Tag Archives: capital

U.S. cities are attracting a lower percentage of startup capital

Several surveys of global innovation have noted that the U.S. innovation edge is slipping, but until now they have not pinpointed where the U.S. share of global tech investment is going and possible reasons why.

A recent report detailing which cities today are attracting the most venture capital, Rise of the Global Startup City, states that the U.S., while still a lead player, is no longer the epicenter of all things new and  technological. Other cities are attracting a growing share of the venture pie, especially those in China.

“America’s long-held singular dominance of startup and venture capital activity is being challenged by the rapid ascent of cities in Asia, Europe, and elsewhere,” reports the study. “While the United States remains the clear global leader, the rest of the world is gaining ground at an accelerating rate.”

The reasons for the shift are complex: better access to data and computing power; local talent that cannot easily emigrate to the U.S. – or no longer wishes to  – and soaring real estate prices and salaries in established technology centers like Silicon Valley, New York and Boston.

Inhospitable Environment

Another reason not mentioned in the “Global Startup,” which was commissioned by the Center for American Entrepreneurship, is the inhospitable environment for U.S. IP rights, especially patents. The U.S. has fallen into an abyss where most IT patent rights are uncertain and virtually impossible to license, creating disincentives for both investors and tech companies.

At the same time, China has flaunted an increasingly plaintiff-friendly patent system that is more welcoming to innovators and foreign participation than a decade or two ago. Also, a decade or so ago, cities like London, Berlin and Delhi were barely a blip on the VC radar. Now they are serious players who want to grow.

For the full report, “The Rise of the Global Startup City, go here.

Source: Richard Florida/Ian Hathaway

Eureaka! The Harvard Business Review

HBR Article Takes Aim at IV Doubters

Intellectual Ventures makes its most convincing argument yet in support of its patent rights business model in an article in the current (March) Harvard Business Review. In “The Big Idea, Funding Eureka!” IV CEO and founder Nathan Myhrvold says that patented research should be funded in much the same way that venture capital is provided to start-ups.

“Our goal,” says Myhrvold, “is to make applied research a profitable activity that attracts vastly more private investment than it does today so that the number of inventions generated soars.”

Sounds pretty good. The HBR article may be IV’s most graphic illustration to date about what it does, how it does it and its potential impact on innovation. [Brody Berman Associates, BTW, is not retained by IV.]

IV has been superb at raising capital, almost $6 billion of it, but weak on convincing the technology and legal communities that IV’s business model has meaning and is not a larger, more evolved predator. “The Big Idea” attempts to bypass nay-sayers and directly address the business-financial community, still largely clueless about how what IP rights are and how they can be used to generate ROI.

The firm has attracted its fair share or detractors (operating companies who may be vulnerable to IV’s 30,000+ patents), inventors who may feel crammed down by their market-driven offers and competitors, jealous of its ability to raise capital, control pricing and generate licensing agreements, mostly without litigating.

The question that really needs to be asked: Is IV’s impact on innovation and commerce net positive or is it effectively a hedge fund designed to exploit the  inefficiencies in a nascent innovation market? IV’s real genius may be in raising capital and buying a critical mass of relevant patents that are good or, at least, good enough to have an impact.

While the jury is still out (couldn’t resist that), the nine year-old, the 650-employee company has provided new ideas about ideas, and has been a catalyst for how they are best identified, packaged and monetized.  The HBR article is worth reading.

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