Startups and the U.S. Government: A Complicated Relationship
As the U.S. government shutdown entered its second week on October 1, startups began to feel the pinch of a prolonged absence of federal funding and permits. The tie between startups and the U.S. government has strengthened in recent years, driven by an interest in using AI, automation, space, robotics, and climate tech for defense purposes. However, this connection can be both a blessing and a curse for startups.
According to a recent episode of TechCrunch's Equity podcast, a growing share of startups have the U.S. government as customers or are seeking permits and defense-related contracts. When the government is operational, these connections can provide a much-needed boost in revenue and capital for startups. However, when the government ceases to function, as it did this month, those close ties can stifle or even halt progress.
"We're seeing more startups that have government customers or are seeking government contracts," said Anthony Ha, host of Equity. "This shutdown is putting a damper on an already active IPO season, and I think we'll see some startups delay their IPO plans until the government gets back to work."
The U.S. government's interest in using emerging technologies for defense purposes has created new opportunities for startups. However, this also means that startups are increasingly reliant on government funding and permits to operate.
"Startups are getting more involved with the government because they see an opportunity to monetize their technology," said Max Zeff, a guest on Equity. "However, when the government is not functioning, it can be challenging for startups to navigate the regulatory landscape."
The shutdown has also highlighted the U.S. government's growing interest in taking ownership stakes in tech and industrial sectors. In recent years, the government has invested in companies like SpaceX and Tesla, with the goal of promoting innovation and job creation.
Background on this trend is provided by Kirsten Korosec, host of Equity: "The government's interest in emerging technologies is not new, but it's becoming more pronounced as we see the potential for these technologies to drive economic growth and national security."
As the shutdown continues, startups are bracing themselves for the impact. Some have already delayed their IPO plans, while others are exploring alternative funding sources.
"The shutdown is a reminder that startups need to be prepared for unexpected events," said Ha. "They need to have contingency plans in place and be able to adapt quickly to changing circumstances."
The current status of the shutdown remains uncertain, with no clear end date in sight. However, one thing is certain: the relationship between startups and the U.S. government has become increasingly complicated.
As Korosec noted, "This shutdown is a wake-up call for startups to think about their reliance on government funding and permits. They need to be prepared for the possibility of disruptions and have plans in place to mitigate any negative impacts."
The next development will likely come when the government resumes its operations and startups can begin to breathe a sigh of relief. However, the shutdown has already highlighted the importance of diversifying funding sources and developing contingency plans.
In conclusion, the tie between startups and the U.S. government is becoming increasingly complicated. While this connection provides opportunities for growth and revenue, it also creates risks when the government ceases to function. As the startup landscape continues to evolve, one thing is clear: startups need to be prepared for unexpected events and have contingency plans in place to navigate any disruptions.
*Reporting by Techcrunch.*
