Over at Andrew Hargadon’s blog, GreenTech Media, he has posted an interesting take on the Valley of Death problem. The Valley of Death is usually seen as a financial issue: how to get funds to move from early stage research to later stage commercialization. Hargadon points out that the issue is not just lack of money. There may be very good reasons why the project does not attract funding — it may lack other forms of capital:
In addition to financial capital, there are three other forms that at different times can be significantly more valuable: physical capital (the physical resources someone has already acquired and organized), intellectual capital (the knowledge and skills someone has acquired and organized), and social capital (someone’s social network, or access to the capital “stocks” of others). [Note that we normally refer to all three of these as parts of intellectual capital.]
While a startup’s balance sheet might clearly show where they stand with respect to their financial and physical capital, it does little to reveal their intellectual and social capital. And yet for companies to avoid their own untimely demise, they depend as much or more on knowledge, experience, and the ability to manage their company’s fortunes — and on their social networks to discover, guide, and acquire the critical resources they will need to succeed.
So the solution to the valley of death funding problem is not just more money — but a careful look at all the forms of intellectual capital needed to make the project work. For this reason, I have been advocating programs to do more to help companies and entrepreneurs better manage their intellectual capital. Those services could be offered as part of SBA and EDA programs, built into business incubator programs, and be the core services of a specialized center, such as Glasgow’s Intellectual Assets Centre and Hong Kong’s Intellectual Capital Management Consultancy Programme. And, as I noted last week, that analysis and evaluation can be tied directly to the funding process — as the Hong Kong center just announced.
One other point, Hargadon’s comments were made in the context of green tech.
As I noted earlier, the Department of Energy encourages applicants for the clean energy production loan to put up their IP as collateral. DOE is not necessarily looking to recoup funds by selling the IP if the loan goes bad. They what to control the IP and the technology if they have to step in and finish the project.
So the elements is understand the key role of intellectual capital are beginning to take shape. We need to push the process along.