Letting politicians decide which startups get funded and which don't seems like an inevitable way to let politics get in the way of merit:
- Politically-connected startups get funded first
- Political goals other than merit (diversity, "social justice," etc) are used as criteria
- Arbitrary political limitations get placed on the company ("you can't do business with anyone who [performs abortion | does business in Libya | employes illegal immigrants | uses e-Verify...]")
- Startups are steered toward political ends rather than growth ("while you're here, why don't you make a version of your app that teaches kids about [why immigration is good | why immigration is bad | why CO2 is evil | why CO2 is necessary to plant life]")
- etc.
Beyond even that, it's a really tough gig to identify succesful startups from bad startups. Venture funds do it full time and are right only 1-in-5 times. Imagine your favorite city bureaocrat (who gets paid a city bureaucrat wage) trying to figure out if Spotify will be succesful or not. The best VC teams are not suddently going to work for the city government.
In short, you get what you deserve when you put politicians in charge of doling out money, especially in a context that has so much discretion.
I don't see a fund ever happening specifically for these reasons. Any state/federal dollars given to a startup will very quickly result in someone making the powerful and valid argument "I don't want my tax dollars going towards [some sensitive activity/company/person]". Tax breaks on the other hand make that argument much less meaningful.
Government-run funds are doomed to be crap. I'd much rather have it go towards entrepreneurial education or something. Teach more young people about the idea of starting their own company. They'll do the rest.
There is a way to get money from the government funds now for your startup. One of the companies I work with went after grants (and were awarded them) to help develop our technology.
You have to attempt to solve a problem that those offering grants care about, but I think this is an often overlooked opportunity for startups.
I won't be holding my breathe for a fund here in LA.
LA has tons of tax breaks for new and small businesses. As a new business or one making less than $100k you pay no city taxes at all.
I have actually been quite surprised by how accommodating such a large city was in facilitating tax breaks towards starting my business there. The city clerks actually called me up and helped me file for deductions after I had completely missed deadlines.
Anyhow the problem with LA as a startup culture has a lot to do with the proximity of Hollywood. People dream big, and have a tendency to ignore the more pragmatic aspects of building a business over the long term. Businesses in LA tend to go big and flame out very quickly. It doesn't help that its relatively common for LA startups to be funded by dumb money from someone who made their bucks as a big dreamer. LA is unique because of its lack of tempered pragmatism, but unfortunately and ironically I feel like for a startup culture, thats its undoing...
- Politically-connected startups get funded first
- Political goals other than merit (diversity, "social justice," etc) are used as criteria
- Arbitrary political limitations get placed on the company ("you can't do business with anyone who [performs abortion | does business in Libya | employes illegal immigrants | uses e-Verify...]")
- Startups are steered toward political ends rather than growth ("while you're here, why don't you make a version of your app that teaches kids about [why immigration is good | why immigration is bad | why CO2 is evil | why CO2 is necessary to plant life]")
- etc.
Beyond even that, it's a really tough gig to identify succesful startups from bad startups. Venture funds do it full time and are right only 1-in-5 times. Imagine your favorite city bureaocrat (who gets paid a city bureaucrat wage) trying to figure out if Spotify will be succesful or not. The best VC teams are not suddently going to work for the city government.
In short, you get what you deserve when you put politicians in charge of doling out money, especially in a context that has so much discretion.