America’s engine of innovation is sputtering – and there seems no repair in sight.
Capital available for risk taking is falling at a time when foreign scientists educated at the nation’s universities head home to places such as India.
America's innovation ecosystem is in crisis, says Pascal Levensohn
The result will be to inhibit the formation of small, innovative business ventures, says Pascal Levensohn, managing partner of the Levensohn Venture Partners.
In other words, America’s innovation leadership is in danger of faltering, Levensohn said Wednesday during a speech to the Cybersecurity Applications and Technologies Conference for Homeland Security in Washington.
“I firmly believe America’s innovation ecosystem is in crisis and that this crisis is becoming progressively more acute,” he said. “Corporate R&D budgets, new university endowment commitments to venture capital and new commitments by private investors to funding of entrepreneurs are all declining in real time,”
At a time when the nation needs to plant the seeds for the next generation of breakthrough innovations, large financial institutions rocked by the economic downturn are curtailing risk capital.
Already the U.S. has since the mid 1990s reduced overall R&D funding as a percentage of GDP and favored incremental improvements at the expense of basic research.
The nature of research has changed since the days of Bell Labs
This wasn’t always the case. Wireless and optical technologies came from ambitious initiatives – symbolized by the iconic Ball Labs – illustrating the heights to which research ascended in this country. The subsequent demise of Bell Labs shows how far it has fallen.
Many Silicon Valley startups sprouted from technologies Ball Labs developed. And the Internet grew from research funded by ARPA three decades ago.
The country needs to foster stronger partnerships between government, university research organizations, corporations and entrepreneurs – particularly those that bring together experts from multiple disciplines, Levensohn said.
It also needs to make a greater commitment with funding research and enabling risk-taking in the economy.
The Obama Administration has taken good first steps by including billions of dollars of R&D investments in its stimulus plan, said Levensohn.
More must be done.
It takes far less capital to startup today. Silicon Valley still has more capital and people skilled in startups than anywhere else on the planet. Silicon Valley is no more, or less, in crisis than the rest of the economy–it reflects what’s going on in the broader economy.
Tom–
The amount of capital is secondary to (1) the need for cohesive interaction and coordination between the public and private sectors and (2) the need to restore a balance between primary research and commercialization. Venture capitalists are not in the business of promoting open-ended primary research– we are in the business of development and commercialization. There is a big difference between risk capital that measures success in terms of ROI and risk capital that embraces less sharply defined concepts of breakthrough innovation.
My core point is that the fundamental nature of global competitiveness has changed. The U.S. is losing ground internationally on multiple technological fronts. We need to recognize this and act to correct it.