Comments on: Business Week Report on “Radical Future of R&D” Misses Critical Capital Markets Link in Innovation Ecosystem http://www.pascalsview.com/pascalsview/2009/09/business-week-report-on-radical-future-of-rd-misses-critical-capital-markets-link-in-innovation-ecosystem.html thoughtful commentary on venture capital, innovation, and public policy Wed, 10 Mar 2010 15:43:05 -0800 http://wordpress.org/?v=2.8.4 hourly 1 By: Angelika Preston http://www.pascalsview.com/pascalsview/2009/09/business-week-report-on-radical-future-of-rd-misses-critical-capital-markets-link-in-innovation-ecosystem.html/comment-page-1#comment-2459 Angelika Preston Wed, 16 Sep 2009 13:21:56 +0000 http://www.pascalsview.com/?p=765#comment-2459 Now, the mistake: “Venture capitalists are sitting on plenty of cash and are good at bringing startups to the market. We just have to rebuild the upstream labs that focus on basic research– the headwaters for the whole innovation ecosystem.” FULL STOP. First, the venture capital business is contracting severely: From the April 18th, 2009 NVCA/PWC Moneytree report: “Venture capitalists invested just $3.0 billion in 549 deals in the first quarter of 2009, according to the MoneyTree™ Report from PricewaterhouseCoopers (PwC) and the National Venture Capital Association (NVCA), based on data provided by Thomson Reuters. Quarterly investment activity was down 47 percent in dollars and 37 percent in deals from the fourth quarter of 2008 when $5.7 billion was invested in 866 deals. The quarter, which saw double digit declines in every major industry sector, marks the lowest venture investment level since 1997.” The above two points are different. What I read in the quoted paragraphs above is that "they are sitting on plenty of cash" not that they are currently investing plenty of cash. To me these are two different things. If IPO's are the engine that drives job creation then the problem is more serious than I thought after reading the article. The technology bubble that eventually broke contributed to the unrealistic ROI expectations of investors leading to corporate short term vision leading to job exportation and pinks slips to meet overhead cost cuts not to mention numbers manipulation to meet profit targets. The issue here is short-term thinking. Science and research does not fit into that box and solutions like IBM's to collaborate across boundaries makes good sense. It would seem to me, reading the BusinessWeek article, that job creation is also a global issue as is the economy. This is not new. As the former director of the aviation and hospitality practice at FutureBrand in NYC, 90% of my revenue came from foreign countries. We created jobs globally including the US that saw the greatest growth once acquired by McCann Worldgroup. They were all high paying jobs. The point of the article from my experience base is that the short-term financial results model is driving jobs over seas, creating a chasm between low paying and high paying jobs leaving no middle class and no spending at home because of it. How can more IPO's help this? Global collaboration is the road to more middle class and 60K plus jobs at home, if we have the innovative knowledge base to differentiate our workforce. I believe we are in the business of selling knowledge in the future. Without collaboration we will be left out of the global innovation business not to mention without educating our population we won’t have the innovators. Let's not forget that India has more honor students than America has kids. The model is broken. Last century's model won't make it in the 21st century. Why? IPO’s are productive for a few. How is that sustainable? The solution is a question of focus. The quarterly reporting of more IPO's won't create long-term sustainable growth but only short-term infusions of cash. Falling profits eliminate jobs and shrink the job market permanently. Nor will it create global competitive viability. I think we have reached a point where throwing more money at a problem only shifts the problem and does not solve it. Angelika Preston Owner Angelika Preston LLC Now, the mistake:

“Venture capitalists are sitting on plenty of cash and are good at bringing startups to the market. We just have to rebuild the upstream labs that focus on basic research– the headwaters for the whole innovation ecosystem.”

FULL STOP. First, the venture capital business is contracting severely:

From the April 18th, 2009 NVCA/PWC Moneytree report: “Venture capitalists invested just $3.0 billion in 549 deals in the first quarter of 2009, according to the MoneyTree™ Report from PricewaterhouseCoopers (PwC) and the National Venture Capital Association (NVCA), based on data provided by Thomson Reuters. Quarterly investment activity was down 47 percent in dollars and 37 percent in deals from the fourth quarter of 2008 when $5.7 billion was invested in 866 deals. The quarter, which saw double digit declines in every major industry sector, marks the lowest venture investment level since 1997.”

The above two points are different.

What I read in the quoted paragraphs above is that "they are sitting on plenty of cash" not that they are currently investing plenty of cash. To me these are two different things.

