The U.S. government is successfully investing in local startups

The U.S. government plays an important role in increasing the number of unicorns

The United States leads the world in the number of unicorns, or companies valued at over US$1 billion. The U.S. government facilitates the growth of such startups. It provides significant support for business development.

This trend indicates the state’s growing role in the private sector. Additionally, venture capital inflow is crucial for various sectors. For example, the government has increased its budget for the defense industry. Increased spending on the sector stimulates the development of projects in the field of national security. Many of these startups are becoming attractive to venture investors.

However, alongside support measures, steps are being taken that could curb investment activity. For instance, the new White House administration is considering eliminating clean energy subsidies. This could negatively impact investment flows in this area.

Commonweal Ventures Study

Commonweal Ventures conducted a study on the role of the state in developing the private equity market. The results were as follows:

1. 24% of American unicorns received government funding.
2. Both federal and municipal governments provided support.
3. From 2003 to 2023, the government invested approximately US$100 billion annually in the private sector.
4. The average year of establishment for these companies was 2012. At the time of their establishment, these companies were valued at an average of US$1.7 billion.
5. By 2023, these companies’ value had grown to US$8.3 billion.

Support came in the form of grants, subsidies, public-private partnerships, direct capital investments, and other mechanisms. Thus, government support plays a vital role in shaping a sustainable venture ecosystem, especially in strategically important sectors of the economy.

Advantages of support

It is worth noting that startups are highly interested in government assistance. Depending on the requirements, they are willing to alter their business models to obtain funding. A striking example is DraftKings, a company valued at US$17 billion. Initially, it specialized in fantasy sports, but after sports betting regulations tightened in 2018, it changed direction.

Applicants for funding represent various sectors. OpenAI, for example, received grants for AI research and development. The CIA’s venture capital division invested in Palantir. Tesla received a US$465 million loan from the Department of Energy in 2010. The electric car manufacturer still benefits from various tax breaks today.

Government support is particularly relevant for those in the healthcare, energy, and utilities sectors.

The government’s cooperation with IT companies deserves special attention. These startups provide products and solutions used to modernize government infrastructure and implement digitalization programs. In this case, financing is a form of partnership that benefits both parties, not just an investment.

Thus, government investment in private companies creates an effective interaction model that promotes innovation. However, cutting subsidies in a number of industries could negatively impact venture activity. It will be more difficult for promising projects to obtain the necessary capital.