Sunday, May 10, 2009

Creating a National Innovation Framework

By Michael A. Barr

In difficult times it pays to think big. Richard A. Bendis and Ethan Byler certainly do. They have published a document that I believe we in the start-up community should think about and discuss. It is entitled:
Creating a National Innovation Framework, Building a Public-Private Support System to Encourage Innovation.

The authors call for a national effort to support innovation, entrepreneurship and the advancement of both technologies and early-stage businesses. This effort would encourage the participation of multiple interests: federal and state governments, the private sector, unions, foundations and the investment community.

This Framework contains new structural elements for a widespread national Innovation strategy:
  • A Federal Innovation Partnership and a National Innovation Advisor with access to the President

  • A National Innovation Seed Fund and a Technical Assistance Grant Fund
This funding program, continue the authors, would create a two billion dollar National Innovation Seed Fund to invest in experienced early-stage capital providers, including VC and Angel Funds, as well as other public and/or private funding Authorities.

The purpose of this fund, Bendis and Byler conclude, is to jumpstart new knowledge economy jobs that will shape America’s future.

Many of us entrepreneurs feel ambivalent about government involvement in our work. On the one hand we might appreciate and use government funding and support; on the other hand we are dismayed by bureaucracy and its notorious lack of urgency. Bendis and Byler are talking about the best of public and private resources working together in harmony. Should we publicly support them?

I asked entrepreneurs I know and the response ranged from a “Bronx Cheer” (That’s not an endorsement) to a retelling of DARPA and its creation of the Net. Many of us are not sure about putting innovation and government in the same sentence. A young Bill Gates spent a few months as an intern in Washington and developed a dislike for all government meddling in technology and innovation. This contempt ultimately led to protracted legal skirmishes that at one point threatened to split Microsoft.

Two billion dollars could prime the pump, many of us argue. We have the example of government spending in the space program and in military programs that gave us new materials, jet engines, pilotless drones, GPS, Velcro, a space station and increasingly better solar panels. True, it also gave us a bridge to nowhere, subsidies to farmers, and a tax code that has become an industry unto itself.

We have a visionary, tech-savvy leader in the White House. I say we put aside our instinctive distrust of heavy-handed government and lobby it to invest in us. Google is still about 400 dollars a share. Chrysler and GMAC are in dire straits. What do you think?

Today’s article is presented by Michael A. Barr, who is a member of our Startup Professionals team. He brings to the table a long list of business and academic credentials, including business coaching and leadership skills. Check him out on our website. You will be hearing more from him.


Marty Zwilling


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5 comments:

  1. DARPA is a great model, because they are more willing to take risks that could lead to revolutionary changes. They have a very high failure rate and they are OK with that.

    Let the government back risky projects, hundreds of them, and take a share the same way an incubator or angel would. Then, take the profits, and turn them around into funding other high risk high reward businesses.

    I think the government could do this well for the public good. Just because the government has done a bad job in the past, doesn't mean it's not possible to do well. It's a great idea.

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  2. I wish you were one of our lobbyists in Washington D.C. You sound like a voice of reason and good will.

    Thank you for adding value to our work. Be nice to know who you are!

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  3. I thought about it a little more.

    I think each department should fund some variation of DARPA. Energy, Transportation, Health and Human Services, etc. There should be more encouragement for high risk high reward research, but rather then one program, this should be a component of each department, directed at helping along research that could shift paradigms. Instead of a singular national innovation framework, we need several.

    In health care, for example, there are many medications that have potential to cost effectively treat diseases that are not studied because patent protection is expired, while ungodly amounts of money go into 8 bladed razors and the latest patentable formulation of your anti allergy pill. With DARPA like funding, everyone would benefit from under-examined therapies getting studied. In transportation, there should be DARPA like grants to reduce fatalities, get better gas mileage, etc. and so on and so on.

    But this doesn't seem like an area for entrepreneurs as much as for researchers. When testing pharmaceutical agents with expired patents, for example, the goal is not profitability, but an increase in efficiency or outcome the current market system does not really provide for. When doing high risk research on traffic, the goal is not profitability, but protocols that reduce traffic related fatalities in a cost effective way. And so forth.

    Ideally, these grants would be ways for the public to take large risks in exchange for large social benefits that can't directly be converted to business. Our psuedo-free market provides for companies that will become conventionally profitable, a national innovation framework (or frameworks) should provide for research projects that result in large increases to the public good that don't readily translate into conventional business models.

    Further, these grants should not be administered by current angel and VC networks. A better model is the model the Gates foundation is using in some of its grants. Find the thought leaders in various fields (who vigorously disagree with each other), let them sort through the proposals. Then, let a single recommendation be enough to move the grant along. Just a few of our geniuses saying "this deserves more research."

    Even though a lot of innovation comes from angels and VC funded activities, I'm not convinced they are the best way to fund research for the public good. I think a better way is to let thought leaders in relevant fields who disagree with each other decide who gets funded. Letting VCs distribute funding puts the cart before the horse. We don't need ideas that angels and VCs will approve, we need the good ideas that they won't fund funded.

    Just some further thoughts.

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  4. A client funded the development of a high tech product through the SBIR program. It was great! Phase I Proof of Principle was $75,000 grant. If successful outcome, could then apply for a Phase II, which at that time was just $500,000, now I think much higher.

    Company had about 12 Phase I's and 8 Phase II's from Air Force, DARPA, NSF, NIH, etc. This company was always successful as followed goals of the program: come out with a commercial product while giving good research to sponsor. Company owned IP, no loan/payback. Hope it is still functioning!

    I helped write grants, complied with audits, and marketed commercial products when they were ready for market. What you are suggesting could be similar to this model.

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  5. You and anonymous above are the kinds of advisors we need - real thinkers with real
    solutions. I thank you.

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