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Strengthening The Ma Innovation Economy V1

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This is a presentation I put together for the Oasis Group, a group of successful Boston area professionals who meet monthly to share ideas

This is a presentation I put together for the Oasis Group, a group of successful Boston area professionals who meet monthly to share ideas

Published in: Business, Economy & Finance
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  • 1. Strengthening The Massachusetts Innovation Economy Todd Hixon Presentation to the Oasis Group February 24, 2009 24
  • 2. Agenda Massachusetts is viewed as one of the primary innovation regions in the U.S. But, Valley has dramatically outperformed M B t Si V ll h d ti ll t f d Mass in the last 30 years, especially in Tech How did Si Valley develop such powerful advantage? What can Mass do to build a stronger innovation economy? 1
  • 3. Mass Has World Class Intellectual Resources 10 Two of the world’s top world s 9 10 research universities, 8 7 within walking distance 6 5 Four major research 4 hospitals in Boston 3 2 Route 128 tech cluster 1 0 Kendall Sq. Bio/Med Nobel laureates/Pop Patents/Pop (x100) Small Cos/Pop (x10^4) cluster CA MA SOURCE: Highland Capital Partners, 2008; Pop = 1 million of population. 2
  • 4. But, W. Coast Dominates Tech , “NASDAQ 104” Tech Market Cap p NASDAQ proxies control of p (64% of companies; 80% of Market Cap) innovation sector wealth created since ~1970 NASDAQ 104 totals $1 5 Trillion $1.5 of Market Cap • Northern California = 46% • West Coast = 76% • Mass. = 5% • East Coast = 13% NASDAQ 104 = NASDAQ 100 plus four MA companies: ADI, EMC, BSX, & AMT Circle size proportional to market cap. SOURCE: NASDAQ, Yahoo Finance, as of 2-19-09 3
  • 5. Si Valley Also Leads Bio/Med y “NASDAQ 104” Bio/Med Market Cap (16% of companies; 12% of Market Cap) Northern California is 26% West C W t Coast is 30% ti Massachusetts is 21% East Coast is 45% NASDAQ 104 = NASDAQ 100 plus four MA companies: ADI, EMC, BSX, & AMT Circle size proportional to market cap. SOURCE: NASDAQ, Yahoo Finance, as of 2-19-09 4
  • 6. Money Follows Performance % of U.S. Venture Capital Investment (12-month rolling average) Si Valley gaining share 45% 40% Mass constant at about 35% Si Valley y 10 percent 30% 25% Other East Coast 20% declining d li i 15% Mass 10% 5% 0% 995 998 001 004 007 19 19 20 20 20 Si Valley Other CA NW MA Other EC SOURCE: PWC/NVCA Moneytree database, as of 12/31/08. 5
  • 7. Silicon Valley: An Overnight Success? “As recently as 1950, the area that was to become Silicon Valley still touted itself more modestly as the “Prune Capital of America”. Source: Mark Suchman, Understanding Silicon Valley, p. 72 6
  • 8. Radio Days 1900-1955 1900 1955 Si Valley East Coast 1900 • FTC founded 1910 • Magnavox spins out of FTC • IBM s IBM’s IPO • RCA formed by GE and Navy 1920 • “Radio group” controls radio patents • FTC acquired by ITT, moved to NJ C acqu ed , o ed o J • Raytheon founded by Vannevar Bush ay eo ou ded a e a us 1930 • Litton Industries spins out of FTC • Polaroid founded • H-P founded • Bush runs OSRD, 1/3 of $ to MIT 1940 • Varian founded • MIT Rad Lab works on radar; Terman • Terman returns to Stanford, creates spends war at Harvard 1950 Sanford Industrial Park • AR&D formed (1st institutional VC) • SRI f S founded • Wang Labs f W L b founded d d • Stanford EEs> MIT • Raytheon leads US transistor • H-P’s IPO production 7
  • 9. A Butterfly’s Wing y g In 1955 William Shockley co inventor of the 1955, Shockley, co-inventor transistor [at Bell Labs], decided to establish a firm to exploit his invention. To secure $ million of p $1 funding he approached Raytheon. After a month of bargaining Raytheon demurred. Arnold Beckman, founder of L.A.-based Beckman Instruments, funded Shockley to start a firm in Palo Alto. Source: Martin Kenney, Understanding Silicon Valley, p. 230 8
  • 10. Hardware Days 1956-1994 1956 1994 Si Valley Route 128 • IBM San Jose lab opens p 1955 • Schockley Semi founded • DEC founded • Lockheed moves to Stanford IP • Honeywell ← Raytheon • Varian & H-P IPOs • Military > 50% of Rte 128 revenues 1965 • Fairchild ← Schockley; Draper I formed • Military buys >50% of semiconductors • DG ← DEC • Intel ← Fairchild; options; Stanford TLO • Prime ← Honeywell • PARC founded: “Silicon Valley” coined • Computervision founded 1975 • Kleiner Perkins I ($8m capital) • Apollo ← Prime • UCB + SJ State EEs> Stanford • “Massachusetts Miracle” coined • “Homebrew” computer club; Apple founded • VAX introduced • Oracle & 3COM founded; Apple IPO • EMC founded 1985 • Adobe, Intuit, & Symantec founded • Sun founded; IC co.s exit DRAMs • MIT TLO • Cisco founded • Wang files Ch. 11 • LSI Logic, Cypress, Cirrus, Maxim; Xylinx, • Apollo acquired by H-P 1995 Altera founded • Parametric founded • Juniper founded • American Tower founded 9
