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

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Strengthening The Ma Innovation Economy V1

  1. 1. Strengthening The Massachusetts Innovation Economy Todd Hixon Presentation to the Oasis Group February 24, 2009 24
  2. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 14. What Enables Recombination? Community y Open System Equity culture 13
  15. 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. 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. 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. 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. 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. 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. 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. 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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