Burton Lee Presentation at YES Execom Athens, 14-16 April 2011 "Lessons from Silicon Valley Promoting High-growth and Innovative Entrepreneurship in Europe"

1. Lessons from Silicon Valley
Promoting High-growth and Innovative Entrepreneurship in Europe
Dr. Burton H. Lee PhD MBA
Managing Director, Innovarium Ventures | Lecturer, Stanford School of Engineering
Burton.Lee@innovarium.net
Prepared for:
European Confederation of Young Entrepreneurs (YES)
YES EXECOM Meeting
Athens, Greece
April 15 2011

2. Topics
• European Entrepreneurship & Innovation @
Stanford Engineering
• Silicon Valley 2011
– What We Do in Silicon Valley
– How Silicon Valley Works
– Lessons Learned
– European Companies and Countries in Silicon
Valley
• Entrepreneurship in Europe
• European Innovation Policy
April 15 2011 Copyright 2011 Burton H. Lee and Innovarium Ventures 2

3. Serial Entrepreneurship
is The Key !!
Not Just “Entrepreneurship”
April 15 2011 Copyright 2011 Burton H. Lee and Innovarium Ventures 3

4. http://www.europeanentrepreneursatstanford.com
Copyright 2011 Burton H. Lee and
April 15 2011 http://me421.stanford.edu
Innovarium Ventures
4

5. European Innovation Ecosystem
Idea Generation Talent Creation
Research & Development Entrepreneurship Education
Universities, Corporations, Natl labs
Immigration Policies
Technology Transfer/
Commercialization
University / Lab TTOs
Legal &
Political Context
Enterprise Innovation
Product & Services Design, New Company
Development & Management Formation
Angel Investors Recycling of
Primary Focus of Entrepreneurial
Talent & Angel/VC
2010 ME421 Program Venture Capital Investment Capital
Exit
M&A or IPO
Simplified Schematic
April 15 2011 Copyright 2011 Burton H. Lee and Innovarium Ventures 5

6. Program Scope
Comparative Entrepreneurship & Innovation Systems
Angel Investors Institutions
& Markets
VC Funds
Incubators/
Accelerators
Entrepreneurs
& Startups
Foundations
+ Government:
R&D Labs Pan-EU
National
Universities Regions
Municipal
Corporations
Silicon Valley European
Innovation Ecosystem Innovation Ecosystem
Copyright 2011 Burton H. Lee and Innovarium Ventures 6
April 15 2011

7. European Partner Countries, Regions & Companies
Speakers in Stanford Engineering ME421 Graduate Course
2009 - 2010 - 2011

8. Year Three Highlights
European SuperAngels in
Silicon Valley
European Incubators in Silicon Valley
NL, IT, CH, D, SE, FR
University Reform in Germany
Prof Gerhard Casper, President Emeritus
April 15 2011 Copyright 2011 Burton H. Lee and Innovarium Ventures 8

9. Year Two Highlights
Intelligent Buildings Startup
Yoga Systems, Estonia
New Venture Funds in Europe
Germany, Ireland and Spain
Europe in the Spanish Kings, Monks, Nuns and
Global Entrepreneurship Scene Explorers as Early Entrepreneurs
Instituto de la Empresa, Madrid Madrid Region, Spain
April 15 2011 Copyright 2011 Burton H. Lee and Innovarium Ventures 9

10. Year Two Highlights
Spinning Out Successful Startups
from Non-profit Research Institutes Semiconductor Startup/Incubator
VTT Finland INCIDE - Basque Region, Spain
Enterprise Software w University IP Clean Tech – Wave Power
Yseop - Lyon Region, France Wavebob, Ireland
April 15 2011 Copyright 2011 Burton H. Lee and Innovarium Ventures 10

