White House Startup Investment Coincides with Sweeping Changes for TechStars, Y Combinator, Other Incubators: A Road to Recovery, or Another Bubble?

It’s been an unforgettable seven days for tech entrepreneurs—as if somebody poured startup juice into the nation’s water supply.

First President Obama dedicates a good chunk of his State of the Union address to the virtues of high-tech innovation and entrepreneurship. Then Russian investor Yuri Milner and Silicon Valley super-angel Ron Conway pair up to offer $150,000 investments, on very attractive terms, to every startup taking part in the Y Combinator venture incubator program, now and in the future. Then yesterday, the White House unveils its Startup America initiative, including $2 billion in matching capital for early-stage startups, as well as separate mentorship and incubator programs for cleantech startups and veterans. And then TechStars founder David Cohen announces that he’s basically open-sourcing the four-city TechStars operation—including its legal documents and mentorship and investor network—to independent startup accelerators in 12 more cities in the U.S., plus five in other countries.

And that’s only the highlight reel.

It’s like America has gone startup-crazy. To an extent that would have been inconceivable during the post-dot-com haze of 2002-2005 or the economic crisis of 2008-2009, entrepreneurs—obsessive visionaries who take enormous risks, often with other people’s money—are suddenly the new culture heroes, and the organizations that fund them are being showered with new (or redirected) resources.

Maybe it’s impatience with a sluggish economic recovery that isn’t translating into more jobs. Maybe it’s an awareness of the accumulating impact that Google, Facebook, Twitter, mobile gadgets, and other products of the innovation machine are having on culture and communication. Or maybe policymakers are finally listening to the stories we journalists have been telling for years about the power of private funding to spur the entrepreneurship that fuels high-growth companies.

Whatever the case, the last week has witnessed a series of private announcements and public policy changes that magnify the opportunities—and potentially the risks—for budding entrepreneurs. As a society, we have placed a much bigger bet this week on early-stage startups, in both real financial terms and in the more gossamer realm of hopes and expectations. The outcomes are bound to be both energizing and occasionally discouraging.

Amidst all this, it seemed only appropriate to see Jesse Eisenberg, who played the creator of the world’s most valuable startup in The Social Network, hosting last weekend’s edition of Saturday Night Live—with help from the real Mark Zuckerberg. (Whose company, by the way, yesterday announced that as part of the Startup America program, it will host 12 “startup days” in 2011 to give engineering support to early-stage companies.)

The State of the Startup Union

The Obama Administration has directed much of the last week’s media narrative on entrepreneurship, starting with the president’s State of the Union address on January 25. Viewed live by 43 million people, the speech introduced a new tag line—“winning the future”—and made the case that the country’s greatest asset in an increasingly competitive global economy will be its tradition of free-enterprise-driven innovation, supported by taxpayer-funded technology R&D and education. “What America does better than anyone else is spark the creativity and imagination of our people,” Obama said.

The president went on to set specific innovation goals, such as extending 4G wireless coverage to 98 percent of Americans by 2016, building high-speed rail lines that serve … Next Page »

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Wade Roush is a freelance science and technology journalist and the producer and host of the podcast Soonish. Follow @soonishpodcast

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4 responses to “White House Startup Investment Coincides with Sweeping Changes for TechStars, Y Combinator, Other Incubators: A Road to Recovery, or Another Bubble?”

  1. AndrewW says:

    StartUpAmerica is just more useless public relations and cheerleading. Of course we should encourage start-ups, but it is much more important to seek breakthroughs.

    Energy is a good example – DOE and private industry have spent $400 billion in the last 20 years on R+D and financing for green technologies and yet we still haven’t found “clean, affordable electricity.” That’s the goal.

    During the last two years DOE (with Stimulus funds) has spent more than $30 billion on “development deals,” primarily for over-priced and under-performing wind and solar schemes. Most of these projects received 100% “loan guarantees” and those loans can never be repaid. They are grants.

    America (and the world) should get serious about finding a breakthrough by offering a $1 billion prize for a solution. DOE should hold an Energy Summit and review ALL potential solutions. We would either find a breakthrough or understand exactly where we are.

    It is delusional to continue to pretend that wind and solar can meet our energy needs – they never will. America has made progress because of competition and reward and now is a good time to remember that, Offer a PRIZE and let’s get busy seeking a real, sustainable solution.

  2. Rob MayRob says:

    I think it would be better if the government stayed out of startups. It’s best left to the private sector.

  3. Has it occurred to anyone that we have a consumer based economy, but no real consumer VCs? Seems odd. A proper number for startup investment would be about $500M and span all industries and geographies. We live in a global community where helping business requires leadership, not the random walk approach.