Tag: Silicon Valley

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McNair Center Startup Ecosystems

Silicon Valley: A Powerhouse for Innovation

Silicon Valley’s economy is a powerhouse. Representing 14% of U.S. Gross Domestic Product, if California were a country, it would have the sixth biggest economy in the world. Although it has remained successful for decades, California was not always the leader that it is today. What about California led it to become a high-tech phenomena?

The Growth of Silicon Valley

Semiconductor Expertise

Although Silicon Valley is well-known among the American public today, this area was not always known for its tech development. In the first half of the twentieth century, San Francisco began to become a hub for the radio and telegraph industries. The first steps towards becoming modern-day “Silicon Valley” occurred in the 1940s, with the founding of Hewlett-Packard and Bell Labs. Engineers at HP made oscilloscopes, radar and artillery technology to aid the US in World War II. The first ever transistor was also invented at Bell Labs during this time period. The transistor later went on to become the computer processor, and its inventor created Shockley Semiconductor Labs, the first company to create transistors out of silicon.

In the ‘50-60s, employees with knowledge of semiconductors at Shockley Semiconductor Labs left and started their own enterprises. From there, the area became a hub for technology, known for expertise in semiconductors.

University Collaboration

Another milestone, occurring simultaneously with the region’s growth in semiconductor production, was the creation of the Stanford Research Park (SRP) in the early 1950s. Stanford University’s Dean of Engineering developed SRP as a hub for entrepreneurs and researchers to collaborate. Soon after SRP’s creation, the city of Palo Alto annexed SRP’s lands to generate tax revenue; this created a mutually beneficial relationship between Palo Alto’s residents and the researchers at SRP.

In 1951, Stanford Research Park’s first company, Varian Associates, broke ground. Varian went on to develop the microwave tube, which served as underlying technology for satellites technology and particle accelerators. Since then, SRP has been the home to many technological breakthroughs, from developing components of the international space station to being the home to Facebook as it was in its earlier stages of growth.

University presence in the area gave Silicon Valley the advantage of having a steady stream of innovators. Lawrence Livermore Labs‘ establishment at the University of California at Berkeley in 1952 also brought a wave of innovators to the area. Their development of breakthrough defense technology began many years of innovations. Their work in collaboration with Los Alamos National Laboratory later enabled the launch of the Human Genome Initiative in the 1980s.

Over the following decades, more companies located themselves in the area. The 1970s brought Apple, Atari, and Oracle. The location of these large companies in the area brought talent and prestige.

Two decades later, after the area was well-established as the leader for the computer industry, companies like eBay, Yahoo, and Google all joined the ranks of Silicon Valley’s residents.

High Tech High Growth Enterprises and Changes Over Time

Graphic 1: Bay Area Startup Firms, 1980-2016

Graphic 1 shows changes in the amount of high tech high growth enterprises since 1986 in the Bay Area. We can draw a few insights from this information. First, the Bay Area’s concentration of these types of enterprises has clearly grown. The cities of San Francisco and San Mateo also became significantly more crowded than 30 years ago. However, concentration is not the only thing that has increased. Enterprises span the entire bay perimeter, whereas they used to mostly exist in small clusters.

A small cluster of enterprises has been growing to the East of the Bay Area, in Pleasanton. This could be a sign of even further sprawl in future years as the more popular areas become overcrowded.

Home to Venture Capitalism

Silicon Valley also houses the street that features some of the most prominent VC firms in the world: Sand Hill Road. Sand Hill Road, a 5.6-mile strip in Menlo Park, is famous for its high concentration of VC firms. The biggest names in tech – like Microsoft, Amazon, Facebook, and Twitter – all received funding from Sand Hill firms.

Although the success has been relatively steady, many sources are hypothesizing that Sand Hill Road’s reign may not last much longer. Tech Crunch attributes Sand Hill Road’s potential demise to VC firms’ desire to be closer to entrepreneurs along with the understanding that location isn’t as important as it used to be due to increased technology and on-site visits to founders. Sand Hill also has some of the highest space rental prices in the United States, which doesn’t incentivize firms to stay. Nonetheless, even as firms leave Sand Hill Road, they tend to stay in the Silicon Valley area. This means that Silicon Valley’s reputation as a VC leader is not truly in danger.

Broadening Success to California

With the success of Silicon Valley in Northern California and the long-standing success of Southern California as a center for pop culture and media, it is no surprise that the state experiences economic prosperity.

The Milken Institute cites the diversity of high-tech firms as what allows Silicon Valley and the rest of California to thrive. This diversity serves as a protection in the event that a specific tech industry crashes. Through sharing of resources and ideas, new firms are frequently popping up as well.

