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Friday, March 6, 2009
State of New England
Stimulation Nation: Can the billions spur innovation?
MHT's Galen Moore: Charities score with online fundraising
MHT's Marc Songini: Mass. bio firms prep for lifting of stem cell ban
How is the economic crisis affecting tech companies?
As I write this, earlier today President Obama signed into law the American Recovery and Reinvestment Act (better known as the “stimulus package”), after which he optimistically proclaimed that “we are at the end of the beginning” of an economic recovery. The debate over whether the stimulus package, a mostly well-intentioned but unavoidably complex mechanism, is the right next step to helping kick start the American economy, and by extension the global markets, is now less critical than focusing on how it will be implemented.
While I am hopeful that the stimulus package will have its full-intended impact and that the arbiters of the $787 billion will dole it out wisely with minimal waste, this is unlikely. So the question then is how to optimize the situation and get the most economic bang for our borrowed buck?
I was reflecting recently on the MIT Innovation Summit we held almost exactly a year ago where one of our keynotes was John Kao, author of Innovation Nation. Kao discussed how the United States was well advantaged to remain the global leader, but that our future greatness and prosperity hinged on our ability to unleash innovation at all levels, and in all areas of our society. He also described the “appropriate” role for government, which is to create a fertile landscape for innovation, incent risk taking, reward those that are successful, but not overstretch in its reach into the marketplace.
So, can we be both the Innovation Nation, and the Stimulation Nation? If so, then I suppose the challenge for us all, and especially for our governmental leaders, is not unlike changing the tires on your car while driving 75 mph down the highway — how to provide much-needed capital and infuse optimism to the market without frittering away too much of the money, while also setting the groundwork for a new age of innovation in the U.S.
I will not presume to be filled with enough wisdom, or hubris, to posture an answer, but here are a few simple concepts from the startup world that ought to be considered as part of the stimulus deployment.
• Innovate radically. We need to rethink the way that the government does R&D. Increased R&D spending has been a long time in coming, but the system to deploy and leverage these funds is long in the tooth. The Brookings Institute recently held a roundtable on implementing a set of innovation centers across the U.S. which would facilitate increased collaboration and cross-discipline innovation efforts. While Brookings’ focus was primarily energy related, this approach could apply equally to other areas. For example, one key reason Kendall Square is such a fertile center for innovation is in large part because of the density and diversity of the research being done there, as well as the ever-present commercialization influence of entrepreneurs and investors.
• Focus on the future. Turn to next-generation technologies and industries to “make America great” again. The stimulus package points to some important areas such as energy production and conservation, and health care reform. However, there are many “old-line” industries that will inevitably absorb the lion’s share of the funding. For example, while the auto industry has been the economic backbone of America for decades, this does not mean that we shouldn’t let parts of it fail if appropriate. Just as in startup land, America needs to focus on creating the next generation of winning global products. The new Big 3 could be Life Sciences, Clean Tech and Financial Services — areas that can provide millions of new and repurposed jobs and propel America into a global leadership position for the 21st century.
• Implement strong governance. Many entrepreneurs dislike the oversight of their board of directors, but this close-in governance is central to making sure that spending, progress and value creation are aligned and on track. Taking a small portion of the stimulus package proceeds to implement effective governance mechanisms, not just using government oversight, to ensure that we hold stimulus sweepstakes recipients to task, while rewarding those that perform with more funding just makes good sense.
These are hugely trying times and I do not envy the president or our vast cadre of hard-working government servants, but we need to ensure that innovation pervades all that we do and that we are intensely thoughtful about how the government leaps into the deep end of the market pool.
Jim Matheson is a general partner at Flagship Ventures, an early-stage venture capital firm based in Cambridge. He can be reached at jim@flagshipventures.com.
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