Category Archives: Innovation

Darwinian and Lamarckian innovation – by Pascal Picq

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I enjoyed reading Un paléoanthropologue dans l’entreprise, i.e. a paleoanthropologist in the corporate world, the last book of Pascal Picq, a paleoanthropologist who explores the world of innovation. He applies his knowledge of evolution to compare two types of innovation: by simplifying, Continental Europe, rather Lamarckian and the Anglo-Saxon world and especially the United States, of Darwinian type.

I warn the reader by quoting Picq’s conclusion (page 236): “the Darwinian corporation has nothing to do with all the stupid stereotypes erroneously expressed about evolution. It is a corporation that adapts to changes by mobilizing innovation mechanisms, which are based on the torque variation / selection ”

From the very beginning, we dive into the heart of the matter: “The public officials who are working to open up our French vertical society will see, in the opposition between Lamarck and Darwin, the ineffectiveness of competent organizations facing the fruitful “bricolage” (do-it-yourself) of the networks which create new sources of innovation and development.” And he adds: “Diversity is a prerequisite for innovation.” (Page 12)

Picq explains (page 44): “Natural selection works in two steps, the production of variations – ithat is variability – and, secondly, the selection. It is the Darwinian algorithm.” There is neither chance nor necessity. At each stage of evolution, innovations appear as random variations constrained by history. That’s the game of possibilities.

He is well aware that the use of biology to economics analogies is dangerous (page 51): “the concepts of corporations and species are not defined easily.” And the analogy of evolution has probably its limits. “But there’s an important message: variability” (page 52) “If the environment is favorable, there is no selection. If there is competition for resources, then it manifests itself by playing variations. Adaptation comes from this mechanism.” There is no perfect Adaptation, but (page 55) “isolationism is the penultimate step before extinction.” I can not help thinking of the work of Saxenian who has shown that the more closed culture of the Boston area partly explains its lag behind Silicon Valley and the demise of Digital Equipment (DEC).

“There is no perfect adaptation; even if we create the best products, the success or failure depends on many other contextual and contingent factors. The ways of coping are not impenetrable, but take paths and sometimes difficult to predict detours: crafts, breakthrough innovations, and also the return of products once thought obsolete which find new niches. There would be a solution, that of a planned model of needs and uses. Except that between Thomas Edison and Steve Jobs, no major innovation came out of directed economic systems. On the other hand, do we fit in an existing market or do we create new markets? For structural and historical reasons – i.e. cultural – the best European companies are excellent in markets already structured but have difficulty inventing new markets such as U.S. companies.” (Page 84). Earlier, he wrote: “The dominant idea of ​​a technological change that is linear and accumulative obscures a much neglected field of innovation: history.” (Page 63)

“If a new market emerges, everyone has a chance. The absence of pressure from competition and selection admits all possibilities, giving the false impression that one is great. But when the market is saturated or shrinks, this is where selection has a role. This was the case with mobile phones in the mid-1990s. A company like Nokia, historically out of the field of electronics, was able to find its place. In today’s highly competitive market, it would be simply impossible.” (Page 87)

I let the reader discover the concepts of preadaptation, transaptation, exaptation. Picq also describes the K and r strategies which I quote from wikipedia:
– The r-selection: In unstable or unpredictable environments, r-selection predominates as the ability to reproduce quickly is crucial. There is little advantage in adaptations that permit successful competition with other organisms, because the environment is likely to change again. Traits that are thought to be characteristic of r-selection include: high fecundity, small body size, early maturity onset, short generation time, and the ability to disperse offspring widely.
– The K-selection: In stable or predictable environments, K-selection predominates as the ability to compete successfully for limited resources is crucial and populations of K-selected organisms typically are very constant and close to the maximum that the environment can bear (unlike r-selected populations, where population sizes can change much more rapidly). Traits that are thought to be characteristic of K-selection include: large body size, long life expectancy, and the production of fewer offspring, which require extensive parental care until they mature. Organisms whose life history is subject to K-selection are often referred to as K-strategists or K-selected. Organisms with K-selected traits include large organisms such as elephants, trees, humans and whales, but also smaller, long-lived organisms such as Arctic Terns.

Here we are in the heart of the matter:
– Lamarckian innovation (page 158) is active. It responds to a solicitation of the environment and tend to the improvement. “The function creates the organ.”… “Inventions are the daughters of necessity.” It works to improve products in established industries: automotive, aerospace, rail, space, telephone, water, construction, petrochemicals …
– Darwinian innovation (page 160), initially produces diversity without thinking of the advantages or disadvantages of what emerges, then in a second step, there is the action of selection. In such a context, you have to waste time, set the conditions for the production of ideas. It allows serendipity.

