With a severe liquidity squeeze and a withered initial public offering (IPO) market, the venture capital industry and entrepreneurs face incredible challenges. The infrastructure to take companies public has nearly collapsed.
“The ecosystem is broken,” Judy Estrin told an audience at the Tech Policy Summit this week in San Mateo, California. Judy, serial entrepreneur and former chief technology officer of Cisco, was referring to the ecosystem comprising venture capitalists, investment bankers, universities, entrepreneurs, scientists, customers and others that has launched scores of innovative and profitable companies including Intel, Apple, Cisco and Google over the last forty years.
Judy has become a crusader for innovation, one of the Ten Cultural Elements of Collaboration that I identify in The Culture of Collaboration book. While there have been “exit” opportunities for venture-backed companies in recent years, those exits have been almost entirely mergers and acquisitions (M&A). “M&A is not enough to spur innovation,” Judy insists. Therefore, we must fix the innovation ecosystem and repair the IPO market to regain innovation leadership.
In her book, Closing the Innovation Gap (McGraw-Hill, 2009), Judy chronicles the breakdown of the innovation ecosystem. She argues that sustainable innovation never happens in a vacuum. “It is not just a flash of brilliance from a lone scientist, nor is it simply the result of a group going offsite to brainstorm and play team-building games.” Judy also quotes Danny Hillis, former vice president of research and development at Walt Disney Imagineering, as saying essentially that the key is not only to create the “soup” where people brainstorm, but also to develop a system that translates their ideas into something effective. Clearly, Judy believes that collaboration is key to innovation.
Collaboration is also key to fixing the innovation ecosystem. Let’s face it. Greed-fueled star culture helped break the ecosystem. To fix it, we must recruit and promote collaborators throughout the ecosystem. This means funding entrepreneurial teams focused on the fundamentals of building great companies. It also means rebuilding the public trust that companies are rooted in innovation rather than hype. It also means changing expectations to embrace long-term growth over short-term returns.
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