innovation ecosystems clare fairfield. key terms innovation venture capital invention ≠ innovation

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  • Slide 1
  • Innovation Ecosystems Clare Fairfield
  • Slide 2
  • Key Terms Innovation Venture Capital Invention Innovation
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  • Innovation Invention Innovation Innovation Ecosystems must be Created Education is the Framework for Developing Sustainable Innovation Ecosystems
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  • Venture Capital Term Venture Capital thrown around freely Venture Capital is only a single element in an extremely complicated system that is almost universally not understood or even recognized Often erroneously used as short hand for the concept of innovation or economically valuable innovation Common mistake is a singular focus on venture funds Deal Chasing vs. Deal Making
  • Slide 5
  • US 20 th Century Experience as a Guide Learn from the successes and mistakes of US educational and investment innovation practitionersfailure is the best teacher Experience teaches that attempting to duplicate Silicon Valley/Boston is an extremely difficult proposition Understanding the evolution of the US system provides a development roadmap and a cautionary tale
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  • The Once an Eagle Problem 6
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  • The Paradox of Early Stage Returns Highest rate of return Hardest to execute Attracts ever increasing levels of investment in venture capital resulting in: Declining ratio of professionals to dollars managed Relative decline in early stage investment activity Declining population of early stage venture capitalists Investors with a passion for being rich, not for developing people and technologies Significantly larger deal size Early Stage Investors vs. Financial Engineers Risk of Long Term Loss of Institutional Investor Support 7
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  • Historical Realities Venture capital funding rate 1-2% Venture capital success rate 10-20% Venture capital failure rates 20-40% Investment IRR hurdle rates driven by these statistical realities 8
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  • 2,500 Business Plans 25 VC Investments 5 Wins The Venture Fund Lifespan Funnel
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  • 2007 VC Investments By # 139 30 1,313 7 31 21 1 140 21 43 3 12 1 7 20 62 19 15 43 8 19 4 3 55 54 8 59 76 2 140 162 7 18 7 MD 87 DE 3 CT 31 RI 3 MA 356 NJ 76 3 DC 15 HI 4 74 1 NVCA Yearbook/Thompson Venture Economics 2 12 2 1 6 10
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  • Proprietary & Confidential12
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  • Essence of Innovation Scalable Deal Flow Deal Flow = Sustainable Sources of Quality Investment Opportunities
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  • Building Innovation Ecosystems Decades vs. Years The political cycle does not match the innovation cycle The venture capital cycle does not match the innovation ecosystem cycle Deceptively easy to talk aboutexcruciatingly difficult to execute A systemic approach is the critical factor
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  • Pitfalls to Avoid Short Term Focus on Job Growth Focus on Short Term Investment Returns Focus on Technology Value Unrealistic Development Timeframes Systemic Misalignment of Interests with Financial Investors Wishful Scaling
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  • Innovation/Entrepreneurial Ecosystems Sustainable innovation systems will only appear within a robust ecosystem Investment in Technologies & Companies Not enough by itself A critical catalyst Least important success factor Requires the simultaneous presence of all key innovation ecosystem factors
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  • Essence of Innovation Deal Flow Deal Flow = Sustainable Sources of Quality Investment Opportunities
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  • Systemic Approach Coordinate Policy Government---Investors---Educators---Service Providers Scientists---Corporate Execs---Entrepreneurs---Students Fund Size/Compensation Structure Creating Quality Deal Flow Reduce Risk Increase Success Rate Tech Transfer/Commercialization Policies Government Support Programs Full Spectrum Financial Support Culture that Tolerates and Supports Failure Service Provider Excellence
  • Slide 19
  • Education is the Foundational Activity A critical lack of knowledge and understanding exists at all levels of innovation systems across the globe Innovation & Entrepreneurship taught at all educational levels Institutionalized education and involvement of government, business, and academic policy makers and officials Support for education and operation of venture investors and innovation service providers
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  • Education as Framework Education is a Positive Wrapper Produces sustainable infrastructure Facilitates Accelerated Relationship Building Government Investors Academia Business Applied Model Coordinated with Traditional Academic Model Scalable Flexible & Fresh Provides Platform for Ongoing & Regular Points of Contact & Interaction Provides Workable Framework for a Global Model
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  • Essence of Innovation Deal Flow Deal Flow = Sustainable Sources of Quality Investment Opportunities
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  • The Value of Education UndergraduateGraduateCombined Number of Businesses Started424183 Success Rate88%93%90% Average Annual Growth Rate57%80%69% Average Age (Years) 4.25.2 4.7 22
  • Slide 23
  • Team Experience Over 200 direct venture capital/private equity investments within multiple investment funds and educational programs. Founding investment in several of the worlds leading venture capital and private equity firms including: Kleiner, Perkins, Caufield and Byers; Kohlberg, Kravis & Roberts; TA Associates; and Brentwood Associates. Creation of university-based entrepreneurial education programs and centers. Professional venture industry educational program design and delivery. Participation with the US Congress, the US National Science Foundation, the US Department of Commerce and the US Small Business Administration in governmental innovation programs, investment programs and innovation policy formation. Exposure to and participation in international innovation and venture capital programs and development efforts in multiple countries. Startup operational experience. Operational business experience. Venture development legal experience. International relations and international innovation activities.
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  • Thank You