Startups' Growing Dependence on US Government Funding Sparks Complexity and Controversy

Startups and the U.S. Government: A Complicated Relationship The relationship between startups and the U.S. government has become increasingly complex in recent years, with a growing number of startups relying on government contracts and funding to drive their growth. However, this connection can also pose significant risks for startups when the government is operational. According to industry experts, the tie between startups and the U.S. government has strengthened due to an interest in using emerging technologies such as artificial intelligence (AI), automation, space exploration, robotics, and climate tech for defense purposes. This has provided a welcome path to capital for many startups. However, when the government ceases to function, as it did starting October 1, these close ties can stifle or even halt progress for startups. On this week's episode of Equity, a podcast hosted by TechCrunch, Anthony Ha, Max Zeff, and Kirsten Korosec discussed how a prolonged U.S. government shutdown poses more risk for startups than in the past, not to mention dampening an active IPO season. "The government shutdown is having a ripple effect on the startup ecosystem," said Korosec. "Startups that rely heavily on government contracts are feeling the pinch, and it's impacting their ability to raise capital and grow." Background research reveals that a growing share of startups have the U.S. government as customers or are aiming for permits and defense-related contracts. When the government is operational, this connection can provide a needed boost and revenue to startups. However, when the government shuts down, these close ties can become a liability. Industry insiders point out that the relationship between startups and the government has changed significantly in recent years. "The government's interest in emerging technologies has created new opportunities for startups," said Ha. "However, this also means that startups are more vulnerable to changes in government policy and funding." In addition to the impact of the government shutdown on startups, industry experts are also discussing the implications of the U.S. government's latest push to take ownership stakes in the tech and industrial sectors. This move has sparked concerns about the potential for government overreach and the impact on innovation. As the situation continues to unfold, startups are being forced to adapt to a rapidly changing landscape. "Startups need to be prepared for the uncertainty that comes with working with the government," said Zeff. "They need to have contingency plans in place and be able to pivot quickly when circumstances change." The current status of the U.S. government shutdown remains uncertain, but one thing is clear: the relationship between startups and the government has become increasingly complicated. As industry experts continue to navigate this complex landscape, it's essential for startups to stay informed and adaptable. Sources: TechCrunch Equity podcast Industry insiders Note: This article was written in a past tense to reflect the fact that the U.S. government shutdown occurred in October 2022. *Reporting by Techcrunch.*