11. Year One Highlights
Corporate Venturing & Incubator Executives
Sten Tamkivi Roche, SAP, Siemens, DSM, Virgin
Head, Skype Estonia
Prof. Alberto Sangiovanni Vincentelli Uli Fricke Dr. Sven Schade
UC Berkeley EECS Triangle Ventures, Germany European Commission
Co-Founder, Cadence
Board Member, EVCA DG Enterprise & Industry
April 15 2011 Copyright 2011 Burton H. Lee and Innovarium Ventures 11

12. Working with European Governments at the
Center of the EU Innovation System
Expert Testimony @
European Parliament
“EU Innovation Policy”
Feb 10 2011
FP7 Expert Evaluator
European Commission
Brussels, Belgium
February 2010/2011
One American’s experiences in the heart
of European innovation policy- and
decision-making …
Appointed Member, Irish National Innovation Taskforce
Office of the Prime Minister, July 2009 – March 2010
April 15 2011 Copyright 2011 Burton H. Lee and Innovarium Ventures 12

13. Silicon Valley 2011
April 15 2011 Copyright 2011 Burton H. Lee and Innovarium Ventures 13

14. Silicon Valley
Global Center for Innovation
We lead the world in
innovation finance, new
Europe innovation models, disruptive
ideas, and rapid scaling of
technologies and companies
to a global level.
Silicon
India China
Valley
The world – countries,
regions, cities, universities and
And they all come to
companies – all come to
Latin Stanford to see how
Silicon Valley to learn new
America we do it
innovation models, new
technologies and new ideas.
Copyright 2011 Burton H. Lee and
April 15 2011 14
Innovarium Ventures

15. What is Silicon Valley, Precisely ??
• 2.9 Mn inhabitants
• 4 Counties, 40
municipalities
• 1.3 Mn jobs
• Growth areas:
– Software
– Industrial/Energy
– Media & Entertainment
– Biotechnology
– Medical Devices
Copyright 2011 Burton H. Lee and Innovarium
April 15 2011 15
Ventures

16. Silicon Valley in Pictures
• 40% of US Venture
Capital investment in
2010
Copyright 2011 Burton H. Lee and Innovarium
April 15 2011 16
Ventures

17. What We Do in Silicon Valley
• We build and grow companies to a global level faster –
and more efficiently – than anywhere else in the world
• We create more new jobs and industries – faster – than
anywhere globally
• We look for disruptive ideas, technologies and
intellectual property that can be scaled globally
• We do world class research and technology
development
• Silicon Valley is where the World Learns First new
approaches to innovation
– And where China, Japan, Korea, Singapore and India come to learn
April 15 2011 Copyright 2011 Burton H. Lee and Innovarium Ventures 17

18. + Mobile Systems
Source (modified): S. Blank and M. Hancock, Stanford Program on Region Innovation Economies, 2009
April 15 2011 Copyright 2011 Burton H. Lee and Innovarium Ventures 18

19. How Silicon Valley Works
“Structured Chaos”
• Institutions
– Strong research universities and laboratories
– Numerous technology multinationals that are industry leaders
– Low barriers to spawning new entities and/or models
– Many established institutions are early adopters
• Markets
– Relatively low barriers to market entry by new institutions
– Low transaction costs
– High liquidity + Critical mass
– Flexible, efficient
– Strong capital and labor markets that facilitate growth and recycling of
serial talent and serial investment
• Processes
– Rapid and efficient pipeline processes:
• From innovation/idea => product/service => company => market
• Goals: global scale, fast-to-market, high investor returns
• Disruptive ideas are rewarded and encouraged the most
April 15 2011 Copyright 2011 Burton H. Lee and Innovarium Ventures 19

20. How Silicon Valley Works
• High concentration of knowledge, skills, talent in
diverse technical and business disciplines
• Specialized business services infrastructure:
– VCs, legal firms, accountants, etc
• Open business and information sharing environment
– Collaboration + competition
– Open source + Confidentiality co-exist
• Results-oriented meritocracy
• Climate that rewards risk-taking and tolerates failure
• High quality of life + Great Weather !
• Favorable government policies
– Federal, state and local
April 15 2011 Copyright 2011 Burton H. Lee and Innovarium Ventures 20

