StartUp America and the Realities of Innovation

By: Haydn Shaughnessy

StartUp America is President Obama’s policy of choice to kick start jobs growth in the United States. StartUp America Partnership is a private sector initiative to help out. How closely related are they and what do they mean for innovation in America? We talked to Lesa Mitchell, VP Innovation at the Kauffman Foundation, one of the architects of the partnership.

IM: Is StartUp America partnership endorsed by The White House?

 

Absolutely. Over the past year the Kauffman have had a close dialogue with the Office of Science and Technology Policy relative to their interest in how to create new firms and how to grow new firms. Through StartUp America they’ve brought together leaders from across the US Administration who are anyway supported of entrepreneurship and are looking for a better return on investment dollars. They reached out to us with a view to how they could work with the private sector and how that could provide more flexibility.

StartUp America Partnership is solely the private sector – what can it do to support startups in creating new customers, in collaboration and in funding. For example, with a venture arm how do startups get to the point where they can be evaluated by venture funds? How can we help with the question of becoming a collaborator in supply chains or the question of getting major customers? Google and Cisco for example were the first customers of Bloom Energy, an early stage cleantech company. Getting these types of customers at this stage allows a startup the experience of scaling their business.

We released a report a couple of days ago drawing on Census data that shows we are at an all time low in new firm creation in the United States. We are an initiative to address this dip. We are trying to do something.

IM: What went wrong?

What went wrong was an economic downturn. We know that a lot of startups and teams come from an older demographic. The average age of entrepreneurs is 40 years old. They are very experienced people in industry. We consider this spill over from existing firms a good thing. People stop taking risks in a downturn.

IM: But don’t we normally get more startups in a recession?

Yes, but I would caution you against the idea that significant high growth firms come out of a downturn if you take a longitudinal view.

 

 

IM: Are you going to be involved in educational work?

Yes. Kauffman has been a long term supporter of NIFTY and teaching for entrepreneurs. A common element in many of the entrepreneur teaching programs is they are experiential. When we look at research data it seems tenable that when students get to understand a case the experiential events have been very important and that the experiential elements of learning are maybe more important than a degree program. We’re widely supportive of anything experiential.

And for many years cooperative educational programs have been very important but we have lost that – we believe in letting students an opportunity to work in a startup.

For the first time now entrepreneurship in the USA is on the radar of the Administration. The Administration in the past has generated a lot of data around startups but the focus has always been on big companies. This is the first time that leadership has taken a role.

 

 

IM: Isn’t the problem though one of big firms not performing as job creators?

I can’t address the question of what’s gone wrong with US industry. We do know the number of new firms that need to be created. We know not enough are being created. The example of cooperative education is an example of what went wrong. We know for example that inventors have a depth of knowledge in a certain area and many of them sitting in universities attribute their early careers as consultants to industry to understand the role of science within industry.

 

 

IM: But innovation is about how you sell rather than what you make.

We just had that conversation here yesterday with the head of R&D for IBM, a former head of R&D for IBM now a senior fellow with Kauffman. We’ve been having long discussions about invention which is different and distinct from innovation. We know a lot about inventors, who they are, where they came from. The knowledge on innovation and applying business models to innovation, there is in fact very little about innovation from a scientific method point of view.

I believe that entrepreneurs are taking advantage of the technology out there but for example in life sciences and clean energy we haven’t even come close to the big data plays out there. I would agree with you there is a bubble around the social media space now – tied to young people but the concern should be people working in big firms who could have set up new companies and are not doing that.

We are going to start seeing some big data plays in the area of life sciences and business model innovations around big life science data. Jamie Heywood’s PatientsLikeMe, based on a business model where patients create their own data, getting around the patient data morass. As soon as you see patients’ willingness to share data you see very different plays.

 

IM: Is your focus on Cleantech and health particularly?

We have no sector specific remit at all. We are interested in all areas – life science, social cleantech… We are interested in all areas like women for example, where there are highly skilled people who are not becoming entrepreneurs. There are more doctorates in life science but no increase in entrepreneurs.

In the USA we have an initiative called ASTIA, which identifies early stage women entrepreneurs and puts a support system around them. Ernst and Young have created a Winning Women program as part of the Entrepreneur of the Year program. Entrepreneur of the Year lacked a pipeline of women and Winning Women now supports them into the Entrepreneur of the Year program.

What is a variable, what is different between men and women, is access to not-for-profit networks. Male scientists tend to sit on boards and are exposed to business requirements. Women tend to sit on NASA, the NIH but not boards.

 

 

IM: Is there a possibility that America’s real problem is de-risking economic activity by supporting companies like GM and the banks?

We’re doing some research on the rise and fall of cities to try to understand some of these issues. We’ll release a report in two months time that looks at the cities that experienced less of a downturn. The city that experienced less of a downturn than any other is in fact Los Angeles. LA has never really had an predominant industry – it is made up of many, many industries. Where we see the downturn having the biggest impact is in those areas with one capital intensive industry, like Detroit. We can see that a city is an ecosystem that needs diversity.

We can see that a city is an ecosystem that needs diversity.

We are highly developed in terms of infrastructure in comparison with places like India and China who have almost Fromer like opportunity with Charter Cities. They can build to scale and they can adapt technologies to these greenfield opportunities. The regulatory problem in the US is a big one for competitiveness policy. We’ve spent a lot of time talking with entrepreneurs and they say over the years as we put more policies in place they have come to make less sense. We need to look more at our regulations and see how they impact entrepreneurs.

For example, in Cleantech startup companies funded by Flagship Capital in Boston are seeking to scale their businesses in China and India because of the regulatory and infrastructure barriers in the USA. They can accelerate their businesses there because China and India are building infrastructure from scratch based on what we now know about technology. The regulatory barrier is a big one but we can’t just get rid of say The Food and Drug Administration. We need them but we also need to find a new way to look at regulations. For example it is impossible for a solar provider in California to distribute via utilities in other States who all have different standards. Look at Brazil – one standard per watt for the whole country.

By Haydn Shaughnessy