Nonetheless, California’s success is not unstoppable. According to the Milken Institute, California’s human capital capacity has been decreasing. Its rank in the Human Capital Investment Composite has dropped from second in 2002 to seventeenth in 2014. With this, California must recruit human capital from other states and countries in order to satisfy demand. If this human capital pipeline ever stutters, it could create issues for California’s continued growth. California is also only mid-tier when it comes to per capita academic R&D investment; this may not bode well for maintaining innovative competitiveness in the future.

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McNair Center Weekly Roundup

Weekly Entrepreneurship Roundup 4/14

Weekly Roundup is a McNair Center series compiling and summarizing the week’s most important Entrepreneurship and Innovation news.

Here is what you need to know about entrepreneurship this week:

How to Make Texas More Startup-Friendly

Iris Huang, Research Assistant, McNair Center for Entrepreneurship and Innovation

McNair Center’s Huang interviews Blake Commagere, entrepreneur, angel investor and startup mentor in the San Francisco Bay Area on how to improve an entrepreneurial ecosystem. Commagere graduated from Rice University in 2003 with a degree in Computer Science. Upon graduation, Commagere moved to Austin to begin his career as an entrepreneur and soon decided to move to Silicon Valley. Commagere has raised over $12 million in VC, started seven companies and sold five.

Commagere describes the pull of talent toward San Francisco as “a virtuous cycle,” where “former successful startup founders become the next generation angel investors and venture capitalists, who fund and help more startups succeed.” Silicon Valley’s concentrated network of VC firms and tech startups provide struggling entrepreneurs with a vast pool of mentorship opportunities, funding resources and talent. Budding startups heavily rely on local tech networks for early-stage support and advice. In order to develop its entrepreneurial ecosystem, Texas cities need to focus on building its tech space.

Additionally, the state’s cities must expand their VC presence. Otherwise, there will always be too many startups fighting for too little capital (as if this isn’t a problem already), and startups will continue to move to cities like San Francisco. Startups depend on local VC firms because many firms refrain from investing in companies outside their primary city. When firms do invest in outside companies, the qualification bar is set much higher.

Medical Device Startups and the FDA

Iris Huang, Research Assistant, McNair Center for Entrepreneurship and Innovation

McNair Center’s Huang takes a look at the FDA approval process for medical devices. The medical device industry is a $140 billion market. For many companies in the industry, obtaining FDA approval is a long and costly path. For some, it’s a barrier. Of the 6,500 companies in medtech, 80 percent are composed of fewer than 50 employees.

A Stanford University survey of over 200 medtech companies found that the average cost for a low-to-moderate-risk 510(k) product to obtain FDA clearance was $31 million. The same survey found that it took these products 31 months from initial communications with the FDA to obtain clearance. For startups, these costs pose significant barriers to entry. Huang aptly summarizes this dilemma: “as the cost of getting to market approaches the average exit value, the medtech funding equation looks less attractive to venture capitalists.”

The FDA approval process acts as an essential screening point in the medtech industry. However, Huang recommends that policymakers consider possible ways to alleviate the significant burdens placed on the businesses involved in the development of these critical technologies.

First Data Joins Silicon Valley Bank In Fintech Accelerator

Tom Groenfeldt, Contributor, Forbes
Silicon Valley Bank (SVB) recently announced a collaboration with First Data, a global payments technology solutions company, on Commerce.Innovated, its fintech accelerator. Commerce.Innovated, founded in 2014, is a four-month long virtual accelerator for startups in the financial services and technologies sector. The accelerator, unlike most early stage accelerators, focuses on startups that have already secured or are in the process of securing seed or Series A funding.

According to SVB’s Reetika Grewal, the accelerator looks for firms with “five to 10 people with an idea they are committed to.” In this stage, startups usually require help with the “operational,” rather than conceptual, front of development. Commerce.Innovated helps fintech firms bring their solutions to market. Since these startups already possess strong leadership with a clear vision for their product, a virtual platform makes sense.

A $150 Million Fund, The Engine, Will Back Startups Others Find ‘Too Hard’

Lora Kolodny, Contributor, TechCrunch

The Engine is a venture fund and accelerator for “advanced technology startups.” The new fund recently closed its debut round at $150 million. Startups in The Engine’s portfolio gain access to one of MIT’s unique resources, The Engine Room, a laboratory for small startups to develop and test their technologies. In addition to to The Engine Room, startups also receive access to laboratory equipment and technologies from organizations in the greater Boston area.

Despite its close affiliation to MIT, The Engine invests “in teams and technologies that hail from a variety of industry and academic backgrounds, not just from the MIT ecosystem.” The Engine supports companies involved in the development of “hard-tech” – so basically anything “from advanced materials and manufacturing technologies to medical devices, robotics, artificial intelligence, nuclear energy, fusion and more.”