21. How Silicon Valley Works
• Strong linkages to global innovation clusters
– Outsourcing Centers:
• India, China, Ukraine + other CEE
– Talent In/Outflows:
• India, Israel, China
– Immigrant Entrepreneurs: 30% of startups
– Law Firms
– Multinational corporations:
• Siemens, Panasonic, Canon, Daimler, BMW, SAP, Orange,
Fujitsu, Sony
– Business units + research groups
April 15 2011 Copyright 2011 Burton H. Lee and Innovarium Ventures 21

22. What is “Hot” in Silicon Valley Today?
• Mobile and personal computing technologies
– “Apps” – Applie + iPhone, Google + Android, Facebook
– eBooks – Apple + iPad, Kindle
• Gaming
• Technology convergence
– Kurzweil’s “Singularity” – genomics + artificial intelligence/robotics + nanotech
– “BioInfoNano”
• New VC models and firms
– SuperAngels
• Empowering entrepreneurs vs investors • “Open Innovation”
– The Founders Institute, co-founders network • Cloud Computing
• Networks and social computing (Web 2.0) • Personalized Medicine
– Social, business
• Social media – for enterprise social computing (E 2.0)
• Talk about missing out on federal grant funding
• Customer web analytics
• Great entrepreneurs
• Stanford’s d.School
• Looking for new incubator and accelerator models
• Asia ( India, China )
• Google, Apple, Tesla
April 15 2011 Copyright 2011 Burton H. Lee and Innovarium Ventures 22

23. What is “Not Hot” in Silicon Valley
• Manufacturing
– Unless its related to clean tech
• Logistics and supply chain management
• Enterprise software
• Nanotechnology
• Europe
– Small, fragmented national markets that are slow to grow
– Occasional new and interesting ideas and products
– Few new startups that are scalable to a global level
– Good scientists and engineers
• Japan
• Cisco
• HP
April 15 2011 Copyright 2011 Burton H. Lee and Innovarium Ventures 23

24. Silicon Valley & European Innovation Ecosystems
Key Differences
• Culture
– Attitudes towards risk and failure
– Attitudes towards work vs play vs private life
– Attitudes towards sharing of information
– Asking permission before acting vs looking to government for thought leadership
– Optimism vs skepticism
– Openness vs Closed
• Speed
– Processes and decisions much faster in Silicon Valley
• Government role
– Minimal intervention from federal, state and local governments
• Institutions
– Broader diversity of institutional models and sizes in US; more flexibility of action
• Markets
– Lower transaction costs, greater liquidity, larger, more markets
• Scale, Size and Critical Mass
• Networks
– Strong hubs, dense and efficient messaging, global, rapid formation
April 15 2011 Copyright 2011 Burton H. Lee and Innovarium Ventures 24

25. LinkedIn Network of Burton H. Lee, April 15 2011
Copyright 2011 Burton H. Lee and
April 15 2011 25
Innovarium Ventures

26. In Silicon Valley We Are Not Good At:
• Taking directions from government bureaucrats
– Reluctance to get involved in policy
– This is changing slowly, with re-emergence of US federal
government as a major new investor in innovation and basic
research
• Working with regional government laboratories
– NASA, LLNL, LBNL, SLAC, etc
• Representing ourselves in Washington DC
– First Valley lobbyist engaged in recent months
• Understanding and explaining how the Valley really works
– Replicating the Valley outside of the Valley
• Regional infrastructure
– Transportation, environment, etc
April 15 2011 Copyright 2011 Burton H. Lee and Innovarium Ventures 26

27. Why Silicon Valley Is Important for
European Companies
• Technology startup companies
– We scale up hitech startups faster than can be
achieved in Greece or anywhere else in the EU
• Greater availability of risk capital (angel and VC funds)
• Close to early adopter markets and customers
• Management and technical talent
• Service providers infrastructure
• Higher valuations
• Stronger exits market
• Global vision
April 15 2011 Copyright 2011 Burton H. Lee and Innovarium Ventures 27