These are the 20% free time at Google. He also explains (page 98) the dangers of rationalizing research expenditures (see my post on the need for wasting ideas). Then (on page 103) “Steve Jobs launched Next, without much success, in a culture of the trial and error; it allowed him to propose and test new ideas that led him to come back to Apple – which would have been inconceivable in Europe.”

And here’s his summary (page 139):

Lamarckian Culture Darwinian Culture
Continental Europe USA
Hierarchy of Schools Diversity in excellence
“I did Polytechnique” “I created a business”
Uniformity of elites Diversity of elites
Large Corporations “Small Business Act”
Culture of Engineering Culture of Research
“Agrégés” (teaching) PhD (research)
Culture of Compliance Culture trial and error
Managed innovation Darwinian algorithm
Selection on IQ Selection on creativity
Applied R&D R&D by emergence
Colbertism Freedom of territories
Career Entrepreneurship
CAC40 Top25

I could have added his distinction (page 222) between Owner/manager of a company and Entrepreneur. Another interesting anecdote: “If you look at the French CAC 40, almost all have been around for half a century. Bertlesmann is the only one being less than 40 years in the European TOP25 whereas there is one third in the United States.” I mentioned this in Start-Up by citing the work of Zhang Junfu. “Zhang also analyzed this astonishing dynamics by comparing the 40 biggest high-tech Silicon Valley companies in 1982 and in 2002 as provided by Dun & Bradstreet. Twenty of the 1982 companies did not exist anymore in 2002 and twenty one of the 2002 companies had not been created in 1982.” Here it is in full:

Forty Largest Technology Companies in Silicon Valley
1982 2002
1. Hewlett-Packard 1. Hewlett-Packard
2. National Semiconductor 2. Intel
3. Intel 3. Cisco b
4. Memorex 4. Sun b
5. Varian 5. Solectron
6. Environtech a 6. Oracle
7. Ampex 7. Agilent b
8. Raychem a 8. Applied Materials
9. Amdahl a 9. Apple
10. Tymshare a 10. Seagate Technology
11. AMD 11. AMD
12. Rolm a 12. Sanmina-SCI
13. Four-Phase Systems a 13. JDS Uniphase
14. Cooper Lab a 14. 3Com
15. Intersil 15. LSI Logic
16. SRI International 16. Maxtor b
17. Spectra-Physics 17. National Semiconductor
18. American Microsystems a 18. KLA Tencor
19. Watkins-Johnson a 19. Atmel b
20. Qume a 20. SGI
21. Measurex a 21. Bell Microproducts b
22. Tandem a 22. Siebel b
23. Plantronic a 23. Xilinx b
24. Monolithic 24. Maxim Integrated b
25. URS 25. Palm b
26. Tab Products 26. Lam Research
27. Siliconix 27. Quantum
28. Dysan a 28. Altera b
29. Racal-Vadic a 29. Electronic Arts b
30. Triad Systems a 30. Cypress Semiconductor b
31. Xidex a 31. Cadence Design b
32. Avantek a 32. Adobe Systems b
33. Siltec a 33. Intuit b
34. Quadrex a 34. Veritas Software b
35. Coherent 35. Novellus Systems b
36. Verbatim 36. Yahoo b
37. Anderson-Jacobson a 37. Network Appliance b
38. Stanford Applied Engineering 38. Integrated Device
39. Acurex a 39. Linear Technology
40. Finnigan 40. Symantec b

NOTES: This table was compiled using 1982 and 2002 Dun & Bradstreet (D&B) Business Rankings data. Companies are ranked by sales.
a – No longer existed by 2002.
b – Did not exist before 1982.

In conclusion, Europe is characterized by a very Lamarckian entrepreneurial culture, promoting and supporting the established sectors, very much organized and structured for businesses, schools, unions, governments, banks, etc.. It excels in active innovation for engineers, in highly technical fields with great success in structured markets. Obviously, (page 164) “there is a real difficulty, which is the transfer of innovation in the entrepreneurial phase.” It means to (page 168) “take risks, foster a culture of trial / error” and not to penalize failure. “There is an urgent need to develop an entrepreneurial culture at all levels of our society: schools, colleges and universities, of course, but also in business and society in general.”

This is not about to be Lamarckian or Darwinian. “And remember that R&D is research and development, R for Darwin and D for Lamarck, the two steps of the Darwinian algorithm.” All the talent is in the balance between the two phases. (Page 170)

Here Picq might be wrong. Darwin and Lamarck should both be applied to the D and it may be where we have failed in Europe. We forgot Darwin needs to be in the development phase too.