Hard-tech startups typically face higher costs, more risk and a longer development period than most B2B or consumer-focused software. These startups often find it difficult to find VCs willing to invest in their innovative, but risky technologies. The Engine, according to the fund’s CEO Katie Rae, is dedicated to lowering the costs of development and testing “hard-tech” and encouraging more entrepreneurs to go into the field.

Tax Reform Must Help Small Businesses, Too

Laurie Sprouse, Reporter, The Wall Street Journal

Laurie Sprouse, a small business owner from Dallas, covers tax reform and small businesses for The Wall Street Journal. As Sprouse points out, small businesses have added two thirds of new jobs to the U.S. economy in recent years. Still, analysts and policymakers continually propose tax overhauls that largely ignore the plight of small firms. Instead, politicians and reporters alike focus on alleviating financial burdens for larger corporations and providing helpful, but insufficient, tax credits for small businesses. According to Sprouse, “Only a plan that benefits businesses of all sizes equally will create the broad economic growth President Trump and Congress seek.”

Stripe Acquires Indie Hackers in Bid to Strengthen Relationship with Entrepreneurs

Ken Yeung, Contributor, VentureBeat

Founded in 2010, tech company Stripe delivers application programming interfaces (APIs) that support electronic payments for consumers and businesses. Recently, the firm announced plans to acquire Indie Hackers, a startup dedicated to creating an internet community for entrepreneurs to share their success stories and lessons. While the financial terms of the deal remain unclear, it seems that site will operate as an independent subsidiary of Stripe.

Indie Hackers founder, Courtland Allen, describes his site as a “community where successful founders could share their valuable stories and insights, and where aspiring entrepreneurs could go for inspiration and advice.” Meanwhile Stripe executives view the deal as an opportunity to grow “the GDP of the internet” by increasing the “overall number” of successful businesses.

In an interview with VentureBeat, a Stripe spokesperson revealed that the company wants to support Indie Hackers’ mission by taking on some of the budding site’s financial burden. In just under a year, the site already runs a monthly profit of $6,000. Going forward, Allen hopes to see Indie Hackers take on a similar role as Y Combinator’s Hacker News.

The Weekly Roundup will return in June. 

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McNair Center Rice Entrepreneurs Startup Ecosystems

How to Make Texas More Startup-friendly

profileOver the last decade, Blake Commager (@commagere) has raised over $12 million in venture capital funding, started seven companies and sold five—including the first version of Facebook Causes and some of the most popular apps on Facebook, such as Zombies and Vampires. Born and raised in Midland, Texas, Commager graduated from Rice in 1999 and moved to the San Francisco Bay Area in 2003.

Commagere is the CEO of MediaSpike and an angel investor, advising several startups in the Bay Area. His varied experience in the tech startup space, from founder to investor and mentor, gives him a comprehensive perspective on the Silicon Valley startup ecosystem. As Commagere worked at a startup and tried to start a company in Austin before moving out to Silicon Valley, I was interested in learning why he chose to move out to the Bay Area and what Texas could do to better support startups.

Iris Huang: What brought you to the Silicon Valley?

Blake Commagere: I had always been interested in solving the problem of address book updating. In 2003, a friend of mine and I were working on our own company in Austin, and while doing competitive analysis, we found out Plaxo, a startup in Mountain View, California, was trying to solve the same problem. I liked their solution and they already had funding so I moved here to join the company.

I also felt the pressure to move to the Bay Area. By virtue of having a high concentration of tech talent, the Bay Area created a gravitational pull for even more tech talent. You see that with a lot of industries—they blow up largely in a few cities and as the ecosystem develops around them, the momentum increases, which makes it harder for other cities to compete. The more talent it has, the more successful the industry becomes in the region, the more new talent comes. The concentration of talent creates a virtuous cycle—in the Bay Area, the former successful startup founders become the next generation angel investors and venture capitalists, who fund and help more startups succeed.

The concentration of talent in the Bay Area has two main advantages:

The sheer concentration of talent and ecosystem make the process of building a startup easier, not a lot easier, but even if it’s just 2 percent easier, that makes all the difference. Given how hard it is to build a company, anything that makes it a little easier can be incredibly important. The high concentration of talent in the Bay Area makes it easier for startups to hire good employees. Startups will also have an easier time meeting people who can provide advice and introduce them to investors.