28. Why Silicon Valley Is Important for
European Companies
• Established enterprises
– Close to mature markets and customers that are
often “early adopters”
– Access to global supply chains
– Early adoption of latest enterprise software
systems and models
– Management and technical talent
– Global vision and networks
April 15 2011 Copyright 2011 Burton H. Lee and Innovarium Ventures 28

29. Entrepreneurship in Europe
April 15 2011 Copyright 2011 Burton H. Lee and Innovarium Ventures 29

30. Entrepreneurship “Hotspots” in Europe - 2011

31. Impediments to
Entrepreneurship in Europe
• Cultural attitudes towards failure
• Punitive bankruptcy laws and regulations
• Rigid university systems
• High cost of starting new companies
– Patenting, legal fees, etc
– Outdated incorporation laws and regulations
• Strong preferences for employment security
– Government and big company jobs
• Weak (but improving) angel & venture finance markets
• Weak intellectual property base and markets
– Much research in Europe is not converted into IP, and is
not commercialized
April 15 2011 Copyright 2011 Burton H. Lee and Innovarium Ventures 31

32. The Entrepreneurship Scene in Finland
• Long history of independent initiatives and entrepreneurship
– Linux and Open Source
– MySQL
– Mobile
• Strong ICT startups scene
– Aalto University
• Aalto Entrepreneurship Society
• Aalto Venture Garage
– Other universities
• Strong ties to Silicon Valley, excellent network
• Strongest country in non-enterprise software today
• Growing recognition in Finnish government and large
companies that entrepreneurship is Finland’s future
April 15 2011 Copyright 2011 Burton H. Lee and Innovarium Ventures 32

33. The Entrepreneurship Scene in Finland
Copyright 2011 Burton H. Lee and
April 15 2011 33
Innovarium Ventures

34. European Innovation Policy
April 15 2011 Copyright 2011 Burton H. Lee and Innovarium Ventures 34

35. What *Is* on the European Innovation Agenda
• Strong R&D programs and funding base
– Target of 3% of GDP - Government + industry
• Risk Capital formation and investment
– Increase volume and quality of angel and venture capital investment into
startup companies
• Entrepreneur formation
– University entrepreneurship programs
– EU entrepreneurship programs
• “Knowledge networks” and “broker” models
– Supports goal of European integration
• Tech transfer, IP & commercialization @ universities + research orgs
– At national level
• University reform – but in very few countries – national level only
– Jurisdiction of national governments (and not the European Commission)
– Regional governments too
• Limited legal reform
• Infrastructure
– Broadband buildout, incubator/S&T park facilities, wet labs
April 15 2011 Copyright 2011 Burton H. Lee and Innovarium Ventures 35

36. What is *Not* on the Innovation Agenda
• Enterprise Innovation
– European firms lag US companies in adoption of ICT, use of ICT
as a strategic technology
• Chronic underperformance in productivity
• High cost structures
• Sometimes addressed in part under “enterprise policy”, but not
integrated with broader innovation strategy
• Commercialization of research from EU research programs
– Almost no generation of new companies from FP7
• Development of innovation competencies
– Product design, ICT management
• Monitoring of outcomes of EU and national innovation and
regional development programs
– Incubators, S&T parks, “brokers” and “knowledge networks”
April 15 2011 Copyright 2011 Burton H. Lee and Innovarium Ventures 36

