private investor is going to
| give a shit about a "seal of excellence" handed out by the
| government.
| systemvoltage wrote:
| I think you're still overestimating. VCs would run away
| from a company that was vetted by the government.
| [deleted]
| cpach wrote:
| Now this is cringeworthy for sure.
|
| As someone living in the EU, this makes me embarrassed. We
| should be able to do better than this.
| estaseuropano wrote:
| Easier to top up than to have a pot available and no one
| using it... Its a new instrument so I guess they couldn't get
| a good estimate what was needed. Also better if you can
| select rather than fund everything.
|
| I suppose they will pitch in other funds, e.g. they have
| encouraged countries to use some of the funds under the
| Recovery and Resilience Facility to fund projects that got
| these certificates of quality.
| FreeSpeech wrote:
| The EU can't innovate, only regulate.
| wutwutwutwut wrote:
| Innovation can be driven by regulation. So what's your
| point?
| thu2111 wrote:
| Please cite some examples.
|
| BTW the post you're replying to is factually correct. As
| a government the EU does not innovative in the sense
| normally understood by the word, e.g. it does not
| introduce surprising new products, or (directly) create
| new technologies. It does however regulate.
| MrDresden wrote:
| I would say that holds true for most if not all
| governments around the world.
|
| So pointing it out is rather pointless.
| FreeSpeech wrote:
| No, innovation begets regulation. Deregulation fosters
| innovation.
|
| https://en.wikipedia.org/wiki/Chinese_economic_reform
| wutwutwutwut wrote:
| Any source for your statement?
| FreeSpeech wrote:
| How did Deng Xiaoping reform China from economic
| backwater into the powerhouse we have today?
| Deregulation, which birthed innovation.
| TX0098812 wrote:
| Logic.
| spoonjim wrote:
| Using the government as social proof
| karmasimida wrote:
| I prefer EU to just say 'We give up' LOLL
| [deleted]
| raverbashing wrote:
| Grants are limited (even with a budget of 1Bi EUR). News at 11
|
| Being overwhelmed by applicants is a good problem to have (as
| opposed to having few applicants. That would have been worrying)
| c-c-c-c-c wrote:
| I dont think politico articles are a good fit for the HN crowd.
| dang wrote:
| On HN we try to go by article quality, not site quality. Sites
| that mostly produce bad and/or offtopic articles for HN
| sometimes still produce good and ontopic ones sometimes.
|
| https://hn.algolia.com/?dateRange=all&page=0&prefix=false&so...
|
| We do put a standard downweight on major media sites, though,
| especially ones focused on politics. politico.com has had that
| for years, but politico.eu didn't. I've done that now.
|
| https://hn.algolia.com/?dateRange=all&page=0&prefix=true&que...
| doesn't look so bad though!
| acchow wrote:
| Is a government handout more likely to do good than harm?
| visarga wrote:
| Isn't the investment too small? I think 1B or even 4B are pocket
| change when you want to boost a whole economy sector.
| lnsru wrote:
| I share your opinion. Printing money and giving it to Lufthansa
| isn't better in any way.
| ben_w wrote:
| Yes, but the EU as an institution is (ironically) exactly the
| sort of small hands-off interstate-trade-focused organisation
| that the American right wish the USA federal government was.
|
| Total GDP for the USA and the EU was fairly similar before
| Brexit, but the 2019 EU budget was EUR148.2 billion in both
| revenue and expenses compared to the USA federal budget of $3.5
| trillion revenue and $4.4 trillion expenses.
|
| Most of the budget and power is in the hands of member states.
| dr_dshiv wrote:
| Nice analysis!
| hef19898 wrote:
| Which means you should include member state budgets, as the
| EU has no social systems, militaries etc... to find.
| Comparing EU member states to US states is just plain wrong.
| tester756 wrote:
| I don't think
|
| let's remember that decent EU SE salary is 3-5k USD
|
| Except Zurich, London hubs.
