As the FT has noted this morning:
Start-up failures in the US have jumped by 60 per cent over the past year, as founders run out of cash raised during the technology boom of 2021-22.
They added:
According to data from Carta, which provides services to private companies, start-up shutdowns are rising sharply, even as billions of dollars of venture capital gushes into artificial intelligence outfits. Carta said 254 of its venture-backed clients had gone bust in the first quarter of this year. The rate of bankruptcies today is more than seven times higher than when Carta began tracking failures in 2019.
It could be argued that this is what happens in the venture capital world: not all ideas work. And I would agree. Back in the dot.com era, I was involved with a venture capital start-up that did work, in the end. So, it could be said that this is not news.
But I would disagree for three reasons.
First, this is a high rate of failure, implying a lack of due diligence and an excess of hubristic enthusiasm that will have wasted billions.
Secondly, the whole assumption that AI is the next big thing might be wholly misplaced. I do not, for a moment, doubt that there are tasks that can be automated by AI in ways that are useful. But whether that is quite as revolutionary as some - like the Tony Blair Institute, that has a wholly malign influence on our government - think is very much open to doubt. There is considerable naivete on the part of many AI exponents on the scale of the likely human reaction to AI in the workplace, which could be deeply negative.
Third, with so much doubt about the basic use and plausibility of this technology, I am not, unlike Rachel Reeves, convinced that this is where large quantities of pension fund money should be going. I am even more convinced that the pension funds of the UK's local authorities should not be used for this purpose.
Venture capital is about very high risk. Pension funds are not. I question whether they should have any role in this. A national investment bank might. Regional investment funds might.
But before even concluding that, let' ask something much more important. That is whether having basic infrastructure, like hospitals that do not rely on scaffold poles to hold the roof up, and schools that are not likely to collapse, might be a bigger government priority? If Rachel Reeves had wanted to be a venture capitalist, that is what she should have done. She says she wanted to be Chancellor. Why not get public services whilst also ending child poverty right in that case? That would seem to be the actual priority.
I keep asking myself, does Rachel Reeves know what she is really about? The trouble is, I cannot find an appealing answer.
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How is your “vertigo” this morning?
The world is spinning still, but better than yesterday
A drug has been given for it, and it seems to be helping. Or, maybe, I am just getting better
Here is a quotation for Rachel Reeves:
« The belief that one’s own view of reality is the only view of reality is the only view of reality is the most dangerous of all delusions. » ( Paul Watzlawick)
More evidence Reeves isn’t up to the job withdrawing demand from the economy:-
https://www.theguardian.com/money/article/2024/aug/19/winter-energy-bills-rise-great-britain-price-cap
This is always a probable issue when you work for the few not the many!
What will Rachel Reeves’s response be to manufacturers telling her lack of investment in Britain’s transport network is making exports and doing business more expensive than need be? Will “Blackhole” Reeves be doing a Thatcher (the equivalent of government has no money of its own) and telling them the blackhole has got bigger so no can do such investment to help the economy grow! Or will she respond with rip-off PFI’s? Either way she simply isn’t up to the job of helping the country as a whole!
Oops forgot the link:-
https://www.theguardian.com/business/article/2024/aug/19/labours-autumn-budget-must-reverse-decade-of-decline-in-uk-infrastructure
The question I suggest is what should be The Chancellors priorities, I suggest it should be ‘sticking to the knitting’ and looking at essential Government expenditure and let the Dept of Industry or whatever its called these days look at whatever Industry & Business are up to.
“Actions speak louder than words” seems to me apposite here.
It’s a mess for labour, and it’s all their own doing.
Most venture capital goes into growth phases in early startup years not the initial innovation, and it seems this current crop of failures is more to do with the financial markets of the past few years than the intrinsic strength of the companies. As the FT piece says:
‘Peter Walker, head of insights at Carta, said there had been a “huge drop” in the number of companies able to raise money again within two years of their last funding round.
That is particularly galling for start-ups that have slashed costs to survive over the past two years, sacrificing growth in the process. “The advice shifted . . . VCs [were] telling you to grow at all costs, then to be profitable tomorrow,” said Walker. “If you’ve curtailed your growth with cuts then it’s maybe not a VC business.”’
And:
‘According to Jones, the Kruze clients that are successfully raising a second round of funding this year are increasing revenues at an average of 600 per cent annually.’
As for the government role, many startups are born from where the most risk is, basic research that industry/VCs won’t touch, and government agencies/universities are the key enablers. The direction in my view should be for government to secure funding and public returns for what the public invests in but only for what is needed. Eg: new drugs that do something, not ‘me too’ cash cows.
Labour has pulled the plug on investing in things like supercomputing that I’d say we need to fuel applied research and startups.
