The startup scene is just a side-effect of all the correct economic, political and social conditions being in the same place. A healthy startup scene is good evidence that your country is strong enough to take risks, but imo not something you can likely just launch into having.
This is such a true statement, and that’s why i’m mad everytime i hear about governments financing start up scene more or less directly. it makes them feel good, because they’re spending huge amount of money, and the poor results are only seen five years later.
In most cases, they're hoping they can take a shortcut and avoid all the long, slow, and most importantly boring-to-voters work of setting the scene for a healthy ecosystem.
Governments that do this are either clueless or thugs. The market doesn't need their money, they need them to define a fair playground and that especially means defining how the state behaves.
You've basically dissed the governments of the US, the UK and the EU, plus every country mentioned in the SCMP report that Malaysia feels it has to keep up with. Good job.
My main experience is with Romania where any such project of encouraging incorporating, giving grants, etc are just excuses at spending money, badly. I would make these illegal. Perhaps other governments are better at managing money.
Maybe even in a place where things don't work very well the state can still manufacture startups because these companies will get the red carpet from every other institution. They are not representative of the overall economy.
Fair enough, that would explain your reaction. To be fair, Malaysia is more like Romania than some of the other countries I've mentioned.
>just excuses at spending money, badly
Yes, and funding startups is just about the perfect excuse, because new businesses often fail. However, the SCMP report also said the government has been giving grants to startups for some time now. Grants to small businesses is something that a lot of governments engage in: it's about trying to create jobs.
>Perhaps other governments are better at managing money
Nah. Other governments just behave better. Funding new businesses is always a "bad" way of spending money, in that most new businesses fail, and nobody has a good way of figuring out which ones will.
>the state can still manufacture startups because these companies will get the red carpet from every other institution.
They may get some prestige, but I'm sure a lot of startups fail eventually.
> >the state can still manufacture startups because these companies will get the red carpet from every other institution.
> They may get some prestige, but I'm sure a lot of startups fail eventually.
Yes, but you are underestimating the ways the state itself may "help" a company fail. Ever had all your accounts blocked for an accounting misunderstanding of $500? Had the state not pay back the money they owe you while they wait on the statute of limitations or companies suing them? Delay VAT refunding thereby reducing your cashflow?
>>>the state can still manufacture startups because these companies will get the red carpet from every other institution.
>Yes, but you are underestimating the ways the state itself may "help" a company fail.
Yes, but this also undermines your point that government-manufactured startups will necessarily get red-carpet treatment.
Like I've said earlier, Malaysia is more like Romania, and the examples you've listed are peanuts compared to the kind of shenanigans you can get in Malaysia.
I mean, this is a country whose PM is a nonagenarian who's made a spectacular political comeback [0], after having defeated his protégé [1] and his former party [2], and who's known for sending another protégé to jail on sodomy charges.[3] It's also a multi-ethnic country where the privileged status of the majority ethnicity is constitutionally protected[4] and backed by active affirmative action policies.[5]
Which is why there's so much skepticism in this thread about the whole thing.
At least in those cases they’re eating their own dog food. They’ll have customer expectation on the startup they’re financing, and they know there’s a market, and the company will be able to deliver ( not to mention the fact that those are fields on the border of national security, which means you can’t just rely on private companies on the market)
In more ways than one would naively assume, I'm sure. Every time a government starts such initiatives to spend a lot of money, some officials will be making plans on how to benefit from it.
The sane, clean way to help startup funding is to incentivise it with tax benefits for investors.
No, the startup scene is a side effect of a lot of money floating around in a place where there is little job security and surplus of people ready to gamble a couple of years of their life in return for a very small chance at success. Only a small fraction of those people will succeed, but just like with the lottery that will be held up as proof of the system working.
The glut of capital and the conditions that shaped Silicon Valley will likely not be paired again for the foreseeable future. That won't stop governments from trying by supplying one part of that equation.
If you want to take a healthy startup scene to prove that your country has the 'correct economic, political and social conditions' then I'm in agreement with the exception of the word 'correct', they are not so much correct as unique and replicating those conditions will come at a price that very few countries and their inhabitants would be willing to pay.
Consider also that inside the United States many places have already tried to imitate SV and it didn't work there either, and yet, the economic, political and social conditions were identical.
>No, the startup scene is a side effect of a lot of money floating around in a place where there is little job security and surplus of people ready to gamble a couple of years of their life in return for a very small chance at success.