| spoonjim wrote:
| EU creates $1 billion startup fund. China's government probably
| invests that every day.
| detritus wrote:
| Without even reading the article -
|
| "Good!". "Now increase the size of the fund".
| andrewtbham wrote:
| the EU needs stock option tax reform.
|
| https://www.notoptional.eu/en/
| jiofih wrote:
| > these companies simply can't afford to pay the higher wages
| of more established businesses.
|
| HAHAHA. Right after news of a $400M funding round.
|
| What exactly is the problem - the letter doesn't mention it?
| isbvhodnvemrwvn wrote:
| Taxation is not competence of the EU, just the member states.
| streamofdigits wrote:
| Green and digital are the major pillars of the EU vision. Its a
| genuine and positive vision, certainly distinct from the
| US/Chinese versions. There is some skepticism that the vision
| will ever translate to an alternate proposal. Politicians jumping
| on bandwagons, talking a good talk, distributing some funds in
| scatter gun fashion and hoping something will stick... In the end
| the innovation and breakthroughs will come probably more on the
| green than the digital side. There is very strong engineering
| tradition whereas digital somehow was always basically outsourced
| to the US.
| Aerroon wrote:
| Neither sound genuine to me. If anything, they sound like a
| cover for everything else the politicians want to do.
|
| Think about the results the EU has achieved in digital. They've
| managed to:
|
| * create pop-ups on almost every website
|
| * screwed over regional pricing so that Bulgarians have to pay
| the same price as Belgians. Somehow region locks still exist
| though.
|
| * tried implementing a system where all ISPs had to save all
| traffic of their users users
|
| * recently the EU adopted a new copyright directive that will
| force _digital platforms_ to pay money to copyright holders
| because a _user_ might upload copyrighted content
|
| * implemented a digital VAT system that screwed over
| microbusinesses, because the politicians couldn't be bothered
| to implement a minimum threshold (they eventually did... After
| a few _years_ )
|
| On the green front more has been done. But I'm not quite
| thrilled that they banned straws and strong vacuum cleaners.
| Neither do I like that they seem to be trying to make sure that
| we end up stuck with confusing USB cables.
| estaseuropano wrote:
| A few of your points seem right but several are just wrong or
| misleading. E.g. GDPR is a great tool just maliciously
| implemented by companies that have an interest to do so - 90%
| of the banners you see are purposefully designed to be
| annoying and delivered by a small group of ad networks. The
| aim is to grind you down and make you just click anything to
| get rid of them. But it has also given us Google/Facebook
| takeout and the right to actually delete your accounts.
| djbebs wrote:
| Gdpr is totally and complete crap. It has zero redeeming
| qualities.
| bidirectional wrote:
| Meanwhile in Silicon Valley, single companies can raise the same
| amount of money in one round of funding. It's quite pathetic in
| its lack of ambition.
| barbazoo wrote:
| From the government though?
| yohannparis wrote:
| In the Silicon Valley it's mostly private money, this is a
| government fund. Not the same thing.
| BobbyJo wrote:
| The larger point is: you can't replace a healthy investment
| ecosystem with grants. A government fund is itself
| representative of a lack of ambition. If the EU actually
| wants its own SV, they're going to have to address
| regulation, not throw money around.
|
| The real problems startups face in the EU are labor and tax
| laws. Companies can't use equity as compensation (which is a
| big lure for talent) and it's extremely hard to fire people
| (which makes pivoting or dealing with general market changes
| impossible for small companies). Pro-employee policies are
| necessarily anti-employer. Smaller, more innovative,
| companies have a harder time surviving such policies. So long
| as there is greater risk in EU companies, investors will take
| their money elsewhere.
| jiofih wrote:
| It's _expensive_ to fire people, it can be done. Money
| doesn't seem to be an issue for startups these days.
|
| Every company I've worked for has given equity as
| compensation here.
|
| Opening a company is insanely easier than anywhere else
| I've been.
|
| I can't relate any of those factors to lack of innovation
| from my own experience. It must be something else?
