State property,venture capital and the urbanisation of state capitalism

Abstract

To sharpen the conversation between urban studies and ‘new state capitalism’, I argue that studies of the state's role as a venture capitalist in the urban process may be developed along four lines: (1) expounding where logics of state-backed venture capitalism fit within shifting repertoires of urban entrepreneurialism; (2) specifying how the injection of state-owned capital in start-ups facilitates processes of both real and financial valorisation, thereby altering urban relations of production; (3) analysing state-backed venture capitalism in light of emerging forms of ‘derisking developmentalism’; and (4) foregrounding geopolitically infused techno-nationalism as a potentially significant driver of state-backed venture capital.

Introduction: The rise of state-backed venture capitalism

Governments across the world are increasingly acting as direct participants in venture capital (VC) markets, either by operating fund-of-funds (that is, investing in VC funds managed by private managers) or by directly investing through their own VC funds. Examples of state-owned venture capital (SVC) funds include British Patient Capital, the European Innovation Council Fund, Széchenyi Funds (Hungary), Karnataka Information Technology Venture Capital Fund (India), Fortune Venture Capital (China), the Australian Innovation Fund and Merah Putih Fund (Indonesia). Many sovereign wealth funds and national development banks, such as Bpifrance, the Business Development Bank of Canada, Banco Português de Fomento and Chile's Corporación de Fomento de la Producción, have also launched VC arms.

The global expansion of the state's role as a venture capitalist reflects governments’ desire to leverage the much-vaunted buoyancy of VC markets and the business acumen of VC investors as means to finance technological innovation, facilitate the creation of start-ups, boost the competitiveness of small-and-medium enterprises and foster growth-oriented urban development. The promise of commercial innovation, ‘disruptive’ entrepreneurship and transformative technologies is indeed particularly enticing in an age of low labour productivity gains, lacklustre economic growth and pressure to compete in high tech.

Su and Lim's (2025) (excellent) research agenda ‘urban state venturism’ suggests analysing this phenomenon in light of two scholarly debates: (1) the place of the state in the capitalist urban process, and (2) the ‘new state capitalism’ (the latter understood as the recent expansion of the state's role as industrial policy actor, investor-shareholder and direct owner of corporate entities across the world economy; cf. Alami and Dixon, 2024; Whiteside et al., 2023). Efforts to draw these two fields together have been scant (with important exceptions considered below). Fostering a dialogue between them has the potential to yield productive insights into the contemporary nature of urban governance and can help us theorise the new state capitalism as an urbanised formation.

Placing state-backed VC in urbanised state capitalism

Su and Lim offer several generative ways to explore the role of the urban in the making of state-capitalist geographies. First, SVC is a useful empirical entry point to theorise the urban as a strategic site of materialisation of state capitalism, where state-capitalist modalities (such as state-backed investment and industrial policies) touch ground and articulate to each other; where state-capitalist entities (sovereign funds, state-owned enterprises, city-regional government actors) meet and interact; where state spatial projects and corporate strategies intertwine; and where various forms of state and private ownership fuse together (Goulding et al., 2023; Hall, 2023; Ward et al., 2023).

Second, a focus on SVC can help us think through the role of state property in the (re)production of authoritarian urbanism. In an early attempt at bridging state capitalism and urban geography, Shatkin (2014) examined how the Singaporean state uses it landed property and ownership of corporate entities as means to manipulate urban space and secure political hegemony. More recent contributions emphasise the role of state-coordinated urban infrastructure mega-projects in consolidating authoritarianism (cf. Kinossian and Morgan, 2023). Future research may determine the extent to which SVC contributes (or not) to such tendencies.

Third, SVC offers an interesting case to reflect on the financial and investment operations of state-owned corporate entities, and their role in achieving development objectives while simultaneously accelerating the financialisation of urban space (cf. Wu et al., 2022; Whiteside, 2023). Fourth, analysing SVC can shed light on the relationship between contemporary state capitalism and attempts to mitigate some of the urban contradictions of neoliberalism, such as widespread market failures, the poor delivery of infrastructure and public services, extreme forms of uneven development and the intensification of geoeconomic competition between city regions (MacKinnon et al., 2023; Schindler et al., 2023).

Urban state venturism as urban entrepreneurialism?

In defining ‘urban state venturism’ as ‘the transposition of state institutions into venture capitalists to strategically select and finance firms with innovative potential in targeted urban regions’ (2024: 3), Su and Lim position SVC within debates on the nature of contemporary urban governance. This conceptual move is germane: so far these debates have had little bearing on state capitalism studies. (Reciprocally, SVC and state ownership have featured little in urban governance scholarship). That said, I argue that the conceptual contours of urban state venturism could be further defined in two ways.

First, by articulating it with related arguments concerning the transformations of national and municipal governments as they aim to develop and harness the fast-growth potential of tech-driven start-ups and entrepreneurial ecosystems. For instance, Levenda and Tretter diagnose a shift from the ‘entrepreneurial city’ to the broad ‘valorisation of entrepreneurship as the dominant pathway for urban economic growth’ (2020: 90). Moisio and Rossi identify the emergence of the ‘start-up state’, which ‘seeks to capitalise on the endogenous entrepreneurial capacity of urban environments’ (2020: 537). Thompson et al. write on municipalities’ adoption of ‘more interventionist and entrepreneurial roles in developing local economies, generating alternative sources of revenue or financialising existing assets’ (2020: 1171). There are clear overlaps and potential synergies between these conceptual proposals and urban state venturism. Future work on the latter may therefore specify how it complements, nuances or modifies them.