The large tech community in the Bay Area also provides a lot of emotional support, which turns out to be extremely important for startup founders. What’s unique about entrepreneurship is the combination of the high level of stress and lack of experience and resources. It’s very intimidating as an entrepreneur when you have a dozen things you have to do today but you have no idea how to do any of them. No business school teaches you what you need at a startup day to day. Sometimes other founders can’t help you either, but at least, you can commiserate with them. For example, after you pitch to a dozen VCs and no one wants to invest, you can talk to your community—they’ve all been through the pain so they understand how you feel. The therapeutic value of the commiseration is really important. You won’t feel so lonely, which, in addition to the hardship of building a company, could be overwhelming.

IH: How can Texas cities become more friendly to founders?

BC: A good ecosystem for startups cannot be developed overnight. It takes several entrepreneur/venture capital cycles—maybe over 20 years.

Someone should have a laser focus on building the tech community so entrepreneurs no longer feel alone in their journey. What entrepreneurs are trying to do is just too overwhelming to do on their own. They will leave for somewhere that has a supportive community if they can’t find the mentorship and network locally. In Austin, most of the time meetings happen by chance. Serendipity is unreliable—someone needs to build a tight knit community and make sure the support network is well-organized.

Someone has to bring capital there. No matter how great the idea is, you need to have money to fund it and make it happen. The number of VC firms and the amount of VC funding in Texas are limited (Note: total VC funding in Austin is $834 million, as compared to $25 billion in Silicon Valley according to the MoneyTree Report from PricewaterhouseCoopers). In Silicon Valley, there are so many funds; a startup can be rejected by a dozen of the top VC firms and still be able to raise funds from hundreds of other VCs. However, in Austin, if you pitch to Austin Ventures and they say no, your fundraising is over.

Also, with a small number of VCs, their time is limited so they can only invest in a small number of companies. Imagine if there are 100 great startups that deserve to be funded but there are only six general partners in your region. Simply for lack of VCs, some of these companies won’t get what they need to survive.

IH: Why is it necessary to raise VC funds locally?

BC: Silicon Valley VCs are unlikely to invest in startups in Texas. VCs have strong motivation to invest in nearby companies because the nature of venture capital investing—95 percent of startups fail—forces them to use their time wisely. VCs usually take board seats at the startups they invest in. Every board seat they take is an opportunity cost, preventing them from taking others. When VCs invest in startups in other cities, they have to travel for board meetings. So the time they spend on that board seat is longer and the opportunity cost for that investment is higher. That’s why you can’t expect Bay Area VCs to invest in Texas startups and when they do, the bar might be three times higher for Texas startups than Bay Area startups.

Funding is not the only value VCs provide for startups; their professional network plays an important role in helping startups succeed as well. However, VCs’ network is geographically dependent. If the startups are far away, they will not be able to benefit from VCs’ powerful network. This lowers their chance of success. This also discourages VCs from investing outside their primary cities.

Raising a fund to start a VC firm in Austin or Houston could be challenging—the new VCs will have to take the extra step to convince potential limited partners that “there is a reason and opportunity to invest here,” instead simply joining all the other VCs are in the Bay Area. However, this is what has to happen. Ideally, the new VCs have built their career and network in Texas for many years, which gives them the motivation and ability to raise a fund locally.

IH: How can Texas cities retain local talent?

BC: It all comes back to the availability of VC funding. Frequently I see announcements that a city is hoping to make the city more attractive to startups with programs for office space or professional services. None of that is a big expense compared to your employee costs. Some people argue that since everything is more expensive in the Bay Area, it makes sense to stay in Austin or Houston. For example, with $1 million funding, you might be able to hire 10 employees in Houston, but in the Bay Area, you can only hire 5 employees with similar credentials. However, this is an unrealistic comparison. In Houston, you are more likely to get $0 funding so really you can’t hire anyone while in the Bay Area, you might be able to get $1 million and hire 5 employees.

Each entrepreneur has their own timeline—when they need to raise funding, if there’s no funding available in Austin or Houston, they either have to shut down their startups or move to the Bay Area and raise money here. Right now everyone just follows the gravity and moves to the Bay Area because that’s the easiest. Texas is losing the tech talents and startups that create so many jobs to the Bay Area. It is very important to break the cycle. Step one is to stop the talent drain with VC funding and keep startups here. As the ecosystem matures, the long-term goal is to make it as easy to raise funding in major Texas cities as in the Bay Area.

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McNair Center Weekly Roundup

Weekly Roundup on Entrepreneurship 3/24/17

Weekly Roundup is a McNair Center series compiling and summarizing the week’s most important Entrepreneurship and Innovation news.

Here is what you need to know about entrepreneurship this week:

Congress Turns Its Attention to Entrepreneurship and Innovation — But Does It Take Effective Action?