| hef19898 wrote:
| Well, it is easy to get rid of employees in case revenue is
| declining. ESOPs and RSUs are a very real thing as well. Of
| course, equity in an unproven company is basically short
| changing employees on salary.
|
| Also, the EU has what, almost 30 different sets of tax and
| labour laws.
| BobbyJo wrote:
| I was making generalizations based on things I had heard
| from people I know in Europe. The things I said may not
| apply everywhere, but I know from coworkers overseas that
| they definitely apply to Germany, France, and Italy.
| hef19898 wrote:
| Having had a failed start-up myself in Germany, I take
| issue with the sentiment that equity isn't feasible as
| part of compensation. That usually comes from founders
| unwilling to work inside the legal framework to find a
| solution. And from investors, because paying employees
| with shares, that get deluded and take the second seat
| compared to investors, reduces HR costs for their
| portfolio companies.
| BobbyJo wrote:
| > That usually comes from founders unwilling to work
| inside the legal framework to find a solution.
|
| I appreciate your engagement, but this statement feels
| like it proves my point. In the US, startups have simple,
| standard, procedures for creating option pools for future
| employees. I had my own failed startup in the US, and
| never had to give a thought to how to structure equity
| compensation.
| hef19898 wrote:
| Same goes here, again ESOPs or RSUs. You do need the
| correct legal entity. And I don't see any reason why
| _stock based compensation_ would be the main reason
| holding European start ups back.
|
| Edit: Thinking of it, you can even do that with GmbH in
| Germany by handing out equity that is tied to to the
| employment, at least for directors and the like. Don't
| ask me about the details, obviously it never came to it
| in my case.
| vecinu wrote:
| > Pro-employee policies are necessarily anti-employer
|
| I can't help but feel offended that you feel this way. As a
| technocrat, sure, let's treat employees as numbers on a
| sheet that we can hire and fire at will because who cares
| about them as people right?
|
| Don't forget employees are people, with families, who are
| _usually_ working to sustain their own lives.
|
| It saddens me how deep this US-centric rhetoric on treating
| employees unfairly has gone.
| BobbyJo wrote:
| What way do I feel? I'm very pro-worker's rights, I'm
| just pointing out the flaw in the EUs approach.
| vecinu wrote:
| I'm not sure how you feel, that's up to you to tell us.
|
| The EU has done a fantastic job of respecting worker
| rights, from the right to disconnect, to time off /
| vacation from work, worker's rights for employment and
| having a social safety net if you become unemployed.
|
| If you like metrics you can read the world happiness
| report [1] or look at how the OECD measures income
| inequality across the world [2], the US is below most
| European countries.
|
| [1] https://happiness-
| report.s3.amazonaws.com/2021/WHR+21.pdf
|
| [2] https://data.oecd.org/inequality/income-
| inequality.htm
| yokaze wrote:
| > Companies can't use equity as compensation (which is a
| big lure for talent)
|
| What? Where do you get that? Then I better return all the
| equity I got.
|
| > and it's extremely hard to fire people
|
| I would say that is hyperbolic, unless you find anything
| but at-will employment "extremely hard". Small companies
| (<20?) in Germany, can fire people without reason. I do not
| know any country (Edit: in the EU), where restructuring is
| not a valid reason to fire someone (with a severance of
| 0.5-1.1 monthly salaries per year of employment).
|
| (Edit: But then, I cannot claim to know all the labour laws
| in the EU)
| BobbyJo wrote:
| > What? Where do you get that? Then I better return all
| the equity I got.
|
| Startups normally use options for equity compensation
| rather than direct shares because of the tax benefits for
| employees and simplicity for reporting. Options are look
| at more like regular shares in the EU. _Can 't_ was a bad
| way of phrasing it. More like _shouldn 't because tax
| laws make it a crap shoot_.
|
| > I would say that is hyperbolic, unless you find
| anything but at-will employment "extremely hard"...
