Outcome driven state funding

Note: This is related to the european GaiaX and my recent experiences.

Funding innovative projects and research with money from the goverment can motivate business units to increase funding for R&D. Especially for smaller companies (SMB) that want to further digitize processes and products, there is nearly never ending pool of options for quick money.

While I like the concept and general - and believe many good outcomes happend - I always think that their might be a better way of spending that much money. The problem lies in the difference between the initial goal (e.g. Adding a software to the current hardware product offering), the real result (e.g. we spent thousands of euros on iPads).

Changing the world with a paper trail

In order to receive funding the company mostly has to provide a good idea, some challenges and the expected (financial) outcomes. In order to complete the funding the company mostly just needs to fill out a papertrail of records and has to release something. The real impact doesn't matter in the long term.

Example GaiaX

The EU wants to become a strong player in the global cloud market with local companies catching up to Amazon AWS or Microsoft Azure. While the consumer market might be lost, the industrial cloud revolution is still an open play therefore money is spent on building the best industrial cloud solution.

A few years into the project millions of euros have been spent. Exampels are showcased on the website. But nothing really changed and there is still not a single "Gaia X Provider" that I could use like AWS. In fairness, they recently published their plan for such infrastructure providers.

That american companies (e.g. Palantir) are now working on GaiaX (and therefore receive funding) might speed up the project but once again is a loss for the initial idea.

Is Venture Capital a better option?

When we want to build large software giants we should spent more of our millions of tax payer euros in venture capital and therefore company building. After all, a german angel gave Google their first check.

Investing small sums in a huge amount of companies and then further push the winners with money is an successfull model. Especially for software that requires iterations and lean thinking its important.

Instead of e.g. spending another 170 million euros on 10 to 15 showcases, imagine a early-stage fund that (co-) invests 50millions into hundreds of small startups or spin-offs and than later investest 100 more millions into the potential winners. It might also work as a signal for further funding.

The difference here: Investors don't care for your plan after you've started. They care for growth and measurable results once the money is gone.

2021-05-29

Philipp ReinerĀ 

is an expert for digital business models. I combine strategy, user experience and software to create a sustainable future today.