Exactly, although the people you're describing are just the founders. There are people in the startup scene who're employees, and for them, getting and keeping a job at a startup for a couple of years, say, is a good enough launchpad for their careers in the industry.
And there's a surplus of such people that needs to be employed. We're experiencing a glut of highly educated people worldwide and academia simply doesn't have the capacity to absorb them. I think I've read on HN recently that there's more funding for startups than academia overall -- and of course I can't find it again -- but here's an actual comment from HN just two years ago:
>Of the cohort of PhD students I went through with, from a rough guess (I haven't taken exact count), the most common role is now "startup CEO", followed by "engineer at enviable company", followed only then by "teaching and research academic".
> No, the startup scene is a side effect of a lot of money floating around in a place where there is little job security and surplus of people ready to gamble a couple of years of their life in return for a very small chance at success, though I'm prepared to admit it'll be very messy without that backup plan.
Aka risk taking. For SWEs clearly they've got job security, otherwise they wouldn't do it. Founders are usually well connected and have enough of a cushion to land safely if the startup crashes. Either way there's plenty of job security in SV.
> I'm in agreement with the exception of the word 'correct'.
I'll agree with you also! Unique is better.
> Consider also that inside the United States many places have already tried to imitate SV and it didn't work there either, and yet, the economic, political and social conditions were identical.
What? There's so much variance just between cities, let alone states. These things are not equally distributed across the US.
> No, the startup scene is a side effect of a lot of money floating around in a place where there is little job security and surplus of people ready to gamble a couple of years of their life in return for a very small chance at success.
That makes no sense. Did Gordon Moore have insufficient job security at Fairchild, so be went and founded Intel? Startup founders are disproportionately from the upper middle class—people who have plenty of security in the US.
> Consider also that inside the United States many places have already tried to imitate SV and it didn't work there either, and yet, the economic, political and social conditions were identical.
Other places in the US can’t imitate SV because of freedom of movement. There are zero barriers to relocating from any part of the US to any other part. So people who want to do a certain kind of tech startup relocate to SV to maximize their chances. The economic and social conditions in the rest of the country don’t really matter. (Which is why government efforts to try and become the next SV are destined to fail.)
Why is American country music concentrated in Nashville? The musicians are from everywhere, (but they move to Nashville). The major record labels are in New York or LA, and so is the capital. What’s special about Nashville?
Silicon Valley and Nashville are best understood as markets. They’re markets for connecting capital to talent. If you want to sell your startup idea (or music act) to investors you go to where the biggest market is, for the same reason you sell your used laptop on eBay instead of somewhere else.
Startup scene is the result of WW2 along the dominant position of the US on the economic miracle of 50-60, that give a chance to create an industry network that will support new initiatives im yhe future. Cant be done with just money like EU and bunch startup gurus want.
First, this kind of thing has been going on for decades. It has been going on in the US with the govt, particularly the military, funding research. 3i, a relatively large PE/VC investors in Europe, started out as a govt-funded body in the UK (there were parallel bodies to the ICFC...I can't remember what they were). Scottish Enterprise is a huge VC investor (they were an early-stage investor in FanDuel).
Second, the concerns that people have are due to issues that are solveable. Controlling how the govt makes appointments, only investing in companies with matched investment from the private sector, etc. It can work. It does work.
Third, the issue that this is meant to solve is the fact that capital markets don't work all that well everywhere. This was the case in the US, it was the case in the UK (and is still the case in the UK), and it may be the case here. Either way, it is a fine and logical solution. If you have experience at the coal face, it is often very evident that investors are not good at this kind of thing (the situation that exists in the US where individuals will fund startups is totally unique, it occurs nowhere else).
>First, this kind of thing has been going on for decades.
Exactly. Silicon Valley itself has its roots in DoD funding. Then, there's a glut of highly-educated STEM people who can do research, and the VC funding. We now have all three in major cities around the world. Surprise, surprise, that's exactly where you would find startup ecosystems.
Everybody sees the tip of the iceberg - the venture capitalists and the tech entrepreneurs, but once you dig deeper, there's a need for
* strong intellectual property protection, be it patents, trademarks, etc.
* minority shareholder protections
* some reasonable liquidity structure, allowing employee compensation to have an equity component without excessive tax burden
* legal protections around embezzlements, self-dealing and various other self-gratifying schemes which can be employed by management with a large bank account at their hand
Those issues don't come up very often in the US, because the rules of the game are quite known.
