How Will President Biden’s Budget Impact Breakthrough Science Startups?
President Joe Biden unveiled a $5.8 trillion budget request this week that includes a number of provisions that could impact deep tech and breakthrough science startups. While a president’s budget is mostly a grab bag of policy proposals that will never get passed at their requested levels, this budget is an interesting messaging document that sets the parameters for a lot of congressional activity (and political jockeying) during the remaining months of the 117th Congress.
For those involved in deep tech and breakthrough science, there is a great deal to be excited about in Biden’s budget (and a few things to be concerned about). Here are some of the key proposals that could have the biggest impact on startups across Prime Movers Lab’s six investment sectors if they get congressional support:
Taxes
While not directly related to scientific breakthroughs, the changes to the tax code in President Biden’s budget would have a far-reaching impact on the startup community. The White House included measures that would add up to the biggest tax increase in history (in dollar terms). Biden is calling for more than $2.5 trillion in tax hikes over the next decade. The most dramatic would be a 20% minimum tax on the unrealized capital gains for individuals/households worth at least $100 million. Depending on how the ultimate tax changes are written, this could force some startup founders to sell shares of their company just to pay tax bills because much of their wealth is tied up in company equity. Biden’s budget also proposed increasing the corporate rate to 28% from 21% and increasing income tax rates to 39.6% on married couples filing together with taxable income over $450,000. These seem highly unlikely to pass because moderate Democrats like Sens. Joe Manchin (WV) and Kyrsten Sinema (AZ) have expressed hesitation in the past. House Democrats didn’t even include the famous billionaire’s tax in their budget last year.
Agriculture
To tackle the climate crisis, the budget invests $24 million in the Department of Agriculture’s “climate hubs” — a multi-agency program to leverage climate science and help landowners combat climate change. The administration is clearly trying to integrate science-based tools into conservation planning in order to “measure, monitor, report, and verify carbon sequestration, greenhouse gas reduction, wildlife stewardship, and other environmental services.” The impact of climate change on agriculture is one of the main reasons we led a financing round in Upward Farms, which uses aquaponic indoor vertical farming techniques to produce microgreens, baby greens, and fish.
Energy
To support the development of technologies that accelerate the transition to a net-zero emissions economy by 2050, the budget invests $9.2 billion in the Department of Energy's clean energy research and development programs— a 33% increase from the 2021 enacted level.
Investments in clean energy infrastructure are also a priority with $2.1 billion in new investments included in the budget. Of that, $150 million would be allocated to the Office of Clean Energy Demonstrations to scale renewable and distributed energy technologies such as hydrogen hubs, energy storage, advanced nuclear reactors, carbon capture and storage, grid infrastructure, and other clean energy infrastructure projects. In addition, the budget includes $90 million for a “Grid Deployment Office” to build a more reliable and resilient grid and $58 million to launch the Net-Zero Labs Initiative, which would fund clean energy projects across the national laboratories to strengthen “clean energy-enabling transmission and distribution systems, decarbonize transportation, advance carbon management technologies, improve energy efficiency.” All of these are major areas of focus for Prime Movers Lab.
The budget also includes a “historic investment” of $7.8 billion for the Office of Science at DOE to “support cutting-edge research at the national laboratories and universities, including biotechnology and biomanufacturing, and support the Cancer Moonshot initiative” (more on cancer research next). In addition, the budget outlines $700 million for the Advanced Research and Projects Agency — Energy (ARPA-E) to focus on “high-potential, high-impact research and development.” Prime Movers Lab will continue to monitor these programs as they move their way through the budget and appropriations processes.
Health
While President Biden’s budget appears light on neuroscience and human augmentation research, perhaps the most impactful proposal in the budget is tasking the newly created ARPA-H, the National Cancer Institute, the Centers for Disease Control and Prevention (CDC), and the Food and Drug Administration (FDA) with reducing the cancer death rate by at least 50% over the next 25 years. It will be fascinating to watch the progress made by these agencies in the ensuing years.
