Venture Industry and Government Together Will Grow the Economy
With the financial crisis as a backdrop, venture capitalists and policy makers are today finding themselves on common ground more than ever. Our economy has some serious structural problems. And the way past these problems will be through innovation and job creation. Venture capital has been the engine for America’s new, innovative companies for over forty-five years. Now, with the passage of the American Recovery and Reinvestment Act, Congress and a new Administration have signaled their readiness to invest in this portion of the economy that has created the majority of new jobs during every recovery since the Great Depression.
The passage of the stimulus bill was no easy task. Congress should be applauded for its willingness to make tough trade-offs for the greater good. No special interest group was without disappointment in certain areas. Yet, many of the sectors that are beneficiaries of stimulus dollars are poised to serve our region and country and in the process also improve our long term global competitiveness. These are industries that the venture industry also supports with billions of dollars of capital investment each year. And our industry has the track record to prove its worth. In fact, one out of every ten Americans works for a company that was founded or grown with venture capital investment and guidance. And collectively these companies account for 18 percent of U.S. GDP.
The venture capital community is largely responsible for the creation of the biotechnology industry, the Internet economy, and the software, semiconductor, and personal computer industries. It is poised to create additional jobs in these areas as well as in the newly emerging clean technology sector over the next several years. There is no question that together venture capitalists and the government can create significant value.
With a total of more than $37 billion in funding for clean energy grants, loans, and tax credits, the stimulus bill represents a significant expansion in federal funding for renewable energy, conservation, efficiency—in short, green jobs. Here in New England, these provisions will allow companies such as Lexington-based 1366 Technologies, an MIT spin-out, to develop more efficient silicon solar cells, or Marlborough-based Qteros, a UMass Amherst spin-out, to expand its facilities and hire people to deliver advanced biofuels out of the Western part of the state. Nationally, the stimulus will help us ensure that these innovative startups will keep their operations here in the United States rather than being lured overseas with attractive foreign government incentives.
The largest allocation of healthcare spending in the bill is in the area of healthcare information technology. This sector has seen only modest venture funding over the years because of the uncertainty associated with the medical industry’s commitment to real change. However, with this commitment from the federal government, we expect to see more venture investment in startup companies such as Andover-based Sentillion and Lexington-based Imprivata, which offer secure software to enable the safe delivery of electronic patient records. Companies like these have the opportunity to improve our health care system dramatically, reducing inefficiencies and eliminating costs.
Perhaps most promising of all the stimulus provisions is the bold investment in science research and development. This expansion of fundamental research is long overdue and it is imperative to keeping America competitive for the long term. Commitments to agencies such as the National Science Foundation, the Department of Energy, the National Institutes of Standards and Technology, and the NIH are seeding tomorrow’s innovations today. For example, companies such as Aveo and Pervasis located in Cambridge, Lexington-based Predictive Biosciences, and Dartmouth spin-out Adimab based in Lebanon New Hampshire all have their roots in government grants. These companies are engaged in developing new classes of drugs to treat many chronic and life threatening diseases. And companies such as T2 Biosystems, also in Cambridge, will use stimulus dollars for research product and development in the area of non-invasive diagnostics. Venture capitalists are eager in their role as company builders to bring to market these discoveries that were made possible with government funded basic research.
The venture capital industry does not profess to be able to solve all of our nation’s economic ills. And we certainly don’t expect the government to be able to do so alone. But working together, the public and private sectors can continue to build on a continuum of innovation, from basic scientific and engineering research to product development, manufacturing, and marketing. In so doing, we can grow the most promising innovations into real companies that will create jobs for American workers and needed products for the American people. Since the 1960’s the venture industry has prided itself on investing in those ideas that improve our quality of life. We welcome the U.S. government’s commitment, demonstrated by the stimulus package, to join us in that vital work.