This sounds less like a cunning plan for economic growth and more like a cunning plan to funnel money into the pockets of the 20-something children of well connected people.
>a cunning plan to funnel money into the pockets of the 20-something children of well connected people.
You're thinking of Silicon Valley/NYC. The money in Southeast Asia is going to washed-up 30- to 40-something financial types who're hoping to make it big with their startup.
But in the end many other factors are also (maybe even more) important. In the case of the EU having different languages, different cultures, different tax systems, different and strong regulations in many areas really does not help.
The EU could create the legal framework for an EU-wide company, that can settle anywhere in the EU, but be liable towards an entity of the EU, not its host country.
I am from the EU and lived in several countries. Had my own company and did a good exit. Now working on another one, operating (tiny scale) in several EU cities.
Edit: never been to SF, so no idea how that is like.
Then you have seen the common market and harmonization of regulations with your own eyes. It's not perfect, but it's getting better by the day.
I have seen many people directly benefiting from EU criticizing it to no end. Very common in East and often due to some other issues (nationalism, immigration etc) and I don't think they will ever be satisfied with anything EU does.
>Ah yes, governements like to think they can create a startup eco system by throwing money at it.
They have to start somewhere. And if they don't, other governments will, as in the case of Malaysia, which lost a home-grown startup to neighbouring Singapore.
>But in the end many other factors are also (maybe even more) important.
That is also true, and is why many people are skeptical when it comes to Malaysia.
"If Malaysia-based capital becomes more involved in the scene, there could be dividends at home, giving the country more leverage to persuade these companies to set up operations within its shores and employ and train locals – a multiplier effect for both capital and jobs, say industry players."
If Malaysian ops is a poor decision if your VC isn't Malaysia, it wouldn't magically become a good decision if your VC is Malaysia. Which suggests that this strings-attached money might not be in the fiduciary interests of the company.
Exits are the number one ingredient for a startup ecosystem. If there’s no market for exits, there’s no investment.
Silicon Valley has the best environment in the world-outside-of-China for exits. Large tech companies are frequent acquirers. Large companies in Malaysia, or Japan, or almost anywhere else, acquire rarely.
Chile tried something similar, with StartupChile which I participated in circa 2011. My impression was that there were some very productive and interesting startups formed, while a lot of money was wasted.
My start-up (now dead) attended the first batch of the MaGIC's Global Accelerator program (GAP) by the Malaysian government in 2017. The talks were bad, the "mentors" were useless and everything was extremely inefficient. Most of the founders who came only stayed for the first few days, realised the situation and dropped their interns for the free co-working space, and left. The whole program smelled like money laundering or nepotism at best. I thought it was satire when I read this headline.
Also, at least >70% of the start-ups in my cohort have died by now. Maybe one or two good ones exited (who were already doing really well before joining).
I'm sorry to hear that. However, Malaysia isn't alone in doing this. A lot of governments are pumping money into developing their own startup scenes, and the article's mentioned the other ASEAN countries that have been doing that, Singapore being the most successful one so far.
And Malaysia will have to do this eventually: they're just fashionably late and playing catch up. You can see with Grab how they lost what was supposed to be a home-grown business to Singapore. Governments everywhere are also seeing how a startup scene can create jobs and absorb the surplus of highly-educated people that universities everywhere are churning out.
Is this the follow-up to the 1MDB investment effort? The 1MDB investment program also had Malaysia step into the shoes of investors.
What's weird about all of these is Malaysia is struggling with an austerity budget, has a fair bit of debt etc. I never fully understand these situations where things like pension funds borrow lots of money to invest in the market to make money. How can you borrow at one rate and earn a higher risk adjusted rate in an efficient market?
I know a bunch of folks in middle east are getting into the Vision fund so I know it does happen, but just interesting. At least they have the actual excess cash.
Have dealt with a number of Malaysian Government groups, including MDEC, InvestKL and MaGIC, etc. The amount of incompetence, basic lack of follow through, and inefficiency are indeed breathtaking.
Bursa Malaysia (the local stock exchange) classifies public listed companies into the following sectors:
1. Basic materials;
2. Consumer cyclicals;
3. Consumer non-cyclicals;
4. Energy;
5. Financials;
6. Healthcare;
7. Industrials;
8. Technology;
9. Telecommunications Services; and
10. Utilities
So, Bursa is largely composed of commodity businesses. It works but shouldn't there be some progress? Is it okay to stick with the status quo?