Anne Dayton, Research Manager, McNair Center
The 115th Congress has passed 3 bills this legislative session relating to entrepreneurship and innovation. The tally seems abnormally high considering that only 10 bills have been passed in total since Congress first convened on January 3rd, While this wave of legislation might appear to indicate that Congress has set its sights on promoting entrepreneurship and innovation, the McNair Center’s Anne Dayton notes that out of the three bills passed by Congress, only one substantiates effective policy.

Out of the three bills passed, Dayton highlights the TALENT Act as likely to “make a real world impact.” The TALENT Act essentially codifies and formalizes the Presidential Innovation Fellows program, an initiative originally introduced by President Obama. The bill falls under House Majority Leader McCarthy’s Innovation Initiative for spurring higher rates of innovation in the private sector. For more insight into the work done by Innovation Fellows, check out Julia Wang’s post for the McNair Center on President Obama’s efforts to generate an “innovation nation.”

The other two acts, Promoting Women in Entrepreneurship and INSPIRE, aim to support women in entrepreneurship but are unfortunately, according to Dayton, “devoid of meaningful changes to public policy.” If you’re interested in how policy can increase women in STEM and innovation-based fields, check out this post from McNair’s Tay Jacobe.

Notwithstanding the results of the recent legislation, Dayton acknowledges that “all three acts passed Congress with bipartisan support”; hopefully these unified efforts are a function of “a shared interest in furthering innovation in government and expanding access to careers in entrepreneurship and STEM” among U.S. politicians.

In Silicon Valley, a Voice of Caution Guides a High-Flying Uber

Katie Benner, The New York Times, Reporter

Bill Gurley is a general partner at prominent Silicon Valley VC firm, Benchmark. Gurley spotted Uber early on, claiming a 20 percent stake in the successful ride-hailing app six years ago. Since Benchmarks original investment in Uber in 2011, the startup’s value increased 1,100-fold. Despite the startup’s huge successes, Uber has run into a host of problems in recent weeks, including legal disputes, stiff competition from rival ride-sharing app Lyft and negative press attention for employee allegations of sexual harassment and discrimination.

In light of the startup’s series of blunders, Gurley decided to take a more hands-on approach in advising Uber’s damage control strategy and will reportedly assist in the search for a COO for the startup. Since joining Benchmark, Gurley has been involved in the firm’s profitable investments into GrubHub, OpenTable and Zillow. However, with a successful public offering, Uber could become Gurley’s greatest tech investment yet.

Gurley is famous in Silicon Valley for his often unorthodox and unpopular advice to successful tech firms. During the dot com boom, he advised tech startup Net Gravity to go public as soon as possible, rather than to delay their IPO for further funding rounds. According to Gurley, “taking on too much venture funding…can fuel a lack of discipline” and lead to the absence of “rigorous financial and operational controls” among startups.

Will the Gig Economy Make the Office Obsolete?

Diane Mulcahy, Harvard Business Review, Reporter

Harvard Business Review’s Mulcahy reports on the potential of the gig economy going forward. In a traditional economy, companies demand employee attendance – in other words, the five day, eight-hour workweek. Under a gig economy, however, companies value employee performance over attendance and allow employees to disconnect their work from the office space. Options that allow employees to work remotely or in co-working spaces cut real-estate costs for employers and provide productive and flexible work environments for employees.

According to Mulcahy, “the most impactful lesson that traditional companies can learn from the gig economy is to judge all workers, including employees, on their results, not on when and where they do their work.” Perhaps entrepreneurs and startups might take a hint from the benefits of the gig economy. For most firms, and especially small businesses, labor is the most costly input into the production process. In fact, according to a study from CBRE, the average U.S. company spends roughly $12,000 per employee per year on office space alone. A survey of 8,000 employees conducted by McKinsey’s Global Institute reveals that employees who work outside of the typical office lifestyle report higher levels of satisfaction and productivity.

MuleSoft Stock Soars after Latest Tech Unicorn IPO

Mikey Tom, PitchBook, Contributor

PitchBook’s Tom covers MuleSoft’s IPO from last Friday. The IPO secured the VC-backed startup a market cap slightly above $3 billion. Mulesoft is 2017’s first large tech enterprise to go public. The San Francisco-based company develops software platforms that integrate data, devices, and APIs (application programming interfaces). Although 2016 was a slow year for public offerings (in comparison to M&A deals), Tom predicts that 2017 could reverse this current trend in VC exits. Tom predicts that the market’s “warm” reception to Mulesoft public offering could signal a shift in the “public market’s appetite for enterprise.” Just last week, tech unicorn Okta filed for its IPO. Okta provides identity management technologies, a hot sector in the tech industry right now.

