The Region's Biggest VC Is the Government — and That's the Problem

In most startup ecosystems, the largest cheque-writer is a fund. In the Northeast, it's the government. Between special-category grants, central missions, state startup schemes, and a steady drip of subsidies, the public purse is by far the biggest source of risk capital in the region. This is usually framed as generosity — the state stepping in where private money won't. But subsidised money is never free, and the price it extracts is subtle enough that most people never see it.

The price is a slow rewiring of who founders build for. When the government is the primary funder, the rational entrepreneur optimises for the funder — and the funder is a committee with forms, eligibility criteria, and priorities set in a capital far away. You start designing the business the grant wants rather than the business the market wants. You chase approvals instead of customers. You measure success by disbursement, not revenue. A whole generation of "startups" can come into being that have never once had to survive a paying customer's indifference, because the customer was always a scheme. This is the subsidy trap, and it's more corrosive than simple dependency, because it feels like progress the entire time it's happening.

The tell is what these ventures do when the grant runs out. A business built to win subsidies has learned exactly one skill — winning subsidies — and it's a skill with no market outside the grant office. Real companies are forged by the discipline of having to be chosen, again and again, by someone who could have kept their money. Remove that discipline and you get activity without durability: incubators full of ventures, launch events full of logos, and remarkably few businesses that outlive the funding cycle that created them.

And yet the honest correction has to resist the libertarian reflex, because "so cut all the subsidies" is glib and wrong. The Northeast's private capital markets are genuinely thin; if the state withdrew tomorrow, much of the region's early-stage activity would simply stop, and market failure is a real thing that public money exists to fix. The problem isn't that the government funds. It's how — writing grants that reward the pitch instead of the outcome, the plan instead of the traction, the intention instead of the sale.

The fix is to make public money behave more like the discipline it's replacing: tie it to customers won, not forms filled; to revenue earned, not milestones reported. A government that funds like a patient investor builds companies. A government that funds like a grant office builds grant-writers. Right now the region is producing far too many of the second, and calling them founders.