It's true that there's a potential in these VC schemes for leakage due to self-dealing. But let not the perfect be the enemy of the good. The article mentions several government funds that have been disbursing funding to tech startups for decades, so this is not a totally new thing run by idealists rather than realists.
I understand the skepticism when I read the responses attached. But I've always been confident about Malaysia. Maybe it's just that I'm a patriot.
Considering the hit and miss (lots of miss) nature of startups this seems like it is ripe for corruption. I'd be really worried about direct government involvement in such things.
Matt Levine suggested WeWork was a kind of short on the VC bubble. I guess that if there was a way to short it directly, I wouldn't be the only contra-investor.
Disclaimer: I've been on the sidelines of a government funded VC failure in Christchurch, NZ. Lots of puff, little output.
My impression is these people aren't hypothesis driven. The smart money seems to look at things and say, "I think the world is going to need disintermediation, curation and retribalization, and leapfrog technologies for emerging markets. You either sustain an existing customers business model or you disrupt it, and our business is providing air cover to the latter, and using the former as a hedging instrument." It's a technology macro view. Dumb money says, "we provide growth capital for key technologies that support national sector x, y, z." Straight micro mandate.
From my armchair, I'd assert the difference is smart and dumb money can practically be defined by those with a hypothesis vs. those with a mandate.
A state fund could be smart money, but they would need a lot of freedom to do it - or find funds/funds-of-funds that had the freedom for them, which is what pensions do today. I wonder whether most governments could handle the political risk of the losses from a real VC fund, because the losses just look like slush funds for connected managers.
Not to dump on them, I think some sovereign wealth funds and even treasuries could benefit from being run more like aggressive pension funds, but the trouble with government is there is no way to clear off the project barnacles that attach to anything with momentum. Maybe they will do it differently.
57 comments
[ 3.4 ms ] story [ 125 ms ] threadThey clearly have no clue what an ecosystem is.
Governments that do this are either clueless or thugs. The market doesn't need their money, they need them to define a fair playground and that especially means defining how the state behaves.
See hogFeast's comment:
https://news.ycombinator.com/item?id=21165893
You've basically dissed the governments of the US, the UK and the EU, plus every country mentioned in the SCMP report that Malaysia feels it has to keep up with. Good job.
Maybe even in a place where things don't work very well the state can still manufacture startups because these companies will get the red carpet from every other institution. They are not representative of the overall economy.
Fair enough, that would explain your reaction. To be fair, Malaysia is more like Romania than some of the other countries I've mentioned.
>just excuses at spending money, badly
Yes, and funding startups is just about the perfect excuse, because new businesses often fail. However, the SCMP report also said the government has been giving grants to startups for some time now. Grants to small businesses is something that a lot of governments engage in: it's about trying to create jobs.
>Perhaps other governments are better at managing money
Nah. Other governments just behave better. Funding new businesses is always a "bad" way of spending money, in that most new businesses fail, and nobody has a good way of figuring out which ones will.
>the state can still manufacture startups because these companies will get the red carpet from every other institution.
They may get some prestige, but I'm sure a lot of startups fail eventually.
Yes, but you are underestimating the ways the state itself may "help" a company fail. Ever had all your accounts blocked for an accounting misunderstanding of $500? Had the state not pay back the money they owe you while they wait on the statute of limitations or companies suing them? Delay VAT refunding thereby reducing your cashflow?
>Yes, but you are underestimating the ways the state itself may "help" a company fail.
Yes, but this also undermines your point that government-manufactured startups will necessarily get red-carpet treatment.
Like I've said earlier, Malaysia is more like Romania, and the examples you've listed are peanuts compared to the kind of shenanigans you can get in Malaysia.
I mean, this is a country whose PM is a nonagenarian who's made a spectacular political comeback [0], after having defeated his protégé [1] and his former party [2], and who's known for sending another protégé to jail on sodomy charges.[3] It's also a multi-ethnic country where the privileged status of the majority ethnicity is constitutionally protected[4] and backed by active affirmative action policies.[5]
Which is why there's so much skepticism in this thread about the whole thing.
[0] https://en.wikipedia.org/wiki/Mahathir_Mohamad
[1] https://en.wikipedia.org/wiki/Najib_Razak
[2] https://en.wikipedia.org/wiki/United_Malays_National_Organis...