Picq develops his concept of “bricolage” (page 174): “We have too long believed that the complexity of organisms depended on the number of genes.” … “In fact, the structures are simplified by successive integration during evolution (optimization) but they allow a variety of functions (plasticity).” (Page 175) “Animals and children are not Cartesian machines, we learn to walk, eat, especially for species of type K.” (Page 179) “In addition the machine Hydra which was never beaten by the best [chess] champions was beaten in 2005 by very good players – but not the great Masters – who used computers that were connected to standard sites and other players. This is Bricolage!” … “A combination of intelligent entities, but simpler and fed with external information is more effective than the best and most sophisticated machines with its programs, routines, software and internal databases.”

I could repeat here his warning on the misunderstanding of Darwinian theory that I put in the beginning. He added: “There is a grotesque conception of the war of all against all [in ecology as well as in innovation]” (page 185). “One must think competition not to eliminate, but with a strategy of coopetition.” … “This requires an open culture, with intricate collaborations.” … “Silicon Valley is the most paradigmatic model” while Sophia Antipolis is a juxtaposition of companies. “The territories and generally peripheral populations set innovations more easily and thus evolve more rapidly.” And again (page 236) “To be Darwinian does not mean to eliminate the other, but to exclude practices and models with deleterious effects on the economy and society as a whole. Darwinian theory has never been the law of the jungle, or the selfish individualism, or the war of all against all. Life is not a Rousseau-like world, but we live much less in the world of Hobbes. ”

One last anecdote: “In the early 1980s, IBM had been reluctant to enter the market of the computer. Big Blue has followed a K-strategy with great expertise on large computer systems. Then the management decided to “isolate” a small group of very creative engineers, without the constraints of the usual processes. This led to the IBM-PC, a perfect example of rapid innovation by genetic drift in a population of small size and placed in the periphery.” This is exactly the illustration of the Innovator’s Dilemma theory from Clayton Christensen.

I’ll let you read his conclusion on why humankind went to Australia. And I have not taken the time to talk about his description of gazelles, antelopes, buffaloes and other elephants, or his defense of a Small Business Act for France (or Europe). Picq might be criticized for inaccuracies, misstatements, a little fast and simple description of a complex situation, but it would be wrong to stop at this, because this is a book extremely stimulating not to say enthusiastic.

What’s an entrepreneur in France?

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I was shocked, or I should say, I smiled yesterday when I used Google Translate to obtain an English equivalent of “l’entrepreneur doit être au centre des écosystèmes innovants”; I got “the contractor must be the focus of innovative ecosystems.” It is not a pure accident.

Let me remind you one of my favorite quotes from Paul Graham “I read occasionally about attempts to set up “technology parks” in other places, as if the active ingredient of Silicon Valley were the office space. An article about Sophia Antipolis bragged that companies there included Cisco, Compaq, IBM, NCR, and Nortel. Don’t the French realize these aren’t startups?”

Contractor, concrete, office space… When I was a kid, an entrepreneur was building houses. Google just kept that old meaning. Or is it that old? I will come back on this topic when I will comment (on the French part of my blog) a book I am currently reading “le paléoanthropologue dans l’entreprise ; s’adapter et innover pour survivre” by Pascal Picq. What stroke me there is a description of the Lamarckian style of French companies vs. the Darwinian flavor of the Anglo-Saxon ones… The book may explain many of the cultural differences of these two worlds.

Mind the Gap: the seed funding of university innovation

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I recently read Mind the Gap: The University Gap Funding Report published by innovosource.

Disclaimer: I usually do not mention my activities at EPFL on this blog and this report deals exactly with the type of funds I manage there: the Innogrants. I was indeed interviewed for this report as one of the active members of the Gap Funding community and the Innogrants are one of the examples mentioned.

Mind The Gap is a great report because it describes a concept which was born a little before 2005, the seed funding, I should even say the pre-seed funding, by universities of their innovations, including start-ups. The next figure illustrates not only gap funding but all the existing tools enabling academic innovation.

Let me just briefly quote it (but you should know the report is not free, so I cannot summarize it in too much detail. The author allowed me however to give you a 25% discount code: USHAPE). In any case, it is extremely rich in data and information.

“This “gap” extends from where the government funding of basic research ends to where existing companies or investors are willing to accept the risk to commercialize the technology.” [page 9]. The author reminds us that “Failure is commonplace in these sorts of pursuits, but ask where you would find yourself (or where you are going) without GPS and the internet, and most recently a little iPhone “assistant” named Siri that originated from the DARPA funded CALO (Cognitive Agent that Learns and Organizes) program through a university consortium.” [page 20]

As a side element, there are also the emerging accelerators, “Popularized in recent years with the likes of Y Combinator and TechStars, accelerators combine access to talent and support services with “stage-appropriate” capital in return for a stake in the company or other repayment structures.” [page 22] but this is another subject!

