Burton Lee Silicon Valley Ecosystem YES Execom

Lessons from Silicon ValleyPromoting 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

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 PolicyApril 15 2011 Copyright 2011 Burton H. Lee and Innovarium Ventures 2

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 SchematicApril 15 2011 Copyright 2011 Burton H. Lee and Innovarium Ventures 5

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 6April 15 2011

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

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 EmeritusApril 15 2011 Copyright 2011 Burton H. Lee and Innovarium Ventures 8

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, SpainApril 15 2011 Copyright 2011 Burton H. Lee and Innovarium Ventures 9

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, IrelandApril 15 2011 Copyright 2011 Burton H. Lee and Innovarium Ventures 10

Year One Highlights Corporate Venturing & Incubator Executives Sten Tamkivi Roche, SAP, Siemens, DSM, Virgin Head, Skype EstoniaProf. 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

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

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 ValleyThe world – countries,regions, cities, universities and And they all come tocompanies – all come to Latin Stanford to see howSilicon Valley to learn new America we do itinnovation models, newtechnologies and new ideas. Copyright 2011 Burton H. Lee and April 15 2011 14 Innovarium Ventures

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 InnovariumApril 15 2011 15 Ventures

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 learnApril 15 2011 Copyright 2011 Burton H. Lee and Innovarium Ventures 17

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 mostApril 15 2011 Copyright 2011 Burton H. Lee and Innovarium Ventures 19

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 localApril 15 2011 Copyright 2011 Burton H. Lee and Innovarium Ventures 20

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 groupsApril 15 2011 Copyright 2011 Burton H. Lee and Innovarium Ventures 21

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, TeslaApril 15 2011 Copyright 2011 Burton H. Lee and Innovarium Ventures 22

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• HPApril 15 2011 Copyright 2011 Burton H. Lee and Innovarium Ventures 23

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

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, etcApril 15 2011 Copyright 2011 Burton H. Lee and Innovarium Ventures 26

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 visionApril 15 2011 Copyright 2011 Burton H. Lee and Innovarium Ventures 27

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 networksApril 15 2011 Copyright 2011 Burton H. Lee and Innovarium Ventures 28

Entrepreneurship “Hotspots” in Europe - 2011

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 commercializedApril 15 2011 Copyright 2011 Burton H. Lee and Innovarium Ventures 31

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 futureApril 15 2011 Copyright 2011 Burton H. Lee and Innovarium Ventures 32

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 labsApril 15 2011 Copyright 2011 Burton H. Lee and Innovarium Ventures 35

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

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 – IncubatorsApril 15 2011 Copyright 2011 Burton H. Lee and Innovarium Ventures 37

An FP Commercialization Framework is NeededPaths 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

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 levelApril 15 2011 Copyright 2011 Burton H. Lee and Innovarium Ventures 39

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 studentsApril 15 2011 Copyright 2011 Burton H. Lee and Innovarium Ventures 40

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

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

Burton Lee Silicon Valley Ecosystem YES Execom

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