A recent comment on a TechCrunch article about the excessive focus on Valley sompanies whined that “even today, Europe is number one in new patents and research. The problem is commercialising things.”
If commercial success is like having a sold-out first show at an art gallery, patents are like your mother hanging your sketches on her refrigerator.
If I had to quickly throw out a guess as to what the EU’s problem is, I’d wager heavily on the excessive amount of government funding. I spent about five of my ten years in IT working at a European company, and along the way I noticed a major disparity: in the US, people talk about raising angel or VC funding, while in Europe, the same sorts of people always seemed to talk about getting EU research grants.
Dispensers of capital–whether VCs or civil servants–profoundly shape the markets they participate in. If step one of your business plan is “Raise five million dollars,” then you are going to go out of your way to cater to the tastes of those kingmakers. In the VC world, success is measured a little tiny bit by being early on the bandwagon with cool ideas, but really mostly by picking companies that make squadzillions of money in one way or another. And that is terribly hard to fake. I don’t know whether Youtube was worth well over a billion dollars, but clearly even Google had to think pretty hard about that, and where else do you go when you want to find clips of commercials from your formative years?
Government grants (or non-profit ones, to be ecumenical) are another game altogether. As with VC, the objective is to be associated with very successful ideas. Success, however, is usually defined by much softer criteria, like the ability to win yet another round of grants.
Ideas are funded because they appeal to the affections and aspirations of the bureaucrats, but really, the difference between success and failure is limited: when prestige is largely a function of being approved by a tight peer group, then the only way to fail is to really challenge the consensus. In this case, commercializing ideas is actually somewhat counter-productive, because (a) if they succeed commercially, you won’t really share in the success like a VC would, and (b), if they bomb, you’ll be humiliated. EU research grants (in my experience anyway) often produced nothing but enormous, turgid reports full of formal and impenetrable language, and technology demonstrations that wouldn’t even merit a “Beta” label here in the land of the ruthless capitalists.
As we consider the future of “green tech” and its ilk, we would be wise to keep the government as far from the role of kingmaker as possible. But if you’re a government official, where’s the fun in letting other people decide where to spend the money?
Posted on December 8, 2009
0