There are already some “famous” gap funding tools: “another study by the Kauffman Foundation [1] investigated two well-known proof of concept centers at MIT (Desphande Center) and UC-San Diego (von Lebig Center) and reported general process and impacts.” [page 26]

[1] C. and Audretsch, D. Gulbranson, “Proof of Concept Centers: Accelerating the Commercialization of Univeristy Innovation,” Kauffman Foundation, 2008.

I do not want to quote much more this 100-page deep and very interesting analysis. My final comment is that a critical element is the leverage gap funding enables. You will find a full analysis on pages 88-90. In his Report Summary, the author depicts the value of gap funding through:

High commercialization rates
– 76-81% of funded projects commercialized on average
Attraction of early stage capital
– $2.8B leveraged from public and private investment sources
Business formation and job creation
– 395 new start-up companies
– 188 technology licenses to existing companies
– 7,761 new jobs, at cost of $13,600 gap fund dollars per job
Building a community of innovation
– Thousands of faculty and students engaged in the process
– Incorporate networks of technical and business professionals in the evaluation, mentorships, and leadership of these technologies
Organizational returns
– $75M returned to the organizations through repayments, royalties, and equity sales
– Maximize resource allocation and downstream savings, by permitting early failures through exploratory and evaluation tactics
– Empower universities to continue to take risks that support the type of breakthroughs that define our present, and the type of innovation that will carry us into the future

Let me finish with what I contributed to the report, i.e. a short description the EPFL innogrants:

When I met Jochen Mundinger in October 2006 it did not take me much time to make up my mind. I had previously seen many startup ideas and Jochenʼs Internet project looked to me original and powerful. Prior to any due diligence, I told him that if my analysis was positive, he would get a 12-month grant to work on his start-up. Because of this program, I am lucky enough to be able to make fast decisions and by January 2007, Jochen was working on his project. He did not wait until the end of his grant to found routeRank and by October 2007, with the support of business angels. Today, the service has grown and been recognized by the famous MIT TR35 award in 2010.

And then there was Andre Mercanzini, a Canadian citizen, who certainly has the drive and enthusiasm of many North-Americans. Andre obtained his PhD at EPFL following a few start-up experiences in the US. Andre has developed electrodes for Deep Brain Stimulation. The path was not as fast and easy as for Jochen. Though Aleva Neurotherapeutics was founded in mid-2008, Andreʼs prototypes needed further validation to attract venture capital (a major use of the grants). The Swiss ecosystem is rich with mentors and support so that Andre developed further his project to the point of raising $10M in his series A round in August 2011.

These are just two examples of EPFL innogrants. Initially backed by Swiss bank Lombard Odier, it has since received support from KPMG and Helbling, an engineering firm. The fact that similar initiatives were launched in Switzerland is another illustration that gap funding attracts and seduces. The Innogrants are a bet on young people. Since 2005, 48 projects have been funded out of more than 300 ideas and 24 companies created. We admit at EPFL that failure is part of the process and even if no start-up is ever launched, the grant is a learning experience. We also have the vision that Innogrants become role models and hope that more and more students will be less shy about expressing their dreams.

The Lean Startup – Eric Ries

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After reading Clayton Christensen, Geoffrey Moore and Steve Blank, I was expecting a lot from The Lean Startup by Eric Ries. I was disappointed. It could be that I did not read it well or too fast, but I was expecting much more. But instead of saying what I did not like, let me begin with the good points.

Just like the previous three authors, Ries shows that innovation may be totally counterintuitive: “My cofounders and I are determined to make new mistakes. We do everything wrong. We build a minimum viable product, an early product that is terrible, full of bugs and crash-your-computer-yes-really stability problems. Then we ship it to customers before it’s ready. And we charge money for it. After securing initial customers, we change the product constantly. […] We really had customers, often talked to them and did not do what they said.” [page 4]

On page 8, Eric Ries explains that the lean startup method helps entrepreneurs “under conditions of extreme uncertainty” with a “new kind of management” by “testing each element of their vision”, and “learn whether to pivot or persevere” using a “feedback loop”.

This is he Build-Measure-Learn process. He goes on by explaining why start-ups fail:
1- The first problem is the allure of a good plan. “Planning and forecasting are only accurate when based on a long, stable operating history and a relatively static environment. Startups have neither.”
2- The second problem is the “Just-do-it”. “This school believes that chaos is the answer. This does not work either. A startup must be managed”.
The main and most convincing lesson from Ries is that because start-ups face a lot of uncertainty, they should test, experiment, learn from the right or wrong hypotheses as early and as often as possible. They should use actionable metrics, split-test experiments, innovation accounting. He is also a big fan of Toyota lean manufacturing.