[3] https://en.wikipedia.org/wiki/Anwar_Ibrahim_sodomy_trials
[4] https://en.wikipedia.org/wiki/Article_153_of_the_Constitutio...
[5] https://en.wikipedia.org/wiki/Bumiputera_(Malaysia)
What about the US government funding of Palantir via In-Q-Tel?
In more ways than one would naively assume, I'm sure. Every time a government starts such initiatives to spend a lot of money, some officials will be making plans on how to benefit from it.
The sane, clean way to help startup funding is to incentivise it with tax benefits for investors.
The glut of capital and the conditions that shaped Silicon Valley will likely not be paired again for the foreseeable future. That won't stop governments from trying by supplying one part of that equation.
If you want to take a healthy startup scene to prove that your country has the 'correct economic, political and social conditions' then I'm in agreement with the exception of the word 'correct', they are not so much correct as unique and replicating those conditions will come at a price that very few countries and their inhabitants would be willing to pay.
Consider also that inside the United States many places have already tried to imitate SV and it didn't work there either, and yet, the economic, political and social conditions were identical.
Exactly, although the people you're describing are just the founders. There are people in the startup scene who're employees, and for them, getting and keeping a job at a startup for a couple of years, say, is a good enough launchpad for their careers in the industry.
And there's a surplus of such people that needs to be employed. We're experiencing a glut of highly educated people worldwide and academia simply doesn't have the capacity to absorb them. I think I've read on HN recently that there's more funding for startups than academia overall -- and of course I can't find it again -- but here's an actual comment from HN just two years ago:
https://news.ycombinator.com/item?id=15380625
>Of the cohort of PhD students I went through with, from a rough guess (I haven't taken exact count), the most common role is now "startup CEO", followed by "engineer at enviable company", followed only then by "teaching and research academic".
Startups are the new academia.
Aka risk taking. For SWEs clearly they've got job security, otherwise they wouldn't do it. Founders are usually well connected and have enough of a cushion to land safely if the startup crashes. Either way there's plenty of job security in SV.
> I'm in agreement with the exception of the word 'correct'.
I'll agree with you also! Unique is better.
> Consider also that inside the United States many places have already tried to imitate SV and it didn't work there either, and yet, the economic, political and social conditions were identical.
What? There's so much variance just between cities, let alone states. These things are not equally distributed across the US.
That makes no sense. Did Gordon Moore have insufficient job security at Fairchild, so be went and founded Intel? Startup founders are disproportionately from the upper middle class—people who have plenty of security in the US.
> Consider also that inside the United States many places have already tried to imitate SV and it didn't work there either, and yet, the economic, political and social conditions were identical.
Other places in the US can’t imitate SV because of freedom of movement. There are zero barriers to relocating from any part of the US to any other part. So people who want to do a certain kind of tech startup relocate to SV to maximize their chances. The economic and social conditions in the rest of the country don’t really matter. (Which is why government efforts to try and become the next SV are destined to fail.)
Why is American country music concentrated in Nashville? The musicians are from everywhere, (but they move to Nashville). The major record labels are in New York or LA, and so is the capital. What’s special about Nashville?
Silicon Valley and Nashville are best understood as markets. They’re markets for connecting capital to talent. If you want to sell your startup idea (or music act) to investors you go to where the biggest market is, for the same reason you sell your used laptop on eBay instead of somewhere else.
SV is all about critical mass, and you're pointing (probably not coincidentally) at the exact point in time where that ball started rolling downhill.
First, this kind of thing has been going on for decades. It has been going on in the US with the govt, particularly the military, funding research. 3i, a relatively large PE/VC investors in Europe, started out as a govt-funded body in the UK (there were parallel bodies to the ICFC...I can't remember what they were). Scottish Enterprise is a huge VC investor (they were an early-stage investor in FanDuel).
Second, the concerns that people have are due to issues that are solveable. Controlling how the govt makes appointments, only investing in companies with matched investment from the private sector, etc. It can work. It does work.
Third, the issue that this is meant to solve is the fact that capital markets don't work all that well everywhere. This was the case in the US, it was the case in the UK (and is still the case in the UK), and it may be the case here. Either way, it is a fine and logical solution. If you have experience at the coal face, it is often very evident that investors are not good at this kind of thing (the situation that exists in the US where individuals will fund startups is totally unique, it occurs nowhere else).