37. Commercialization of FP Research
• Major disconnects between research and commercialization exist today
– A broad framework for coupling research and commercialization of related IPR is
needed if Europe is to achieve its job creation goals for 2020
– Without explicit connection between research & commercialization, European
Union will lose the opportunity to create thousands of new jobs on a sustained
basis
– Commercialization is not possible in many FP7 projects (due to nature of basic
research), but is possible in projects that are closer to industrial application
– Absence of formal linkages demonstrates lack of understanding of research, and
the low value given to research programs and outcomes
– Apparent ideological opposition to linking research and commercialization in
academic and policy-making communities seems rooted in attitudes that “public
monies should not generate private returns”, & “universities must remain pure”
– Little or no coupling of research program performance assessment with program
outcomes
• EU research programs (FP7, etc) must have clearly defined connections,
routes and steps to commercialization paths, where appropriate
– Coaching and mentoring
– Investors: angels, VCs
– Incubators
April 15 2011 Copyright 2011 Burton H. Lee and Innovarium Ventures 37

38. An FP Commercialization Framework is Needed
Paths from Research to Marketplace Introduction
These Stages Currently Not In Place
within EU FP Research Framework
Research Productization Market Introduction
“Basic” & From Laboratory Startup Companies
Pre-Competitive Concept to
Prototype Established Firms
FP8/FP7 Demonstration
[ Not always possible with
FP8/FP7 Projects ]
April 15 2011 Copyright 2011 Burton H. Lee and Innovarium Ventures 38

39. University Reform in Europe
Problem Statement
• Many European universities are under-
performing vs their US equivalents
– Exceptions: Germany, Switzerland, UK and some
Nordic countries
• Mis-aligned and disconnected from national
innovation systems
• Generally under-funded
• Generally poor representation in global rankings
• Jurisdiction over universities resides at
national/regional level, not at EU level
April 15 2011 Copyright 2011 Burton H. Lee and Innovarium Ventures 39

40. University Reform in Europe
Problem Statement
• Most European universities are geared to
teaching as primary mission, not research
– Important exceptions in Germany, Switzerland, and UK
• Generate relatively little intellectual property
• Do not work well with industry
• Generally poor at commercialization of research
• Professors have little industry experience, and
see little value in acquiring same
• Little encouragement of entrepreneurship by
students
April 15 2011 Copyright 2011 Burton H. Lee and Innovarium Ventures 40

41. European Partner Countries, Regions & Companies
Speakers in Stanford Engineering ME421 Graduate Course
2009 - 2010 - 2011
Thank You !!

42. Working in Silicon Valley, Europe, Latin America and Washington DC
• Senior financial, technical and strategy advisory services for global technology innovation organizations
• Professional Services
– Technology startup and growth companies
• Interim CXO and Advisory Board roles
• Expert guidance & decision-making at the interface between market/customers, technology and finance
• Business development – industrial and government
• Business plan preparation/research/review; Government Grant proposal preparation/review
• Coaching and mentoring of CEOs and other CXO-level managers
• Assistance with government regulatory and policy agencies
– Angel, venture capital and private equity Investors
• Fund strategy, team selection and market positioning
• Due diligence: technical, financial, strategy and business models
– Public and non-profit R&D laboratories
• Technology transfer & partnerships; venturing and spin-out of companies; strategy and business development; grant applications
– Research universities
• Innovation-related models, policies and practices
• Technology transfer and licensing; industry partnerships and relations; development and strategy; grant applications
– National and regional government agencies
• Innovation policy formulation, analysis and review; cluster development strategy; economic impact studies
• Science & technology policy formulation, analysis & review: space, aviation, nanotechnology, software/AI/robotics, manufacturing
• Selected recent clients
– US/European technology startup companies – alternative energy, robotics/AI, software, Internet, nanotech
– Venture and private equity funds – aerospace, nanotechnology, ICT, computing, advanced materials, clean tech
– Office of the Prime Minister, Ireland; European Commission; National Science Foundation; NASA, National Academies
• Dr. Burton Lee PhD MBA, Managing Director
– Contact: Burton.Lee@innovarium.net Based in Palo Alto, CA near Stanford University
– Bio/References: LinkedIn Profile
– Lecturer, European Entrepreneurship & Innovation, Stanford School of Engineering
April 15 2011 Copyright 2011 Burton H. Lee and Innovarium Ventures 42