I loved his borrowing of Komisar’s Analogs and Antilogs. For the iPod, the Sony Walkman was an Analog (“people listen to music in a public place using earphones”) and Napster was an Antilog (“although people were willing to download music, they were not willing to pay for it”). [Page 83]

Ries further develops the MVP, Minimum Viable Product: “it is not the smallest product imaginable, but the fastest way to get through the Build-Measure-Learn feedback loop.” Apple’s original iPhone, Google’s first search engine, or even Dropbox Video Demo were such MVPs. More on Techcrunch [page 97]. He adds that MVP does not go without risks, including legal issues, competition, branding and morale of the team. He has a good point about intellectual property [page 110]: “In my opinion, […the] current patent law inhibits innovation and should be remedied as a matter of public policy.”

So why did I feel some frustration? There is probably the feeling Ries gives that his method is a science. [Page 3]: “Startup success can be engineered by following the right process, which means it can be learned, which means it can be taught.” [Page 148]: “Because of the scientific methodology that underlies the Lean Startup, there is often a misconception that it offers a rigid clinical formula for making pivot or persevere decisions. There is no way to remove the human element – vision, intuition, judgment – from the practice of entrepreneurship, nor that would be desirable”. I was probably expecting more recipes, as the ones Blnak gives in The Four Steps to the Epiphany.

So? Art or science? Ries explains on page 161 that pivot requires courage. “First, Vanity Metrics can allow to form false conclusions. […] Second, an unclear hypothesis makes it impossible to experience complete failure, […] Third, many entrepreneurs are afraid. Acknowledging failure can lead to dangerously low morale.” A few pages before (page 154), he writes that “failure is a prerequisite to learning”. Ries describes a systematic method, I am not sure it is a science, not even a process. Indeed, in his concluding chapter, as if he wanted to mitigate his previous arguments, he tends to agree: “the real goal of innovation: to learn that which is currently unknown” [page 275]. “Throughout our celebration of the Lean Startup movement, a note of caution is essential. We cannot afford to have our success breed a new pseudoscience around pivots, MVPs, and the like” [page 279]. This in no way diminishes the traditional entrepreneurial virtues; the primacy of vision, the willingness to take bold risks, and the courage required in the face of overwhelming odds” [page 278].

Let me mention here a video from Komisar. Together with Moore and Blank, he is among the ones who advise reading Ries’ book. I am less convinced than them about the necessity to read this book. I have now more questions than answers, but this may be a good sign! I have been more frustrated than enlightened by the anecdotes he gives or his use of the Toyota strategy. In na interview given to the Stanford Venture Technology program, Komisar talks about how to teach entrepreneurship. Listen to him!

To be fair, Eric Ries is helping a lot the entrepreneurship movement. I just discovered a new set of videos he is a part of, thanks to SpinkleLab.

Fred Destin had also a great post on his blog about the Lean Startup and you should probably read it too to build your own opinion. Lean is hard and (generally) good for you. Fred summaries Lean this way and he is right: “In the real world, most companies do too much development and spend too much money too early (usually to hit some pre-defined plan that is nothing more than a fantasy and / or is not where they need to go to succeed) and find themselves with an impossible task of raising money at uprounds around Series B. So founders get screwed and everyone ends up with a bad taste in their mouth. That’s fundamentally why early stage capital efficiency should matter to you, and why you should at least understand lean concepts.”

Let me finish with a recent interview given by Steve Blank in Finland:
I have devoted the last decade of my life and my “fourth career” to trying to prove that methods for improving entrepreneurial success can be taught. Entrepreneurship itself is more of a genetic phenomenon. Either you have the passion and drive to start something, or you don’t. I believe entrepreneurs are artists, and I’d like to quote George Bernard Shaw to illustrate:

“Some men see things as they are and ask why.
Others dream things that never were and ask why not.”

Over the last decade we assumed that once we found repeatable methodologies (Agile and Customer Development, Business Model Design) to build early stage ventures, entrepreneurship would become a “science,” and anyone could do it. I’m beginning to suspect this assumption may be wrong. It’s not that the tools are wrong. Where I think we have gone wrong is the belief that anyone can use these tools equally well.

When page-layout programs came out with the Macintosh in 1984, everyone thought it was going to be the end of graphic artists and designers. “Now everyone can do design,” was the mantra. Users quickly learned how hard it was do design well and again hired professionals. The same thing happened with the first bit-mapped word processors. We didn’t get more or better authors. Instead we ended up with poorly written documents that looked like ransom notes. Today’s equivalent is Apple’s “Garageband”. Not everyone who uses composition tools can actually write music that anyone wants to listen to.

It may be we can increase the number of founders and entrepreneurial employees, with better tools, more money, and greater education. But it’s more likely that until we truly understand how to teach creativity, their numbers are limited. Not everyone is an artist, after all.”

