In an important piece of research recently released, two smart analysts have put numbers to what many of us active in economic development in New York State have long been saying: there exists a deep, fundamental mismatch between the stylistic preferences of regionally based venture-capital firms and the kinds of innovation emerging from the state’s university R&D community.
The study by Judy Albers and Tom Moebus – both well known and respected players in the statewide innovation ecosystem – employs data from NVCA and other sources to nail the case that while the amount of venture capital under management in New York City is rising, it is specializing heavily in digital technologies (IT, software, media) and focusing on capital-efficient “quick hits,” often at the expansion phase, with high potential for fast liquidity and outsized returns. Almost none of that potential is available upstate, and consequently almost no regionally managed capital goes there.
The authors show that while the VC industry in California and Massachusetts is more eclectic in its tastes, only a very small share of that money comes to New York to begin with, and exceptionally little makes its way upstate. That leaves ventures in what Albers and Moebus call the hard sciences (subdivided into the engineering technologies and life sciences) a long, hard slog with few early-stage investors (and almost no seed investors) either based here or deploying money anywhere in the state.
Because I style myself as “consultant in technology-based economic development,” I’m often asked my opinion on this or that development in the “tech” world. Sometimes I can answer, but sometimes not, because “tech” is not what I’m primarily about. To me, the word “technology” means the full range of practical arts enabled by advanced scientific knowledge and engineering skill. When I use the word, I’m pretty certain I mean something different from what the general public and the media now mean by “tech.”
Back in the dot-com boom, the public and the investment community began using the word “technology” as a shortcut for what was really just “information technology,” and “technology” soon shortened further to just “tech.” Actually, in Silicon Valley, “tech” seems to have a broader meaning than here, because there it encompasses not just the big Web successes like eBay, Facebook and Yahoo, but also a broad range of firms that actually manufacture materials, systems, and devices based on a wide array of modern technologies (think Intel, Cisco, or even Tesla Motors). But here in the Big Apple, because our local venture capitalists have rightly perceived that our economy’s comparative advantage lies in those technologies that hold potential to “disrupt” our world-beating advertising, media, financial, and fashion sectors, “tech” has come to mean largely “soft” technology: Web 2.0, social media, and now, above all, mobile apps. In a word, software.
All this raises some points I’ve wanted to make about New York City mayor Michael Bloomberg’s “applied sciences” initiative, which I’ll write up in a subsequent blog post some time before he leaves office, but I before I do, I need to clear some linguistic underbrush. As a long-ago undergraduate historian of science, I have a stake in clarity.