U.S. Falling Behind in Innovation–Part I
It was bad enough that the U.S. traded its manufacturing might for quick profits by outsourcing outside the country, but now it looks like our knowledge-based economy is faltering under global competition as well.
A report just released by the nonprofit, nonpartisan, public think tank, Information Technology and Innovation Foundation (ITIF) indicates that innovation in the U.S. is rapidly falling behind the rest of the world. The study currently places the U.S. in sixth place in the world, and running at a pace that will place it even lower over the next decade.
There have been many studies made over time, as well as more recently, that place the U.S. as the world leader in innovation. However, those studies have been based on opinions, interviews, and surveys. This report by the ITIF is the first to approach innovation from a scientific perspective, using 16 indicators to study innovation and competitiveness. These indicators fall into six broad categories:
- Human capital
- Innovation capacity
- Entrepreneurship
- IT infrastructure
- Economic policy
- Economic performance
Not only did the ITIF study place the U.S. in sixth place in the world for innovation and competitiveness, but the study also determined that all of the other 39 nations/regions studied have made faster progress toward the new knowledge-based innovation economy in recent years than did the U.S. The study shows that the U.S. has made the least progress of the 40 nations/regions in improvement in international competitiveness and innovation over the last decade. The U.S. is dead last in this category.
This should come as no surprise, since the National Academies published their landmark study, “Rising Above the Gathering Storm,” back in 2005. It warned then that America’s lead in science and technology was “…eroding at a time when many other nations are gathering strength.” It appears their warning has come to pass.
What is happening to the greatest industrial nation in the world? Have we allowed greed and avarice to cloud our minds, so we can’t see beyond the next payday? Are IPO’s more important than innovation? Is shareholder value more important than spending profits and dividends on R&D and innovation? Are our industrial leaders so intent on filling their pockets, they have lost their way? Has our government (under the guise of public interest) regulated the heart out of those companies that could best put the U.S. back in the role of world leader?
The ITIF study presents six things that need to be done by the U.S. (or any nation/region) to improve their innovation and competitiveness. I will present these six things as part II in my next post. Watch for it.
Venture Capital in Mid-America
Venture Capitalists tend to cluster in Boston and the Bay area of California. Many of them also like to be close to the companies they invest in. Consequently, many startups and growing small businesses located in the mid-America regions find it difficult to interest VCs.
No longer. There is a source of VC funding for small businesses in areas the U.S. Census Bureau defines as rural. These VCs are called Community Development Venture Capitalists (CDVC) and most of them are looking for a “double bottom line”–financial and social returns. Many of the CDVCs also provide money for operations assistance and to guarantee debt.
Although the concept of investing in “rural” companies began in the late 90′s, it has only become popular more recently. There are now about 80 CDVCs actively investing. There is a large untapped pool of talented entrepreneurs in small-town America, and even the traditional VCs are starting to realize that becoming successful does not require a big-city address. Ideas hatched in a small town diner are just as viable as those hatched in fancy high-rise buildings.
At the same time, don’t forget that these are still Venture Capitalists, and they don’t just hand out money without expecting a high rate of return. You still have to do your homework, and present a “knock their socks off” business plan–that is believable. There are thousands of people constantly seeking VC money across the country, and very few of them get funded. You must have a great concept, great team, and a great presentation, or your idea will never even get looked at. Do your homework…get help if you need it.
If you are starting a business in “rural” America, or trying to expand your existing business, you may be interested in what CDVCs have to offer. For more specific information on CDVCs, check them out at the Association of CDVCS.
Veteran Owned Small Businesses Shorted
Congress authorized the creation of a non-profit corporation (National Veterans Business Development Corp.) to help veterans start or grow small businesses–and provided $17 million taxpayer dollars to the corporation since 2001. Interestingly (but not surprisingly), only 15 percent of the funding has been spent on business resource centers that are supposed to provide business assistance services to veterans. This is what a recent report from the Senate Small Business and Entrepreneurship Committee is telling us.
It gets better. The report found that the corporation wasted money on excessive compensation for executives, on expensive dinners for employees at high-priced restaurants in Washington, and on questionable charges on company-issued credit cards. The compensation for the top two executives in fiscal 2007 ate up 22 percent of the funding for that year–more than was spent on the business centers. Does any of this sound familiar?
Senators John Kerry, D-Mass., and Olympia Snowe, R-Maine, are now recommending that no more money go to the corporation. Instead, they want any future federal money, to assist veterans in small business, to go to the Small Business Administration’s Office of Veterans Business Development.
Unfortunately, this seems to be the way our government operates when they dabble in the private sector. I shudder to think what will happen if our government nationalizes our banking system.
Maybe our elected representatives would like (or not) to hear what we think about this waste of money, and how they need to better support small business–especially veteran-owned businesses–to get our economy back on track. What do you think?
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