How Spotify Is Finally Gaining Leverage over Record Labels

Josh Constine, TechCrunch, Reporter

Music-streaming startup Spotify has come a long way since its founding in 2008. In 2012, Constine wrote an article for TechCrunch explaining how Spotify’s success has always hinged on the cooperation of record labels; as a result of Spotify’s limited bargaining power in negotiating with artists, the startup pays huge royalties to their record labels. Despite limited leverage over record labels, the popular company now boasts over 50 million paid subscribers. In his latest post for TechCrunch, Constine notes several ways that Spotify has fundamentally shifted the power balance between streaming platforms and record labels.

First, Spotify has become a vehicle for music discovery, with its Discover Weekly feature shaping a many listener’s music preferences. Going forward, Spotify might take further advantage of the selection process for these recommended playlists to gain bargaining power when negotiating with artists. Currently, Spotify attributes a large proportion of the total royalty payments for many large record labels. If record labels want to rethink their partnership with Spotify now, they will potentially jeopardize a substantial stream of revenue. What’s more, Spotify has recently made moves to diversify its service offerings to include videos, limit content access by offering a tiered subscription system for new releases, and own the rights to the music it streams so that it can eliminate royalty payouts completely for some artists.

According to Constine, if Spotify successfully capitalizes on these strategies, the startup may achieve lower royalty rates and negotiation power before going public.

A Physician’s Open Letter to Health Tech Startups

Dr. M. Christine Stock, Guest Author, VentureBeat

In her post for VentureBeat, Dr. Christine Stock sends a clear message to health tech startups: start inviting physicians “innovation process.” According to Dr. Stock, who is a tenured professor of anesthesiology at Northwestern University, doctors want to be involved in the process that will transform how medicine is practiced going forward. The current model of implementation leaves physicians out of the development process.

Dr. Stock comments that “many new technologies work well after the period of adaptation,” but “leaving end-users (physicians) out of the product development process leads to unanticipated problems such as unintuitive and frustrating workflow, taxing documentation requirements and nonsensical and inaccurate cut-and-paste progress notes.” To increase the productivity of physicians during the rollout period and more effectively promote the well-being of their patients, tech startups should openly communicate with physicians. Through feedback from medical professionals, tech innovators might realize that flooding doctors with a flurry of new digital tools often leads to poor workflow and patient dissatisfaction on the consumer end of the chain.

Dr. Stock also notes on areas of the medical field that urgently demand innovation from the startup sector, including patient ownership of personal medical information and creating an open platform for EMR (electronic medical records) systems, so that healthcare providers can easily access medical records from and communicate with providers using different systems.

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McNair Center Weekly Roundup

Entrepreneurship Weekly Roundup: 11/18/2016

Weekly Roundup is a McNair Center series compiling and summarizing the week’s most important Entrepreneurship and Innovation news.

Here is what you need to know about entrepreneurship this week:

Nationalism is not putting a damper on this trillion-dollar sector

Elaine Pofeldt, Contributor, CNBC.com

CNBC Contributor Elain Pofeldt observes that the United States and Europe are witnessing a rise in nationalist and anti-globalization sentiment. She cites Mr. Trump’s election and the Brexit referendum as evidence. The trend may reflect a global desire to redistribute market and government benefits domestically – and a disapproval of corporations that send wages abroad and profits to the already wealthy.

In this uncertain climate, one economic principle remains key: Entrepreneurship fosters economic growth.

The Kauffman Foundation’s recently released Global Entrepreneurship Index emphasizes the importance of entrepreneurship to economic growth. This annual index rates countries on the health and quality of their entrepreneurial ecosystems. There is a strong correlation between a country’s GDP and its technological advancements. Governments should support a strong entrepreneurial ecosystem if they are truly serious about encouraging the country’s economic growth.

Currently the U.S. ranks number one on the index. The index suggests that the strength of the U.S. entrepreneurial environment lies in a strong perception for opportunity. One area of opportunity that U.S. entrepreneurs are increasingly tapping into are the regulated sectors, such as health care, energy and education.

Social entrepreneurs is also on the rise. Jonathan Ortmans, a senior fellow at the Kauffman Foundation, notes how this relates to national policy: “We’re now seeing a much larger number of public-sector leaders — government at the national and local level — jumping in and asking, `How do we tackle this and build stronger entrepreneurial ecosystems?'”

The Role of Entrepreneurship in Job Creation and Economic Growth

Margarita Hakobyan, Contributor, Huffington Post

Huffington Post’s Hakobyan emphasizes the role of entrepreneurship in job creation and economic growth. According to a report released by the Small Business Administration in 2012, small businesses created 60 percent of new jobs in the previous decade.

New businesses challenge existing markets and encourage competition by offering new or improved products. Successful entrants often steer customers away from existing companies. Disruptions in the market consequently force existing companies to innovate or watch their market share diminish.

