Today marks the start of the annual conference of the National Council on Entrepreneurial Tech Transfer (NCET2). Despite the daunting name, NCET2 may be host to the most optimistic audience of any conference to pass through Washington, DC these days. Over the next few days, several hundred university entrepreneurship leaders and corporate investors will spend time with each other – learning about path breaking innovations across a spectrum of industries and plotting to bring these technologies to the market. One can only be optimistic about the future of America when hearing about these breakthrough innovations and meeting the dedicated people committed to seeing them become reality.
We are currently five and a half years from the start of the Great Recession, and in the fifth year of the Obama Administration. Given the breadth of programs to support innovation and entrepreneurship by the Obama Administration, the realities of where job creation is occurring in our economy, and our competitive advantages as a nation, it is not surprising that topics like commercialization and entrepreneurship have become mainstream. Every political speech in Washington about economic growth has to check three boxes. First, that job growth is going to come from innovation and high growth industries like life sciences, technology, energy and advanced manufacturing. And it has to cite the Census Bureau data about job creation by startups and data by the US Department of Labor showing that the job categories that are growing in the United States this decade are in the innovation economy.
But as we think about the next few years, we need a more data-driven discussion of the role of innovation and entrepreneurship in job creation, about the ideas and approaches we should fund, and how we are going to fund these ideas.
Let’s start with how we are going to fund things and the startup investment climate in this country. We are at an interesting time for the investment community. We know that venture capital is going through a transition. In the last two to three years, several major venture capital firms have pulled out of “expensive” sectors like clean energy, manufacturing and life sciences in favor of IT investments. Despite their deep desire to work in these areas, it can be hard to justify investments when the returns in areas like data analytics and social media are so good.
On the other end of the spectrum, there is the angel investing space. Angel investing was all the rage for a while, but in the last few years the levels of funding have wavered, as angels found themselves being diluted or seen their startups failing. And although I am a big believer in crowd funding – have you taken a look at some of the leading sites recently? The vast majority of products are in categories like media content, arts and culture, food, and some IT. We really don’t see a lot of startups borne of NIH funding listed there.
So on the one hand, we have national issues of importance like climate change and medical technology, but on the other hand we have institutional investors and angels like who are not able to put the money there. So our choice is to abandon our national goals or find other ways to invest in these sectors.
So…we need to figure out the role of the government (federal, state and municipal) in commercializing research. Not because government should fund bad ideas that the private sector won’t fund, but because technological knowhow is critical to our global competitiveness, because of the consensus that job creation will come from this space, and the fact that there really are “valleys’ of death” before technology is ready to absorb
Many other countries, such as Germany, South Korea and Israel, don’t seem to have a problem providing public funds for critical industries. They provide support to help industry collectively conduct advanced research, they provide seed funding in economically-disconnected areas, and they nurture technologies as they face the valley of death. As long as we are not deciding that one technology is better than the other or that one sector should benefit over others, then these are all legitimate ways to improve the lives of people and create economic value. Yes, there is a fine line between “picking winners and losers” and nurturing commercialization. But let’s figure out that line and do what we can.
One thing the federal government can do is give researchers, universities and entrepreneurs some flexibility in how they use federal research funds. For the 90% who are not trying for a Nobel Prize, creating economic value through innovation is an equally noble prize.
There is an idea for a fund to be created that sets aside a very small percent of research funds for universities and/or researchers to use for commercialization purposes – such as covering the cost of market research or patent filings. The version that was previously in the America Competes Act reauthorization called for 1% of the federal research budget to be made available for commercialization and entrepreneurship. This would not be insignificant, as it could create an annual fund of around $100 million for universities, companies and research labs could use to then create billions in economic value.
Lastly, we need to continue supporting as many entrepreneurs, accelerators and programs in this space as we can. We know that in areas like Silicon Valley and Boston, venture capitalists often collectively fund several hundred business plans a year around the same ideas. When we look at the data five years later, only a handful of those companies are still around and growing. And yet, these companies are still not job creators because they remain small. Additional data from the US Department of Commerce shows that companies, on average, take 20 years to reach $1 billion in sales. And that true job creation – in the thousands, comes at this point. So we have a situation where only a few companies survive, and it takes a long time for them to create jobs. In many ways, this means we have to have as many innovative startups as we can. And, that we need to do what we can to improve the quality of these startups. We need to find and nurture every entrepreneur with a crazy idea, and every researcher with a breakthrough and figure out if we can make a successful product, service, company or NGO out of them.
I will be at NCET2 over the next few days, and look forward to seeing breakthrough technologies that can improve the human condition, and meeting the people who are willing to commit their every waking hour to making it happen. Despite the challenges, it makes me very optimistic about the future of America.