America and entrepreneurship

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Nearly 3 years after my unusual post about Obama, here is a post slightly related. Before digging into the topic, I have to admit I have a huge respect for the American president. Even after watching George Clooney’s The Ides of March and the disappointment expressed by many people, I am intrigued and fascinated by his track record. I should add for the anecdote that I was in Washington in October 2009 when he was award the Nobel Peace Prize and in Silicon Valley in September 2011 when he pronounced his recent speech to the Congress. I also quite liked the Titan Dinner.

The White House recently published TAKING ACTION, BUILDING CONFIDENCE and the second initiative is about entrepreneurship. It is worth reading these dense 6 pages and among other things, it is striking to notice that the USA, “the most entrepreneurial nation on earth” [page 17] is extremely worried about an “increasingly unfavorable environment” and a “fallen optimism”. For these reasons, the report suggests 12 initiatives to “help spur renewed entrepreneurship”. (They are listed at the bottow on this post)

Here is my simplistic vision of the proposals:
– a few are about lowering the barriers, i.e. “changing the Rules”, what I tagged with an “R” below.
– a few more are about enabling more money and investment towards start-ups, tagged with an “M”.
These are classical measures, important and necessary.

What I found very interesting are the other ones:
– three are about Intellectual Property and Technology Transfer, a sign that the patent system might be in trouble
– even more interesting, the last three are about the People, the Talent. They mention the Immigrants and the Mentors.

These are great advice, that we should also look at very seriously in Europe!


Click on the picture to enlarge

Win the Global Battle for Talent
Some of the most iconic American companies were started by immigrant entrepreneurs or the children of immigrant entrepreneurs. Today, however, many of the foreign students completing a STEM degree at a U.S. graduate school return to their home countries and begin competing against American workers. A significant majority of the Jobs Council calls upon Congress to pass reforms aimed directly at allowing the most promising foreign-born entrepreneurs to remain in or relocate to the U.S.

Reduce Regulatory Barriers and Provide Financial Incentives for Firms to Go Public
Lowering the barriers to and cost of IPOs is critical to accessing financing at the later stages of a high growth firms’ expansion. A significant majority of the Jobs Council recommends amending Sarbanes-Oxley and “rightsizing” the effects of the Spitzer Decree and the Fair Disclosure Act to lessen the burdens on high growth entrepreneurial companies.

Enhance Access to Capital for Early Stage Startups as well as Later Stage Growth Companies
The challenging economic environment and skittish investment climate has resulted in investors generally becoming more risk-adverse, and this in turn has deprived many high-growth entrepreneurial companies of the capital they need to expand. The Jobs Council recommends enhancing the economic incentives for investors, so they are more willing to risk their capital in entrepreneurial companies.

Make it Easier for Entrepreneurs to Get Patent-Related Answers Faster
There are concerns among many entrepreneurs that, as written, the recently passed Patent Reform Act advantages large companies, and disadvantages young entrepreneurial companies. The Jobs Council recommends taking specific steps to ensure the ideas from young companies are handled appropriately.

Streamline SBA Financing Access, so More High -Growth Companies Get the Capital they Need to Grow
The SBA has provided early funding for a range of iconic American companies. The Jobs Council recommends that the Administration streamline and shorten application processing with published turnaround times, increase the number of full time employees who perform a training or compliance function, expand the overall list of lending partners, and push Congress to fully authorize SBIR and STTR funding for the long term, rather than for short term re-authorizations.

Expand Seed/Angel Capital
The Jobs Council recommends that the Administration clarify that experienced and active seed and angel investors should not be subject to the regulations that were designed to protect inexperienced investors. We also propose that smaller investors be allowed to use “crowd funding” platforms to invest small amounts in early stage companies.

Make Small Business Administration Funding Easier to Access
The SBA has provided early funding for a range of iconic American companies, including Apple, Costco, and Staples. The Jobs Council recommends that the Administration streamline and shorten application processing with published turnaround times, increase the number of full time employees who perform a training or compliance function, expand the overall list of lending partners, and push Congress to fully authorize SBIR and STTR funding for the long term, rather than for short term re-authorizations.

Enhance Commercialization of Federally Funded Research
The government continues to play a crucial role in investing in the basic research that enables America to be the launchpad for new industries. The Jobs Council recommends that the Administration do more to build bridges between researchers and entrepreneurs, so more breakthrough ideas can move out of the labs and into the commercialization phase.

Address Talent Needs by Reducing Student Loan Burden and Accelerating Immigration Reforms
A large number of recent graduates who aspire to work for a start-up or form a new company decide against it because of the pressing burden to repay their student loans. The Jobs Council recommends that the Administration promote Income-Based Repayment Student Loan Programs for the owners or employees of new, entrepreneurial companies. Additionally, we recommend that the Administration speed up the process for making visa decisions so that talented, foreign-born entrepreneurs can form or join startups in the United States.

