Venture Capital Has Lessons for Government and Philanthropy

by Aishwarya Khanduja (Analogue Group) and Stuart Buck (Good Science Project)

Most basic science in the US is funded either by government or philanthropy, which collectively donate over $100 billion every year. Traditional government funding offers three things private investors usually can’t match.

• Democratic accountability: agencies like NIH and NSF have deployed billions of dollars guided by public interest rather than profit.

• Massive scale: government has created scientific infrastructure that required collective action at scale, such as particle accelerators, the Hubble Space Telescope, and national laboratories.

• Long-term thinking: Agencies maintain decades-long research programs whose benefits emerge only over generations, such as (D)ARPA funding the R&D in the 1960s that eventually became the Internet.

Philanthropy has its pluses as well. The Gates Foundation could pour billions into malaria research because of the effect on global health, not because it would generate returns.

Government and Philanthropy Have Serious Structural Rot

Despite their historical successes, both traditional government and philanthropic funding have developed structural pathologies that actively hold back scientific progress. We think they should do more to imitate the VC model of funding that has enabled the startup scene in Silicon Valley and elsewhere.1

Government’s Bureaucratic Nightmare

To paint a picture of what traditional government funding looks like: imagine that you are a brilliant researcher with an idea that could transform your field, if it works. You spend six months writing a grant proposal that can stretch to over 100 pages in total, in which you need to predict the next five years, specify your methods in detail, and provide preliminary data proving your idea works (even though you need the grant money to generate that data in the first place).

You submit this proposal to NIH or NSF and wait for many months while your proposal is reviewed by scientists who are often your intellectual competitors. As is well-documented, review committees tend to favor safe, incremental projects over truly new ideas that might fail.

By the time you get the funding (if at all) and execute the research plan, you might learn that your first idea wasn’t quite right and that an even better approach might work (*Marcia McNutt told one of us that this is what regularly occurred when she was a practicing scientist). But if you try to amend the grant, you will need to navigate the federal bureaucracy once again.

Imagine if entrepreneurs—from ...