|
| Anything but at-will _is_ extremely hard with knowledge
| work, especially for small companies.
| marto1 wrote:
| There is also a bright side here. This indirectly
| incentives alternative organizational structures such as
| cooperatives. Some would argue it's also a healthier way to
| grow and has existed in more traditional sectors such as
| farming for a long time.
|
| Personally I think EU has a long way to go, but it's not
| all doom and gloom.
| azinman2 wrote:
| Who do you think in part supplies the cash for SV VCs :)
| estaseuropano wrote:
| Isn't that the problem? SV has too much cash going around so
| lots of bullshit is funded or companies run for decades on VC
| with the single mission to drive out all competitors and then
| hike prices.
|
| SV has given the world a lot but what actually usually
| innovation has come from there in the past 10 years (not
| companies that moved there for easy money, but rather actual
| innovation creation)?
| onion2k wrote:
| The only funding that's equivalent to the EU's $1.1bn this year
| has been GoPuff's $1.2b _series G_ round, in a company that 's
| been going for 8 years and has absolutely proved its market.
| Last year there were some bigger ones, Rivian's $2.5bn round
| for example, but even that wasn't exactly in a startup
| considering they'd already raised $3bn before. The VC funds in
| SV are definitely bigger and better than anything on this side
| of the Atlantic, but even in SV they're not exactly throwing
| huge bundles of cash at seed rounds any more. I wish they were.
| It was fun when people got a couple of mil to prove an idea.
| Reading the daft things that founders did (on Fucked Company)
| was a good laugh.
| jiofih wrote:
| Crazy times when a company with zero revenue and no products
| launched is "not a startup" because of their funding...
| debarshri wrote:
| I might sound a bit naive, but what is the vetting process for
| distributing funds? This sounds more like a grant than
| traditional VC funds.
|
| Raising capital from a good VC firm is hard. period. If you do
| not have track record, you have to go through a lot of due
| diligence, it is selective. I can also understand why, because it
| is some LP's money so you want to invest in a startup that is
| risk-aversed.
| holoduke wrote:
| The problem with these EU funds in Europe is that when you apply
| you need to spend half of the funds on enormous application
| papers which contain heavily regulated requirements for you to
| implement in the company. In many cases it just doesn't add up.
| Too much effort.
| marto1 wrote:
| It's also just plain bad business that leads to loads and loads
| of corruption. It's come to the point where a lot of people
| apply to essentially get a boost to their own spending power
| while parading to be entrepreneurs and then go back to usual
| with no repercussions.
|
| This is also the small kinds of financial swindles. There are
| others that are much worse and involve already established
| companies.
| reader_mode wrote:
| There are agencies who do nothing else but deal with
| bureaucracy of applying for these funds and they are a
| justifiable expense when looking for funds... Next level job
| creation right there
| secfirstmd wrote:
| Agreed. Have applied for EU projects before and it's a costly
| mess.
| cookiengineer wrote:
| That's why when you look up who received the funds you'll
| immediately see a pattern where large scale enterprise
| corporations have 100% owned subsidiaries that do nothing more
| than receive state funds, live for like 2 years without hiring
| any talent that is specific to their "research" area, and then
| get declared insolvent because the managers got themselves a
| big payout.
|
| Most of the funds don't go to startups, and that's exactly what
| I hate about this paper pushing goldberg machine.
|
| The big consultancy companies like accenture are also heavily
| involved in this scam. Founding AI startups without a single
| data scientist or engineer is what they seem to do for a
| living.
| jiofih wrote:
| Did they just hand out cash freely? 2000 companies is A LOT to do
| due diligence on.
| mytailorisrich wrote:
| > _Companies can ask for a grant of up to EUR2.5 million, or a
| combination of a grant with an equity investment, ranging from
| EUR500,000 to EUR15 million, with returns on the investment to go
| back into the program. "The huge demand clearly shows the
| interest of the community for this kind of support," a Commission
| official said._
|
| You bet. 2.5 million in free money is bound to attract
| interest...
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