Exactly. Silicon Valley itself has its roots in DoD funding. Then, there's a glut of highly-educated STEM people who can do research, and the VC funding. We now have all three in major cities around the world. Surprise, surprise, that's exactly where you would find startup ecosystems.
* strong intellectual property protection, be it patents, trademarks, etc.
* minority shareholder protections
* some reasonable liquidity structure, allowing employee compensation to have an equity component without excessive tax burden
* legal protections around embezzlements, self-dealing and various other self-gratifying schemes which can be employed by management with a large bank account at their hand
Those issues don't come up very often in the US, because the rules of the game are quite known.
You're thinking of Silicon Valley/NYC. The money in Southeast Asia is going to washed-up 30- to 40-something financial types who're hoping to make it big with their startup.
The EU thinks the same way: https://www.neweurope.eu/article/eu-plans-digital-startup-in...
But in the end many other factors are also (maybe even more) important. In the case of the EU having different languages, different cultures, different tax systems, different and strong regulations in many areas really does not help.
All EU startup hubs are local (eg the Paris startup scene). The main difference to SF is scale and crazy money.
Edit: never been to SF, so no idea how that is like.
I have seen many people directly benefiting from EU criticizing it to no end. Very common in East and often due to some other issues (nationalism, immigration etc) and I don't think they will ever be satisfied with anything EU does.
They have to start somewhere. And if they don't, other governments will, as in the case of Malaysia, which lost a home-grown startup to neighbouring Singapore.
>But in the end many other factors are also (maybe even more) important.
That is also true, and is why many people are skeptical when it comes to Malaysia.
If Malaysian ops is a poor decision if your VC isn't Malaysia, it wouldn't magically become a good decision if your VC is Malaysia. Which suggests that this strings-attached money might not be in the fiduciary interests of the company.
Silicon Valley has the best environment in the world-outside-of-China for exits. Large tech companies are frequent acquirers. Large companies in Malaysia, or Japan, or almost anywhere else, acquire rarely.
Also, at least >70% of the start-ups in my cohort have died by now. Maybe one or two good ones exited (who were already doing really well before joining).
And Malaysia will have to do this eventually: they're just fashionably late and playing catch up. You can see with Grab how they lost what was supposed to be a home-grown business to Singapore. Governments everywhere are also seeing how a startup scene can create jobs and absorb the surplus of highly-educated people that universities everywhere are churning out.
What's weird about all of these is Malaysia is struggling with an austerity budget, has a fair bit of debt etc. I never fully understand these situations where things like pension funds borrow lots of money to invest in the market to make money. How can you borrow at one rate and earn a higher risk adjusted rate in an efficient market?
I know a bunch of folks in middle east are getting into the Vision fund so I know it does happen, but just interesting. At least they have the actual excess cash.
So, Bursa is largely composed of commodity businesses. It works but shouldn't there be some progress? Is it okay to stick with the status quo?
It's true that there's a potential in these VC schemes for leakage due to self-dealing. But let not the perfect be the enemy of the good. The article mentions several government funds that have been disbursing funding to tech startups for decades, so this is not a totally new thing run by idealists rather than realists.
I understand the skepticism when I read the responses attached. But I've always been confident about Malaysia. Maybe it's just that I'm a patriot.
My second thought on reading this headline was “regulatory capture”. Who put it in their head to invest in R&D this way?
I mean, I’ll take this any day over pandering to real estate developers, and especially in a country with such an amazing natural heritage.
https://www.latimes.com/world/la-fg-malaysia-1mdb-hollywood-...
Venture investing is probably even harder to properly police against self-dealing that happens under cover of "a big contrarian vision".
Matt Levine suggested WeWork was a kind of short on the VC bubble. I guess that if there was a way to short it directly, I wouldn't be the only contra-investor.
Disclaimer: I've been on the sidelines of a government funded VC failure in Christchurch, NZ. Lots of puff, little output.
From my armchair, I'd assert the difference is smart and dumb money can practically be defined by those with a hypothesis vs. those with a mandate.
A state fund could be smart money, but they would need a lot of freedom to do it - or find funds/funds-of-funds that had the freedom for them, which is what pensions do today. I wonder whether most governments could handle the political risk of the losses from a real VC fund, because the losses just look like slush funds for connected managers.
Not to dump on them, I think some sovereign wealth funds and even treasuries could benefit from being run more like aggressive pension funds, but the trouble with government is there is no way to clear off the project barnacles that attach to anything with momentum. Maybe they will do it differently.