Foster Regional Ecosystems of Innovation and Support Growth of Startup Accelerators
There is a significant opportunity to build stronger entrepreneurial ecosystems in regions across the country – and customize each to capitalize on their unique advantages. To that end, the Jobs Council recommends that the private sector support the growth of startup accelerators in at least 30 cities. Private entities should also invest in at least 50 new incubators nationwide, and big corporations should link with startups to advise entrepreneurial companies during their nascent stages.

Expand Programs to Mentor Entrepreneurs
Research consistently shows that a key element of successful enterprises is active mentorship relationships. Yet, if young companies do not have the benefit of being part of an accelerator, they often struggle to find effective mentors to coach them through the challenging, early stages of starting a company. Therefore, the Jobs Council recommends leveraging existing private sector networks to create, expand and strengthen mentorship programs at all levels.

Allow University Faculty to Shop Discoveries to Any Technology Transfer Office
America’s universities have produced many of the great breakthroughs that have led to new industries and jobs. But too often, research that could find market success lingers in university labs. The Jobs Council recommends allowing research that is funded with federal dollars to be presented to any university technology transfer office (not just the one where the research has taken place).

High-tech start-ups: the new star system.

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America loves its heroes! Two recent events seem to show that after Hollywood’s Walk of Fame and the Hall of Fames in sport, high-tech entrepreneurship is creating its own star system:

– it began with Boston’s Kendall Square. See for example the Xconomy article: Entrepreneur Walk of Fame Opens in Kendall Square: Gates, Jobs, Kapor, Hewlett, Packard, Swanson, and Edison are Inaugural Inductees.
– it was followed by Stanford recent Engineering Heroes project. This one is a project only with a very long list of more than 60 nominees.

Well you could build your own list. I think Boston missed Robert Noyce. Stanford will have to decide on its initial winners. The value of such lists is obviously the role model effect it should induce.

Red Herring: the End!

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This is my final post on the old Red Herring magazines I had collected from a friend. It has been fun to read what people thought 10-15 years ago. You can have a look at them through my Red Herring tag.

The most striking “mistake” was clearly linked to the difficutly in predicting the future. Just have a look at the cover page of July 2001.

I am not sure nanotechnologies have changed the world and 10 years is eternity. At least by start-up metrics. Medicine, optics and materials science as mentioned by Jason Pontin below may not have experienced breaktroughs from nanotechnologies.

But honestly, what I liked the most was Anthony Perkins’ contribution in December 2001. “Its back to the good old days”.

So let just me expand why I liked it (by putting in bold fonts what I liked). Here is the text again:

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Just before halloween, Red Herring held NDA, its annual CEO conference on the future of technology. Like the holiday it preceded, NDA started as a spooky affair. More than 400 industry insiders showed up at the spanking new St. Regis Hotel in Dana Point, California, with no idea what to expect. After all, the technology industries have suffered a relentless series of blows to the midsection, and the attendees’ first order of business was to look around and see who was left standing. By the time coffee had been served, however, such fears started to subside. Folks like Qualcomm president Paul Jacobs; Allegro Networks president, CEO, and chairman Dave House; chair of Edventures Esther Dyson; and cofounder of Integral Capital Partners Roger McNamee, were all happily strolling the hotel hallways.

By late afternoon the first day, an enthusiastic, even optimistic, attitude started to take hold. During the “Eggheads Unplugged” panel, which featured Steve Jurvetson, managing director of Draper Fisher Jurvetson; Eric Schmidt, the new CEO of Google; Bruce Schneier, founder and chief technology officer of Counterpane Internet Security; Tim Harris, president and CEO of Structural Genomix; and John Gage, chief researcher of Sun Microsystems, it was encouraging to hear these supergeeks riff on topics like nanotechnology, quantum computing, and other far-out innovations. [1] Almost suddenly, all was well again: our industry was still full of smart people talking about cool things.

At this point, Michael Schrage, codirector of the Massachusetts Institute of Technology’s Media Lab eMarkets Initiative, was edging up to me and observing that technology industries were far from becoming “sunset” industries. “Everyone at this conference is speaking in terms of exponential growth,” Mr. Schrage said. “The only debate that is going on is whether we are going to grow at a rate of ten squared or ten to the eighth.” [2]

On the morning of the second day, I gave a presentation on the “Always-On Generation”. After explaining why I thought the economic growth curve associated with the Internet was still well in front of us, I ended with a slide titled, “What Great Entrepreneurs Are.” [3] First and foremost, I noted that the great entrepreneurs I know are focused. I talked about how Bill Gates had sensed, back in 1995, that he had to turn around the Microsoft battleship and begin focusing on the Internet. He knew that it was going to be such a Herculean task that he had to kick himself upstairs and take on the role of chief software architect to get the job done. I also recounted that when Steve Jobs took back the reins of Apple Computer, he consolidated the company’s product line from 85 different models to two clearly defined families of computers–one for professionals and another, colorful one for consumers.