If IPO's are the engine that drives job creation then the problem is more serious than I thought after reading the article. The technology bubble that eventually broke contributed to the unrealistic ROI expectations of investors leading to corporate short term vision leading to job exportation and pinks slips to meet overhead cost cuts not to mention numbers manipulation to meet profit targets. The issue here is short-term thinking. Science and research does not fit into that box and solutions like IBM's to collaborate across boundaries makes good sense.

It would seem to me, reading the BusinessWeek article, that job creation is also a global issue as is the economy. This is not new. As the former director of the aviation and hospitality practice at FutureBrand in NYC, 90% of my revenue came from foreign countries. We created jobs globally including the US that saw the greatest growth once acquired by McCann Worldgroup. They were all high paying jobs.

The point of the article from my experience base is that the short-term financial results model is driving jobs over seas, creating a chasm between low paying and high paying jobs leaving no middle class and no spending at home because of it. How can more IPO's help this? Global collaboration is the road to more middle class and 60K plus jobs at home, if we have the innovative knowledge base to differentiate our workforce. I believe we are in the business of selling knowledge in the future. Without collaboration we will be left out of the global innovation business not to mention without educating our population we won’t have the innovators. Let's not forget that India has more honor students than America has kids.

The model is broken. Last century's model won't make it in the 21st century. Why? IPO’s are productive for a few. How is that sustainable?

The solution is a question of focus. The quarterly reporting of more IPO's won't create long-term sustainable growth but only short-term infusions of cash. Falling profits eliminate jobs and shrink the job market permanently. Nor will it create global competitive viability. I think we have reached a point where throwing more money at a problem only shifts the problem and does not solve it.

Angelika Preston
Owner
Angelika Preston LLC

]]> By: Jonathan Spalter http://www.pascalsview.com/pascalsview/2009/09/business-week-report-on-radical-future-of-rd-misses-critical-capital-markets-link-in-innovation-ecosystem.html/comment-page-1#comment-2100 Jonathan Spalter Sun, 13 Sep 2009 18:48:05 +0000 http://www.pascalsview.com/?p=765#comment-2100 "Yes, we need to restore the U.S. Government’s commitment to funding breakthrough innovation in basic scientific research. But we also need to take aggressive actions to protect critical elements of our nation’s innovation ecosystem and stop treating it as a series of loosely connected elements." Couldn't agree more. Interestingly, this topic is now being actively examined by one agency of the US government. A couple of weeks ago, the FCC issued what it calls a Notice of Inquiry (NOI) seeking public comments and perspectives on the relationship between innovation, investment, and regulation as it applies to one specific sector: the wireless industry. <a href="http://hraunfoss.fcc.gov/edocs_public/attachmatch/FCC-09-66A1.pdf" target="_blank">http://hraunfoss.fcc.gov/edocs_public/attachmatch...</a> In response to this NOI, you might consider providing an analysis of what role if any the FCC and US Government should play -- if any -- in catalyzing an environment in which IPOs of $50mm and less for companies developing and deploying bleeding-edge mobile/wireless applications, services, content and technology. This might offer a fresh angle to the discussion, and one which I suspect would be of interest to the FCC and its new leadership. Of course, it may also prove applicable to and interesting for other agencies of government -- both at the federal and state level -- in their consideration of how to promote and sustain technology innovation in the US economy. Jonathan Spalter Chairman, Mobile Future "Yes, we need to restore the U.S. Government’s commitment to funding breakthrough innovation in basic scientific research. But we also need to take aggressive actions to protect critical elements of our nation’s innovation ecosystem and stop treating it as a series of loosely connected elements."

Couldn't agree more.

Interestingly, this topic is now being actively examined by one agency of the US government. A couple of weeks ago, the FCC issued what it calls a Notice of Inquiry (NOI) seeking public comments and perspectives on the relationship between innovation, investment, and regulation as it applies to one specific sector: the wireless industry. http://hraunfoss.fcc.gov/edocs_public/attachmatch...

In response to this NOI, you might consider providing an analysis of what role if any the FCC and US Government should play — if any — in catalyzing an environment in which IPOs of $50mm and less for companies developing and deploying bleeding-edge mobile/wireless applications, services, content and technology.

This might offer a fresh angle to the discussion, and one which I suspect would be of interest to the FCC and its new leadership. Of course, it may also prove applicable to and interesting for other agencies of government — both at the federal and state level — in their consideration of how to promote and sustain technology innovation in the US economy.

Jonathan Spalter
Chairman,
Mobile Future

]]>