See this article from The Scotsman on Wind “Green Energy”. What is going on in the UK? Scotland should be ground zero for renewable wind energy. Does Rachel Reeves even care?
https://www.scotsman.com/news/politics/snp-scottish-government-scotwind-renewables-manufacturing-4746518?utm_campaign=scot-news-api&utm_medium=email&_hsenc=p2ANqtz–I8Q1TaxAgqkN-3c35xXjBJxotb7lAHYOuQlXrKhhba8CQmtUPlnWqn-RnPf9R1gjeKySOU1RLuil3zx7FYAuIevQDZg&_hsmi=320650911&utm_content=320650911&utm_source=hs_email
You know BTB, I have a friend in Canada and the question she most asks me lately is “What the Hell is going on in the UK?” We’re through the looking-glass here. We accept it as normal because these days it is 🙁
I try and learn as much as I can about he UK because it does help me analyze and reflect on problems in the USA.
However, I do not understand how one “government can pass bills for a Northern Powerhouse & HS2 and then the next government can just act as though the bills do NOT exist.
I also do not understand how the UK (England???) expects to complete with the EU and NAFTA (USA, Canada & Mexico) without having proper transportation infrastructure, education & training infrastructure, civil infrastructure and social infrastructure in place and functional.
I am not of the delusion that the US is perfect or a leader in these areas but there are systems in place that work.
Also, I do not understand all the local complaints about Jeremy Clarkson and “Clarkson’s Farm” aggressively “egged-on” by some local council in Oxfordshire. “Clarkson’s Farm” is ALL private money and attracts middle to well-heeled tourists from all over the world. This is private development money at work on the grassroots community level at its best.
If Jeremy Clarkson wanted to come Florida and develop a “Clarkson’s Farm”, as “Disneyfied” as it may be, Florida would say “bring it on”. He probably could get a private development grant from the Sate of Florida to cover some of the development costs for this world known tourists attraction.
To tackle all this would take too much time
But re ignoring law, a government can simply decide not to use a law and there is nothing anyone can do about it. Basically, this is use of the Royal prerogative.
And re Clarkson, he broke planning laws and created significant stress in his community. That does not go down well, in either case. He could have worked with the community. It seems unlikely he did. That’s not the way to get on.
“And re Clarkson, he broke planning laws and created significant stress in his community. That does not go down well, in either case. He could have worked with the community. It seems unlikely he did. That’s not the way to get on.”
This is true to some degree BUT (this is a BIG “but”) based on what was shown on TV the situation was much more complicated. The appeal “investigator” reversed the councils decision to “shut him down”.
Do not understand why so many English councils hate film & television production. The State of Florida goes after film & television production with a gusto that includes grants and development funds.
Tne reason is simple: they demand space and create disruption because we hacve little of it
And I live in a place were a lot of films are made (ELy Cathedral is popular for such things)
I am not an expert in renewables but I do know that offshore wind turbines are many times more expensive both in creation and upkeep than land based wind turbines. Accordingly, I understand the profits to be made on land turbines are much quicker and larger. If my suspicions are correct England will soon be seeing thousands of fast and dirty turbines popping up all over the place. Similar to what has happened here in Northern Ireland in the past decade. It will make a few people, especially big land owners, a lot of money. A number of engineering companies in Belfast are busy manufacturing turbines for GB.
I genuinely don’t get the problem with wind turbibnes
I know they are noisy near houses
I don’t find them unsightly, if anything the exact opposite
I don’t like the bird risk – but many more die hitting glass, and always will
“I genuinely don’t get the problem with wind turbibnes”
Donald Trump claims wind turbines kill birds and cause cancer.
People actually believe this.
I seem to recall, from many years ago, that VC assumed that, out of 10 investments, 7 would fail , 2 were ‘zombies’ and 1 would make the whole process worthwhile.
Another case of doing anything but he right thing in my view because she is obsessed with her playing to the expectations of political paymasters.
Plus markets are boom and bust. Venture capitalists know this and have plans for getting through bust years. A bust may be the best time to invest because (1) others are cash-poor so you get good value, (2) possible start-ups will be higher quality and (3) it may be boom when the start-up reaches scale.
A start-up investment is a BET noit a bank account.
From what I can see AI has totally different possibilities depending upon on which nerd is speaking. In the future it will no doubt fit into the IT infrastructure but I would rather my pension fund was less adventurous.
Nobody should invest in, spend time on, or trust artificial intelligence without having first read Asimov. All the “Robots” and the entire “Foundation” series.
The thinking has all been done. It doesn’t need to be done again it needs to be solved.
Or left well alone.
“…does Rachel Reeves know what she is really about?”
Like hell she does.
She hasn’t a [expletive deleted] clue.
Personal aggrandisement is the best explanation I can suggest.
Sara, offshore turbines are more expensive but not “many times”. And they generate more power ads winds are greater and more consistent. To REPLACE fossil fuels we need a lot of turbines.