The second virtue of great entrepreneurship, I explained, was cheapness. This is probably the skill we abandoned most dramatically during the Internet bubble era, when the idea of making a profit seemed the last thing on our agendas. “Michael Dell has built a multibillion dollar business based upon being cheap,” I observed. I also spoke about the virtues of competitiveness and imagination. Throughout my professional career, I have observed the world trying to compete with vigor against Bill Gates. In fact, as far as I am concerned, I noted, Scott McNealy, Larry Ellison, and Steve Case have made careers of trying to topple the king.

Finally, I talked about the fact that great entrepreneurs have a high tolerance for taking risks. To illustrate this point, I noted that the six blue-chip technology companies that had successfully made the transition to the Internet era–Apple, Cisco Systems, Dell Computer, Intel, Microsoft, and Oracle–are still run by their original entrepreneurs. In essence, I believe that it takes the same aptitude for risk to point a large corporation in an entirely new direction as it does to start a company.

After finishing my talk, I felt strangely satisfied that my thoughts had been somewhat original. That was until I sauntered to the back of the room and sat next to Paul Deninger, Broadview International’s CEO and a Red Herring board member. “You know, Tony,” he said in his typical bottom-line style, “its amazing, but what you were just talking about is Entrepreneurship 101. And ironically it seems like we were all listening to these things for the first time!” This is when it occurred to me that somehow–magically–we were back to the good old days. Back to the basics. Back to the days when, as Steve Jobs used to observe, “overnight successes sure take a helluva long time.” When we have to work hard, we earn our glory. And, you know what? It sure feels great!
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So here are my comments:

[1]: you need to be imaginative, nanotechnologies, quantum computing, and elsewhere in the 2001 issues, I read about Nanotechnologies again (including fullerene, gallium nitride) and nanotech start-ups (Nitronex, Zyvex, not to forget Nanosys; I am not sure where they are), Europe irising (in biotech. Really?), Robotics, including artificial intelligence, face analysis and recognition. Coming! We need to dream, do not get me wrong. But RH missed Google (just as I did) and probably the Web2.0.

[2] The only debate that is going on is whether we are going to grow at a rate of ten squared or ten to the eighth.” Well, aren’t we in a recession?. Too easy now that we know.

[3] But the piece I like the most is the back to basics, entrepreneurship 101: focus, competitiveness and imagination, cheapness, high tolerance for taking risks. This is what great entrepreneurs are about. Jobs, Gates, Ellison back then. Brin and Page today.

RIP RH!

How Aart has poisoned the EDA start-up ecosystem

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You know I have a special interest in EDA. One of the influential bloggers, John Cooley, on his DeepChip site gives a video crash course on a start-up ecosystem, how the companies are valued, why VCs invest or not. Clear and simple and sadly true, and funny video at the same time.

The title is provocative and unfair. Aart (de Geus) has not poisoned anything, but the industry he is in may be in trouble.

Why companies fail

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Again, I found an interesting article in an old Red Herring, dated October 1999. It is entitled the Anatomy of Failure and more importantly, it was written by Geoffrey Moore.


There is not much to say about Moore (if you know him) but he is an absolute much read. In the innovation landscape, he can be placed between Bill Davidow’s concept of Whole Product (pdf) (Moore worked at MDV as a venture partner) and Steve Blank’s concept of Customer Developement. (I will come back soon on Blank and his book The Four Steps to the Epiphany).

In 1999, Moore used his concepts of Chasm and Tornado to explain why companies failed and here are his four main reasons:

1- The Slow Fail: Traditional management (accountability to the plan) does not work. Early markets are unpredictable and require a lot of flexibility.

2- The Chasm Trap: If early enthusiats may buy your initial product, you will need a much more complete product (The Whole Product) to satisfy the early majority. If not, you will be trapped in the chasm.

3- The Tornado Dive: if you are lucky enough to have created the “Killer App”, you may not face the chasm, but an antichasm: the inability to deliver a huge demand and manage your hypergrowth. A dream becoming a nightmare.

4- The Dead Zone: The previous grid shows an area which you may find moving from emerging market to crossing the chasm and finding the tornado. The pain and gain are decent but experience shows you will never reach mature markets, the place for the living deads.

In conclusion, Moore shows optimism and mentions the Full Circle: if you find soon that you are failing (“Fail Fast”), you can react (not follow the plan) and avoid the dead zone to either cross the chasm and/or enter the tornado. Then you may succeed. I scanned the full article, in case some of you would like it. Just email me.

PS (2021): Apparently the link with the pdf on the Whole Product is broken. Here is a video of Bill Davidow that might be the same event.