Although the manufacturing sector suffered job losses from advancements in automation and other technologies, its productivity and scale have both risen considerably.

Manufacturing is an exception – many market disruptions create jobs. For example, Netflix, dismantled the video rental industry but created jobs by feeding a demand for large-scale processing of DVDs and maintenance of the grocery store kiosks that sell these DVDs.

Small businesses can also contribute to economic growth through their flexibility and diversity. Flexibility allows startups to react quickly to market conditions. Startups can meet consumer demands faster than established corporations because large companies often must follow long administrative processes before implementing reforms.

Venture Capital Firm Navigates Uncharted Course to Success

Michael J. de la Merced, Reporter, New York Times

The Times’ Merced reports on venture capital firm, Spark Capital. The firm is known for early investment in promising startups like Twitter, Tumblr, Slack and Oculus.

Spark is also wading into uncertain industries. It recently invested in Cruise Automation, a San Francisco-based startup that develops software for self-driving cars. At a time when Google and Uber declared self-driving vehicles “among their top research priorities,” the success of less funded and less established startups competing to break into the same market seemed doubtful. Big industry players already dominated the research on self-automated cars, so most VC firms turned to alternative ventures within less-explored markets. Despite the industry’s conventional wisdom, Cruise Automation was sold to General Motors for $1 billion within months.

Spark adopts a nontraditional process for investment decisions that focuses on products rather than markets. Instead of specializing in certain industries or markets, partners at Spark can bring any prospective venture to the table. Investors then debate the merits of pursuing the opportunity until a consensus among the partners is reached. Spark accredits its most successful decisions to an “appreciation for good product design.”

In total, Spark manages $3 billion in investment funds. Its fifth venture fund will have a first-close target of $400 million.

Ever Wanted to Back a Start-Up? Indiegogo Opens the Door to Small Investors

Stacy Cowley, Reporter, The New York Times

Indiegogo is a popular crowdfunding site that enables small venture capitalists to invest personal money into promising and creative ventures. The major crowdfunding site is the first to take advantage of a new securities rule, which allows “ordinary investors to risk up to a few thousands dollars a year backing private companies.”

Before the rule was passed, only accredited investors, or those with an annual income greater than $200,000 or net worth of $1 million, could invest personal funds in these riskier ventures. With the passage of the new rule, crowdfunding backers can own equity stakes in the companies they invest in.

The new rule addresses an issue raised during Oculus’ acquisition by Facebook. Oculus raised millions of dollars on crowdfunding sites during its early investment stages. The startup used the investments raised by crowdfunding backers to prove to venture capitalists that there was a market demand for its products. Investors poured money into the company, and Facebook subsequently acquired Oculus. The firm’s original crowdfunding backers reaped no gains; angel and venture capital investors took home the profits.

The Reason Silicon Valley Beat Out Boston for VC Dominance

Anil Gupta and Haiyan Wang, Contributors, Harvard Business Review

The Boston-Cambridge and Bay Area have histories in technology entrepreneurship and venture capital (VC). However, since the 1990s, Silicon Valley has consistently snatched a larger share of all VC investments in the US than its Northeastern counterpart. New England’s share in VC investments plateaued at roughly 10 percent. Meanwhile, the Bay Area’s share of VC investments has grown from 22.6 percent to just over 50 percent.

HBR’s Gupta and Wang identify cultural factors and state-level policies as possible explanations for the divergence between the two coastal VC hubs. For example, Massachusetts, unlike California, allows businesses to include noncompete covenants in their employment contracts. Noncompete covenants offer company loyalty, but they can also remove the need for fast-paced innovation that many Silicon Valley entrepreneurs face.

Additionally, New England and Silicon Valley differ in the type of investors and companies that they attract. The Northeast dominates in the life sciences; in the first three quarters of 2016, 60 percent of New England investments involved ventures focused on biotechnology and medical devices. Silicon Valley, on the other hand, is home to many of the startups that develop platform technologies integral to the digital age.

According to Gupta and Wang, California’s stronghold on the digital and tech industry has resulted in a “growing agglomeration effect.” Increasingly, entrepreneurs are migrating to or launching their businesses in the Bay Area to gain access to these synergies that come from being immersed in the world’s greatest entrepreneurship ecosystem.

And in startup news…

Womply bags $30M to Help Small Businesses Harness Data

Tomio Geron, Reporter, The Wall Street Journal

San Francisco-based Womply raised $30 million in its most recent round of financing, bringing its funding total up to $50 million since 2011.

The startup’s platform offers a “web-based suite of software tools” that allows small businesses to analyze performance data on sales, marketing, consumer behavior, revenue and online reputation.

