Posts Tagged: "vc"

There is nothing wrong with academics obtaining research funding from corporate sponsors, and to Professor Tucker’s credit, she fully discloses her funding sources. It is important, however, to fully vet and scrutinize the resulting work product of such sponsored studies. The underlying data and methodology should be independently verified by subject-matter researchers and experts. Yet, no peer review of this paper had been made before Professor Tucker’s “results” were broadcast to the world. Because of the publicity this paper received, it is the purpose of my full paper to fill that void. Indeed, closer scrutiny of this article reveals that it can support none of the claims of the author or sponsors quoted above. This is because the study is fundamentally flawed and is fraught not only with methodology and analytical errors, but with fatal factual errors due to the assumption of false information.

Consider, for example, the old axiom that entrepreneurs must be unwaveringly fixated on a single goal. Most startups are built around a single product or service that is assumed (but not yet proven) to meet a real consumer need and offer a lucrative market opportunity. The CEO of that startup is likewise singularly focused on getting a fully-baked product out the door as soon as possible in order to start generating revenues while at the same time building a pipeline for future offerings. Given the limited resources in most startups, this often means that the engineers are building Version 2 of the product before Version 1 has even been tested in the market.

It is still early to know whether this is irrational exuberance or whether this is a meaningful event for the companies that follow LinkedIn to IPO. In all likelihood it is a little of both, namely a meaningful event that demonstrates at least some irrational exuberance. With the economy and the IPO market having been in the tank for so long a little zeal never hurt anyone, right? In any event, regardless of what LinkedIn does from here on out the fury of trading and interest suggests that good things are on the horizon for the economy and perhaps for job creation as well.

While many people believe that alternative energy is at least several decades away, what is clear is that if we do not set out about making that future a reality it will never been the future we realize. There is tremendous research ongoing relative to battery technologies, solar energy, biofuels, geothermal energy, wind energy, hydroelectric energy and much more. In all likelihood no one, single solution will replace our dependence on fossil fuels, at least not in the foreseeable future, but there does seem to be a light at the end of the tunnel. We only need to choose the path to obtain that reality.

Carrier goes on to detail the comprehensive research of Professor John Walsh who in 2007 surveyed 1125 biomedical researchers in universities, government labs and nonprofit institutions. Walsh received 414 responses and the responses were overwhelmingly clear. Carrier explains that only 3% of respondents indicated that they stopped pursuit of a research agenda based on an excess of patents present in the space. Furthermore, Carrier explained that a mere 5% of respondents even regularly checked for patents related to their research and “no respondents reported that they had abandoned a line of research because of a patent.”

One approach to promoting IP protection at the State/regional level would be for the State/incubators to create targeted “IP Protection Funds.” These Funds could be used to both educate the entrepreneurial community about IP protection and to finance protection for qualifying local startup companies. For example, the fund may directly pay IP legal fees, either as grants or convertible loans, on behalf of a startup, thereby ensuring that IP protection is an integral focus of the company. Administration of the Funds, along with company qualification, may be handled through the grass-roots incubator networks that are already actively counseling the startup community. Such a Fund may also serve to bridge the gap between the under-funded start-ups that desperately need IP protection (yet do not always value it), and the patent practitioner community that is sometimes reluctant to accept under-funded ventures as clients.

The log jam in patents issuances is not the only impediment to start-up job creation. Although it is certainly a big one. Tax and regulatory burdens on start ups have reached a critical mass in the last 10 years. A fact recognized by President Obama when he signed an Executive order last Tuesday ordering the removal of burdensome regulatory rules on business. Also a problem are the post 9-11 immigration policies that are driving many of the world’s best and brightest scientists and engineers to other countries. But the biggest job killer beside the patent backlog is the systemic destruction of our high tech manufacturing capacity.

According to Pascal Levensohn, Managing Partner of Levensohn Venture Partners, the problem with the US economy is the lack of Initial Public Offerings. He opines that without an increase in IPOs in the United States it will be difficult, if not impossible, to see the economic growth that we want. Without economic growth there will be no job creation, and the sluggish US economy will continue on its anemic path. He suggests that the best way to increase IPOs is to increase venture capital and make it more attractive. He writes that is our leaders really wanted to fix the job problem in America “there would be no higher legislative priority than promoting regulatory and tax reform to stimulate new capital formation and venture capital in the U.S.”

But looking back, what strikes me is the surprisingly-variable role that patents played in the growth and success of the half-dozen trailblazing startup companies that I helped lead. For these startups, which collectively created more than 2,500 jobs, I raised approximately $1 billion from strategic and venture investors (who ended up with $3 billion in returns). And in the majority of cases, owning patents proved to be crucial to the funding and commercial success of my startup. But this wasn’t always the case. In several startups, patents were almost completely irrelevant to either the financing or the ultimate fate of the company. Understanding why this was so may offer some insights into both the value and the limitations of patenting.