Nothing Ventured
Feller, Gordon
NOTHING VENTURED UNCLE SAM NEEDS A NEW R & D MACHINE BY GORDON FELLER t the onset of the 21st century, there are two almost diaetrically opposed models for advanced technology...
...If all this sounds vaguely Industrial Age and socialist, it is~R&D by Five-Year Plan...
...Three immediate possibilities come to mind: Option l:Mix taxpayer dollars with private equity to create, say, a billiondollar~ not an unheard-of figure inVC world--venture fund explicitly focused on deals that anticipate U.S...
...Really outthere work often stays in-house, at Sandia or Livermore or one of the other industrial-strength National Laboratories left over from the Cold War...
...A very different way of innovation Gordon Feller is founder of San Rafael, CA-based Integrated Strategies, which advises leading US technology companies...
...artificial intelligence and pattern recognition, to name just a few possibilities...
...Since the venture model really got going in the 1980s, the two models have inhabited parallel universes...
...A highestlevel brain trust would be assembled to select promising areas...
...The venture capital model starts with an idea, a problem or the whiff of an emergent technology, then quickly piles on as much money, brains and entrepreneurial energy as it takes to bring things to a boil.And if that doesn't work--quicklympulls the plug...
...NOTHING VENTURED UNCLE SAM NEEDS A NEW R & D MACHINE BY GORDON FELLER t the onset of the 21st century, there are two almost diaetrically opposed models for advanced technology development...
...Fast, light on its feet, brutally efficient and quick to exploit opportunities, it is the perfect counterpart to the Osama bin Ladens of the world...
...If we were doing this today, those might be biotech testing tools, or aerial drones, or software for allowing universal data searches without compromising individual privacy...
...The straight-ahead Uncle Sam world has indeed benefited enormously (if belatedly) from the PC, high-speed networking, systems-on-a-chip and other venture-fuelled technologies...
...Think Delta Force in suits (yes, occasionally), pocket protectors and~these days--t-shirts, and you have the idea...
...But clearly venture capital could run rings around the command model, for fulfilling at least some of Uncle Sam's Information Age war needs...
...The CIA has already in effect done this with In-Q-Tel, the Silicon Valley venture shop it opened last year...
...teams of VCs with the relevant experience would be assembled to put the money to work...
...Method #1recall it "The Uncle Sam" modelmis owned and operated by the U.S...
...brought us the PC, the Internet and the tech boom of the late 1990s...
...The relevant federal agencies would work with funded start-ups to help define their goalsmexactly as happens now with the "corporate venture" arms of companies such as Intel and Fidelity Investments, which seed startups both to address specific opportunities or problems and to advance the companies' larger strategic goals...
...People really (ifjokingly) say things like:"We could tell you what we're doing, but then we'd have to kill you...
...But more typically, a complex set of specs gets jobbed out to one of the remaining handful of defense megacontractors, who undertake delivery of a very tightly specified black box or aircraft or weapons system, for some version of cost-plus...
...This is also the system that gives you the $400 toilet seat...
...Option 3: Same as #2, but with series of dedicated funds, focused around themes in cutting-edge technology: the intersection of digital imaging, and telecom...
...Silicon Valley, for its part, has always been happy to book multi-million-dollar hardware and software deals with blue-ribbon Washington customers, who never inquire about credit terms...
...But virtually all the high-tech weaponry now being tossed at Afghanistan was developed this way...
...The punch line is simple...
...How might that work...
...Option 2:Avoid the complexities of mixing private and public funds, and instead make Uncle Sam the sole institutional investor behind a dedicated "national security" fund, run by a dream team of VC heavyweights recruited from venture capital's epicenter, Sand Hill Road...
...The current struggle deserves no less.Venture capital is as crucial to our information economy as bond-wielding bankers, vast bureaucracies and rows of whitecoated lab technicians were to creating innovation in the smokestack age...
...But as we all know now, times change...
...Government...
...life sciences and bioinformatics...
...On the ground, hand-picked teams pour their hearts and guts into making the project go...
...From assembly lines cranking out boots to the Manhattan Project's quantum heights, World War II was won by marshalling everything we knew about how to produce and organize and innovate...
...3 0 THE AMERICAN SPECTATOR 9 NOVEMBER/DECEMBER 2OOI...
...digital security and biometrics...
...Bush White House Science adviser Floyd Kvamme, a senior partner at legendary Kleiner, Perkins would be an obvious choice for coach...
...nanotechnology...
...government buying priorities...
...It's time to crank up the scale...
...Don't expect to see the Army's next heavy tank taking shape in a Palo Alto garage (assuming there ever is a new hea W tank~not a foregone conclusion, by any means...
...Its key features are a single customer~ the Pentagon or another big federal agency~top-down "command" innovation, and enough bureaucratic (not to mention, political) oversight to send entrepreneurs screaming for the door marked "Free Market...
...Even the jargon is suitably Special Ops: "stealth mode," code-named products and eyes-only budgets as black as the CIA's...
...In nominal charge are the estimated 2,000 venture capital firms, which operate as trend and talent spotters, plus a militia of well-heeled "angel" investors, many of them grizzled entrepreneurial veterans themselves...
Vol. 34 • November 2001 • No. 8