Second, the analytical value of urban state venturism could be enhanced by fleshing out more systematically where it fits within shifting repertoires of urban entrepreneurialism (Phelps and Miao, 2020). Su and Lim argue that urban state venturism displays affinities with ‘urban intrapreneurialism’ and its hallmarks of well-designed industrial priorities supported by in-house bureaucratic innovation. But consider Web3 Fund, a French state-backed VC fund-of-funds specialised in crypto and blockchain tech, including NFTs. Difficult to find here evidence of meticulously crafted urban intrapreneurialism. Rather, this seems to be a case of state actors succumbing to ‘fad investing’ and uncritically adopting VC's ideologies of market-disruptive innovation. (Which, it must be said, is consistent with French President Macron's ludicrous sloganeering: ‘France as the start-up nation’). Beyond this particular example, the extent to which the proliferation of SVC reflects the capture of urban governance by techno-utopian imaginaries may have implications for how we assess the developmentalist potential of urban state venturism (further discussed below).

Su and Lim also draw interesting parallels between urban state venturism and ‘urban speculation’: both strategies consist of the state willingly assuming high risks and engaging in speculative activities to exploit market opportunities, often offering handsome returns to private interests. The similarities are particularly striking with ‘land value capture’ strategies (cf. Purcell and Ward, 2023). Both rely on the inflation of the commercial value of state property – public land in one case, start-up equity shares in the other – as the condition for delivering spatio-economic policy. Both strategies can therefore be seen as instances of asset-based state rentierism.

Yet there are also crucial differences, which become visible when we probe into the material basis of these processes of asset-price appreciation and analyse how they lay claim to a portion of surplus value (cf. Purcell, 2023). ‘Land value capture’ policies are rooted in the capitalisation of expected future ground rent payments into property values. The source of value appropriation here is the financial valorisation and capture of ground rent, which becomes the object of contestation between the state, developers, investors and mediated by urban governance, land planning, financial viability models and state subsidies (cf. Purcell and Ward, 2023). By contrast, SVC consists of the injection of interest-bearing capital in privately held start-ups in exchange for equity stakes. ¹ This injection performs a dual role (Kampmann, 2024). It enables a process of real capital valorisation (the expansion of business operations, the purchase of capital equipment and labour power, etc.). Simultaneously, it facilitates a process of financial valorisation, which consists of boosting the monetary value ascribed to the equity shares, on the basis of the capitalisation of (risk-adjusted) expected flow of future corporate profits. The financial gain is realised at the moment of ‘exit’, when ownership titles – and therefore claims to future income – are transferred to private owners (via an initial public offering or acquisition by a large tech firm). It consists in the monetary ante-validation of future surplus value appropriation.

Put differently, land value capture and SVC intervene in urban relations of production in qualitatively different ways. Both mobilise state property for the sake of growth-oriented urban development, but on the basis of distinct class relations. Bringing them together under the rubrics of ‘urban speculation’, assetisation and rentierism risks papering over fundamental differences in their relationship to the phenomenal forms of value. This is an important lesson for state capitalism studies, and for the associated project of theorising the state's multifaceted role in the capitalist urban process.

State-owned venture capital as ‘derisking developmentalism’?

Su and Lim encourage us to reflect on ‘[w]hether urban state venturism represents a speculative extension of state developmentalism’. There is indeed an interesting paradox. On the one hand, plenty of cases display developmentalist orientations, such as where SVC is used as a tool to compete in the race to design advanced semiconductors and clean tech, or to ostensibly mitigate uneven regional development. On the other hand, cases abound where SVC is predominantly about deepening VC markets and altering risk/return profiles, often to the benefit of private actors. The proliferation of SVC fund-of-funds (or ‘guided funds’) also suggests that a good deal of contemporary urban state venturism amounts to states throwing money at private venture capitalists in the hope of ‘breeding unicorns’ (a start-up company valued at $1bn). In such cases, the state largely relies on the expertise of private VC. The structural power that VC capital affords – the power to shape technological choices, business models, ownership structures and target markets – is hardly mobilised (Cooiman, 2022).

A productive way to reconcile these two facets is the concept of ‘derisking developmentalism’ (Gabor and Sylla, 2023). This refers to the return of transformative ambitions, albeit with little attempt to discipline private business or to engage in strategic industrial policy coordination. As a result, increased state ownership and the build-up of state capacities deepen state-finance interdependence, but do not alter power relations between the state and financial markets in favour of the former (Cooiman, 2022; Mocanu and Thiemann, 2024).

State-owned venture capital, geopolitics and techno-nationalism

Relatedly, where more classical forms of urban developmentalism required class compromises and a (state-led) alignment of interests between bureaucrats and capitalists, it is difficult to identify in the case of urban state venturism more than a loose vision of techno-financial solutionism shared amongst elites. Even in matters of ‘national security’, where SVC has a long history, there seems to be a broadly similar logic. Consider the curious example of the NATO Innovation Fund, the recently created ‘world's first multi-sovereign venture capital fund’, which will invest in start-ups and in ‘deep tech funds’ to ‘leverage the potential for commercial innovation to address critical defence and security challenges’. ² The Fund aims to ‘shore up talent and technology’ (presumably, to prevent their capture by geopolitical and military rivals) and boost ‘emerging and disruptive technologies’ with ‘massive market opportunities’, while ‘satisfy[ing] the needs and timelines of deep tech innovators’ and (private) VC communities. Thus, even in the context of military-oriented techno-nationalism, SVC is permeated by VC's ideologies of entrepreneurial risk-taking, against-all-odds market-disruptive innovation and imaginaries of technological salvation. Whether this is the odd case or indeed signals a key trend in SVC, what is sure is that geopolitically infused techno-nationalism deserves to feature prominently in future research on urban state venturism and state-capitalist geographies.