Innovation Investments Trickling Down …

I have been arguing here that there is a Capital Investment Crisis in the US because organizations and especially private equity firms are routing investments to self-aggrandizing, sure-thing takeovers which add nothing new to the economy except old line companies stripped of personnel, debt capacity, and no financial ability to adapt a long term innovation strategy. Or, like in the oil+gas industry, companies are not willing to bet on alternative energy because they can invest in oil and gas projects and average 40% return on investment with, for them, much less risk. So Solar, Wind, and other Alternative Energy industries which will be growing to huge worldwide  stalwart markets in 3-6 years time, get limited funding from the so called Energy companies that the oil and gas or Utility companies have declared themselves to be for the past 30 years.

So I have proposed that the IT Venture capital model may be a better example of how Capital Investment should be done in the US. I have cited Vinod Khosla as an example. But  I may have spoken too soon. Judy Estrin, a major Silicon Valley venture capital player is saying the Valley has run out of  Venture steam. Estrin says “that innovative ideas still appear all over Silicon Valley. But … the technologies at the root of new products like Apple€™s iPod or the Facebook social networking service were actually developed several decades ago. If entrepreneurs do not continue to develop groundbreaking technology … the valley would be in dire straits in another decade. …. the situation [is like] a tree that appears to be growing well, but whose roots are rotting underground”. This sounds eerily similar to the closed, sure-thing investments being made by private equity or oil and gas firms. The richness of  Trickle Down Economic rewards to a very select few may be slowly gutting US Business competitive advantage.

2 thoughts on “Innovation Investments Trickling Down …”

  1. Thanks for the the support – however, when I talk to my MBA buddies they don’t like the idea that capital market are being dysfunctional by only betting on sure things. They argue that markets are largely “pure” – and so companies should put their capital where the biggest rewards accrue. …. Hence I think capital leadership, already battered by the credit crisis, will start to flow away from the US.

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