Womply serves a diverse set of clients, ranging from salons to legal firms, but focuses on supporting service-oriented small business. The startup allows small businesses to gain valuable insights into their performance and consumer base. President Cory Capoccia says Womply is helping small businesses increase their efficacy “by “building technology to help grow, protect and simplify running small businesses.”

Rice Entrepreneurs

Spotlight on Rice Entrepreneurs: East-West Tea

Carlin Cherry, Research Assistant, McNair Center for Entrepreneurship and Innovation

East-West Tea is a student-run business that sells boba tea to Rice University students. Initially developed as a project for an undergraduate marketing class, East-West launched operations last month. The McNair Center’s Carlin Cherry interviews operations manager Andrew Maust.

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McNair Center Weekly Roundup

Innovation Weekly Roundup: 11/11/16

Weekly Roundup is a McNair Center series compiling and summarizing the week’s most important Entrepreneurship and Innovation news.

Here is what you need to know about innovation this week:

Silicon Valley Reels in Wake of Trump’s Presidential Victory

Joshua Brustein and Eric Newcomer, Bloomberg

Silicon Valley tech giants became unlikely political players in this election cycle. The results of the election leave the Valley in an uncertain position. Clinton received 114 times the amount of campaign contributions than Trump from the tech industry, so it should come as no surprise that a Trump presidency was not the industry’s favored outcome. The immediate threat to tech companies with the election of Donald Trump is the possibility of stringent immigration restrictions. Restrictions on immigration make it difficult for high skilled employees to work in the US. Furthermore, Trump’s lack of a clear plan for technology and the tech sector has left the industry in a state of limbo.

Election Day’s Tech-Related Triumphs — and Failures

Jamie Condliffe, MIT Tech Review

Many ballot initiatives on Tuesday were tech-related. Florida voted against an initiative that would have forced those with solar installations to give up payments for energy they feed back into the grid. The outcome will promote the expansion of home solar. Nevada voted to deregulate its electrical market. In transportation innovation, Seattle approved a $54 billion project to develop 62 miles of light rail and 37 new rail stations. Washington state rejected the first carbon tax in the US, partly over concerns that it failed to raise enough revenue for clean energy projects. Montana voted against a proposal to establish and allocate $20 million to the Montana Biomedical Research Authority.

How the tech industry is reacting to Donald Trump’s improbable victory

Paul Sawers, Contributor, VentureBeat

While Trump has been outspoken on economic reform, he largely did not address the the technology industry. While Paypal Founder Peter Thiel supported Trump throughout his candidacy, the majority of tech entrepreneurs expressed dismay over the possibility of Trump presidency. VentureBeat’s Sawers includes several Tuesday night tweets from tech industry leaders on the outcome of the election.

Results of the Clarity of the Record Pilot

Michelle K. Lee, USPTO Director & Under Secretary of Commerce for Intellectual Property

USPTO completed its Clarity of the Record Pilot, a program within the Enhanced Patent Quality Initiative. The Clarity of the Record Pilot enhances patent quality by identifying best practices for clarifying aspects of the prosecution record.

68 unique data points were measured, and each point represents a best practice. Examples of best practices include separately addressing independent claims or providing specific limitations in claims that are anticipated by prior reference when used to reject multiple claims. During the pilot, examiners used 14 percent more best practices in pilot cases as opposed to a control group.

The USPTO will be holding a Patent Quality Conference on December 13 to share more information on the Enhancing Patent Quality Initiative.

Women in STEM: Closing the Gap

Taylor Jacobe, Research Assistant, McNair Center for Entrepreneurship and Innovation

McNair’s Taylor Jacobe focuses on the slow growth in women’s presence in STEM and innovation. Jacobe provides robust, global evidence of the economic benefits of integrating women into the workforce and encouraging girls to pursue careers in these fields.

The Obama administration has made efforts to introduce such initiatives, including work-life balance programs and speaking tours with successful women. However, much work remains in combating gender inequality in the workplace, especially within the STEM fields.

The solution to this inequity is neither simple nor obvious. Jacobe recommends a combination of policy changes aimed at eliminating cultural barriers for women and increasing education opportunities for girls.

Women represent 19.6% of the staff at the top 25 tech companies

Dean Takahashi, Contributor, VentureBeat

A recent study by hiring firm HiringSolved reveals that women constitute only 19.6 percent of staff at the top 25-tech companies. The study indicates a critical need for  integration of women into technology and innovation.

Many Silicon Valley tech giants have introduced measures to address the gender imbalance in their workforce. HiringSolved’s study relies on machine learning and artificial intelligence to sift through its databases of information on gender, ethnicity, and age. Although the firm’s methods are by no means foolproof, the results are telling.

Thank you to Meghana Gaur for contributing to this week’s innovation roundup.