Transportation
America’s burgeoning space industry could get an $88 million infusion (compared to $10 million in FY 2022) to expand “opportunities for civil space situational awareness” and support the “long-term sustainability of the space environment.” Much of this ($30 million) will go to the Office of Space Commerce to “improve real-time tracking and reporting of space objects and debris” — which is a growing area of interest for Prime Movers Lab. Check out Partner Christie Iacomini's recent webinar on the topic here.
NASA is one of the biggest winners in Biden’s budget. Biden requested $26 billion for NASA, roughly $2 billion more than the agency received this year. About a third of that budget would go toward enhancing U.S. human spaceflight, including NASA’s Artemis program — the agency’s ambitious program to return to the Moon as early as 2025 and test technologies for exploring Mars.
While International Space Station operations appear to be funded until the end of the decade, the budget allocates $224 million for commercial space stations like the one being developed by portfolio company Axiom Space.
As for Department of Defense funding, the budget clearly reflects heightened tensions with China and Russia. Despite pulling out of Afghanistan last year, Biden is calling for $813 billion in defense spending — a $30 billion increase compared to last year. Two of the more interesting items buried in the budget are the 35.4% increase in funding for the Space Force (more than any other military branch) and the $4.7 billion earmarked for hypersonic weapons, which we’ve tracked over recent months given the conflict in Ukraine and China’s rush to advance these weapon systems.
Lastly, the Transportation Department would get $1.4 billion to modernize electric-vehicle charging stations and support Biden’s goal of ensuring half of all new vehicles in the U.S. be emissions-free by 2030.
Infrastructure
Building on the $65 billion for expanding broadband internet access in the Bipartisan Infrastructure Law (which I previously wrote about here), the budget provides $600 million for the ReConnect program, which provides grants and loans to deploy broadband to unserved and underserved areas. Closing the digital divide is a huge priority of Prime Movers Lab portfolio company Tarana Wireless, which uses next-generation fixed wireless technology to expand broadband access.
The budget also includes $13 million for “cutting-edge advanced communications research and engineering” at the National Telecommunications and Information Administration (NIST) and a $187 million increase for research initiatives at NIST that would focus on “developing standards to accelerate adoption of critical and emerging technologies with a focus on artificial intelligence, quantum science, and advanced biotechnologies.”
Manufacturing
To help ignite a resurgence of American manufacturing, the budget provides $372 million (a $206 million increase from the 2021 enacted level) for NIST manufacturing programs. If enacted, this funding would launch two new Manufacturing Innovation Institutes next year and expand the Manufacturing Extension Partnership, providing an increase of $125 million to make America’s small and medium manufacturers more competitive. In addition, the White House proposed a new $200 million “Solar Manufacturing Accelerator” to improve the domestic solar manufacturing sector, and reduce our reliance on solar panel manufacturers overseas.
Science Research
The budget provides $880 million to the Directorate for Technology, Innovation, and Partnerships within the National Science Foundation to “expedite technology development in emerging areas that are crucial for U.S. technological leadership, including trustworthy artificial intelligence, high-performance computing, disaster response and resilience, quantum information systems, robotics, advanced communications technologies, biotechnology, cybersecurity, advanced energy technologies, and materials science.” Again, those priorities cut across a number of Prime Movers Lab’s sectors, which will be interesting to track this year.
What does this mean for breakthrough science startups?
While many of these programs will be funded at lower levels and some will not be funded at all, Biden’s proposed budget represents a clarion call for action on many of the biggest problems facing not only the United States but the world. If the majority of these proposals are fully funded, it will shift the federal government to a new era of science-backed policymaking and problem-solving that is desperately needed to solve the world’s largest problems.
Prime Movers Lab invests in breakthrough scientific startups founded by Prime Movers, the inventors who transform billions of lives. We invest in companies reinventing energy, transportation, infrastructure, manufacturing, human augmentation, and agriculture.
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