  • 11. Components & Semiconductors Employment 70,000 , 60,000 50,000 50 000 40,000 Si Valley 30,000 30 000 Route 128 20,000 10,000 0 1959 1965 1970 1795 1980 Source: A. Saxenian, Regional Advantage, p. 79; data from County Business Patterns 10
  • 12. Internet Days 1994-2005 1994 2005 Si Valley Route 128 1990 • DEC sold t C ld to Compaq • Netscape & Yahoo founded • Netscape IPO • American Tower founded 1995 • eBay founded • Yahoo IPO • American Tower IPO • Google founded • Akamai founded 2000 • eBay IPO • Akamai IPO; Prime sold to PTC • Data General sold to EMC • Polaroid Chapter 11 • Google IPO 2005 11
  • 13. Recombination Silicon Valley has its share of failures y • DRAMs, Disk drive “fruit flies”, minicomputers Big tech Bi t h companies i Sili i in Silicon V ll are only Valley l incrementally more successful than those in the East • Intel is stodg H P lost its “way” stodgy; H-P “ a ” What Silicon Valley does remarkably well is “recombination”: • Create new companies to pursue new opportunities • Refocus resources to exploit 12
  • 14. What Enables Recombination? Community y Open System Equity culture 13
  • 15. Community “Rebel Alliance” – beat the big Eastern companies g p • Less secretive and litigious Stanford St f d a proactive hub ti h b • SRI, Industrial Park, Honors Program, TLO, VC investment • Faculty encouraged to start companies Critical mass and density disseminates ideas • Homebrew computer club Big tech companies feed small ones 14
  • 16. Open Bias to open systems p y • Ethernet & Unix vs. Token Ring & VMS • Internet vs. AOL walled garden g High employee mobility (no non-compete) Design focus with aggressive outsourcing • Component specialists, manufacturing outsourcing (Flextronics), fab-less IC cos Multi-cultural • “Silicon Valley was built on ICs: Indians & Chinese” 15
  • 17. Equity Culture Start-ups are the path to success p p • “Everyone knows people who got wealthy from options” “Getting l id ff i “G tti laid off is a chance t start a new company” h to t t ” Egalitarian – everyone is a shareholder Heros and role models: • Noyce, M N Moore, Grove, Kl i G Kleiner • Jobs, Joy, Clark, Ellison, Doerr, Draper, Metcalfe • Omidyar, P O id Page, B i Y Brin, Yang 16
  • 18. Fuel for the Bonfire … Companies in the East adopted a feudal approach to organization. There were kings … and yeomen and serfs … with protocol and perquisites to establish boundaries. Noyce … rejected the idea of a social hierarchy at Fairchild. Everywhere the [Fairchildren] went, they took the Noyce approach with them … the atmosphere of the new companies was so democratic, it startled businessmen from the East East. - Tom Wolfe Source: A. Saxenian, Regional Advantage, p. 30 17
  • 19. Geeks vs. Suits The … counter-culture intent on arming the masses with new g technology … made the Valley the place to be. Added to this was the absence of Old World snobbery … back East engineering had always been viewed as glorified manual labor … no one thought of Harvard as a place you went to become an engineer The Valley gave engineers a place engineer. where they could make their living outside the enormous gray corporations. - Michael Lewis The New, New Thing e e , e g 18
  • 20. It’s Not About The Money … y Very few people understand why what works here and in Boston works. It’s very difficult to clone environments. Too many people think that the yp p criticality in the environment is the money. For me the criticality in the environment is the entrepreneurs. - Don Valentine (1988) Fairchild founder founder, Sequoia GP Source: M. Kenney, Understanding Silicon Valley, p. 98 19
  • 21. What Boston Needs … Community: focus mass and density focus, mass, Commitment to “Open” • Systems and technologies • Employment practices, immigrants Equity culture – belief in the value of start-ups • Proactive leadership from universities & government • Role models and heros Boston really is half way between Europe and California 20
  • 22. Time to Regain Leadership California is in disarray: • All but bankrupt • Venture returns down➔ Stanford and CalPERS sold portfolios We are the underdogs, with the advantage that brings New era of investment in society New innovation domains are a level playing field: biotech, energy 21

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