The state of innovation | Deconstructing Obama's State of the Union address
President Obama’s State of the Union speech highlighted a number of priorities that have the potential to impact the innovation scene. With elements of his original platform, his agenda added a few new (and pragmatic) twists, with a savvy nod to current political and economic realities. Innovation-related items included: funding and supporting public- and private-sector innovation initiatives, increasing entrepreneurship, investing in basic and advanced education, driving broadband and high-speed rail, and redirecting oil industry subsidies to clean energy. Here’s a perspective on each of these agenda items:
Innovation: Obama will re-submit his fiscal year 2011 budget with continued investment in federally sponsored research and development designed to spur new invention and commercialization, particularly in clean energy. Obama’s reference to the “Sputnik moment” was made in the context of the continued need for consistent investment by the public sector leading to innovation and economic growth in the private sector. The president’s focus on innovation is not new but shows renewed emphasis on it as a driver of job creation and global competitiveness.
Education: Consistent with the global competitiveness theme, Obama’s reference to STEM (science, technology, engineering and math) education is all about increasing our country’s capacity to catch up to countries including China and European nations that have been chasing (and, now, exceeding) the United States in this realm.
Infrastructure: The president long argued for both broadband investment and high-speed rail. He cited Google and Facebook as models for U.S. leadership enabled by broadband. High-speed rail is a particularly important infrastructure investment in the Northeast; the ability to move the labor shed from Portland to Washington, D.C., would be transformative. As noted by the Republican chair of the House Committee on Transportation and Infrastructure, the Northeast corridor is “one of the most valuable and potentially productive federal assets in the United States,” and the Boston-to-DC corridor is home to 20% of the nation’s population. The ability to shorten travel times between major cities in our corner of the U.S. will address many work force and capital access issues that constrain regions within the Northeast from optimizing for economic growth
Energy: Obama re-asserted his long-held vision for a clean-green energy economy by noting his desire (intent?) to transfer subsidies from oil to this nascent sector. The clean-tech sector is important in the ways Obama cited and then some; with capital markets still timid, there is an important role for the federal government, whether stimulating and enhancing private-sector investing, using the bully pulpit to champion the sector or providing other resources to increase entrepreneurship and in this fast-growing, strategic sector.
Innovation requires investment
Federal investment in national R&D capacity has been supported by presidents of both parties and represents a long-term investment in this country’s future. Investments in national laboratories, programs like Small Business Innovation Research, a federal version of our state’s Maine Technology Institute, and Department of Defense-related commitments all spur discovery and invention. Translation of these investments into commercial products and business ventures has historically been left to the private sector. In today’s risk-capital constrained environment, R&D funding is likely to stay in labs and garages until and unless there’s a meaningful influx of private and institutional capital willing to take the seed/early-stage risk to build promising inventions into commercial realities. I sound like a broken record on this, but it really is important for new early-stage capital to not disappear from the market.
To that end, the administration announced its Startup America Initiative (chaired by AOL’s Steve Case) designed to increase funding, education and resources to startups. A fact sheet described plans for the Small Business Administration to direct $2 billion over the next five years to match private-sector investment funding for startups. SBA’s historic “venture capital” activity — its Small Business Investment Company program — has been dramatically curtailed during the last decade (see “Small money,” Mainebiz 11/1/10). The release describes two programs: $1 billion to support growth capital for companies in underserved locations and $1 billion to support early-stage seed funds to fill the capital gap (see “Capital pains,” Mainebiz 12/13/2010). If the administration can pull this off, it will be a very big deal for those of us in the entrepreneurship community.
Most of those watching the “conversation” around investment versus deficit reduction would be rational to conclude that ain’t nothing going to happen of any import. That said, Obama clearly played a Clintonesque triangulation card of taking on traditional Republican issues —reduced taxes, decreased regulation and smaller (or at least more efficient and effective) government — as a means to move his broader innovation agenda forward. If he’s as successful as was Clinton, he might well get some of his agenda activated. Hope springs eternal.
Michael Gurau, president of Clear Innovation Partners, a Maine-based cluster development organization, can be reached at mgurau@clearinnovationpartners.com. Read more Venture Builder here.
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