Source: Pixabay

Reinventing GovR&D™ — From The Silence Of The Lamb To The Roar Of A Lion…

Canada, EU, and the USA are spending hundreds of billions each year in support of government R&D policies. And yet, R&D programs that used to be a great source of national pride and delivered moonshot results, turned into a futile mediocrity.

No wonder, such big spending lost its luster and both, Canada & the USA are no longer world’s leaders in R&D spending — measured as a percentage of country’s GDP…

Hence, I asked myself a simple question: How can we transform the government TODAY from being the sacrificial lamb on the R&D altar into the roaring lion? The answer: it is simpler than you think…

Undoubtedly, the venture capital ecosystem developed by Western democracies is an envy of the entire world. The sheer sophistication of the venture capital industry in the USA and in Canada — is uniquely unparalleled and unmatched by a “fake capitalism” of communist China, or a “crony capitalism” of Putin.

So, why wouldn’t the governments of OECD countries embrace the venture capital ecosystem and use it to turn their R&D support from COST into a PROFIT center, too? It offers an additional tool in governments’ toolbox and it is ripe for the picking — an immediate “brightspot” waiting to be replicated at scale…

Short-Changing The Governments All Around The World…

No other economist has been alerting the governments around the world to the above problem more than Mariana Mazzucato (MM). Just a quick look at the number of books on the subject published by MM will take your breath away. My last count of her books on amazon returned 24 entries… Very impressive.

You can also look at the Aspen Ideas Festival website which clearly states: “Mariana Mazzucato is a professor in the economics of innovation and public value at University College London, where she is founding director of its Institute for Innovation and Public Purpose.

She also advises policymakers on innovation-led inclusive and sustainable growth. Current roles include advising the Italian prime minister, chairing the WHO Economic Council on Health for All, and serving on economic advisory councils for Scotland and South Africa.

Mazzucato’s latest book is Mission Economy: A Moonshot Guide to Changing Capitalism; she also authored The Value of Everything and The Entrepreneurial State. Among other honors, she received the 2020 John von Neumann Award and was named one of the 25 leaders shaping the future of capitalism by WIRED”.

Take Me To The Moon…

Shooting for the moon is a good advice. Richard Branson encouraged us all to do so for many years. According to her newest book: “Mission Economy”, Mariana Mazzucato is saying:

“Taking her inspiration from the ‘moonshot’ programmes which successfully coordinated public and private sectors on a massive scale, Mariana Mazzucato calls for the same level of boldness and experimentation to be applied to the biggest problems of our time”. And she adds:

“Mission Economy looks at the grand challenges facing us in a radically new way, arguing that we must rethink the capacities and role of government within the economy and society, and above all recover a sense of public purpose.

To solve the massive crises facing us, we must be innovative — we must use collaborative, mission-oriented thinking while also bringing a stakeholder view of public private partnerships which means not only taking risks together but also sharing the rewards.

We need to think bigger and mobilize our resources in a way that is as bold as inspirational as the moon landing — this time to the most ‘wicked’ social problems of our time. We can only begin to find answers if we fundamentally restructure capitalism to make it inclusive, sustainable, and driven by innovation that tackles concrete problems.

That means changing government tools and culture, creating new markers of corporate governance, and ensuring that corporations, society, and the government coalesce to share a common goal. We did it to go to the moon. We can do it again to fix our problems and improve the lives of every one of us. We simply can no longer afford not to”

Moving The Needle Of Capitalism 2.0

Well, I agree with everything MM says and the governments should champion the moonshots. However, her relentless calls to action have barely moved the needle of change so far. So perhaps, we all owe it to MM, and need to think about adding additional tools to the toolbox?

Top R&D Spenders Around The World

The need is real. In my latest post: My 1001 Entrepreneurial Tales: SPACs — Wharton, Warts And All… I wrote that the countries like Israel, South Korea, Germany, Finland, and Switzerland are now spending a bigger % of GDP on R&D than the USA… And all the anticipated deficits linked to the COVID-19 are not going to make increasing the R&D spending any easier.

TTOs To The Rescue

It is not that we did not try… A good example can be found on Wikipedia describing Technology Transfer Offices (TTOs). Since the 1970s, the policies in the US:

“Decentralized ownership of inventions funded with federal grants, allowing universities that received federal grant funding to maintain ownership of such inventions, obligating them to try to patent and license the inventions to US companies, and requiring universities to share license income with inventors”.

“TTOs attempt to capitalize on the research developments made at the university by employing strategies focused on providing the university with opportunities for financial gain and increased research impact.

A common strategy that TTOs engage in is licensing their inventions, either to an industry partner or back to the university inventor if the inventor started a company (i.e. a university spin-off)”

“In recent years, many OECD and EU nations have created legislation that emulates the USA policies in an attempt to increase the commercialization activities and impact of their respective research universities. As of 2011, most European countries grant universities the rights to the intellectual property of inventions developed by faculty researchers”

“Yet although universities created TTOs with hopes of financial gain, many TTOs have retained losses in their commercialization activities and have not generated significant local economic development”

“Even the most profitable TTOs only produce revenue that amounts to 1–3% of the total research expenditures at the university. Moreover, less than 1% of licensed technologies actually yield over $1M in revenue”.

“Another criticism of TTOs is its role in the research atmosphere of the university, with many scholars arguing that its presence and purpose of engaging in commercialization activities conflicts with a university’s mission of furthering knowledge and objective academic inquiry”.

A New Tool In A Toolbox…

If we can learn anything from the last 50 years of TTOs’ history, it boils down to this: we need to deploy additional strategies that are more profitable to the governments and much more scalable…

The current TTO Business Model does not work so well. And in addition, the legal costs, and the complexities of dealing with the TTOs are too expansive for many bootstrapped startups. It is not easy for the SMBs to utilize the TTO’s research, or to deploy it…

The Entrepreneurial Scars On My Back…

And even the best technologies and the best solutions — still do not guarantee sustainable growth & profitability. I wrote about my experiences on LinkedIn and posted a video on YouTube entitled: My 1001 Entrepreneurial Tales: Keyword Spotting & The Magic Of Closing The Deal

In business, offering lower costs at a higher value is necessary but often not sufficient to win. This is one of the most profound entrepreneurial lessons I learned while selling to corporate clients in a Joint Venture with Verizon.

Turning COST Into A PROFIT Center

I learned that the real MAGIC occurs when you can turn customers’ COST into a PROFIT center. And I said: “Use it wisely, and you will pull the rabbit out of a hat, too…”

So, in line with the above thinking, I would argue that the sustainable breakthrough innovation will occur when we turn governments’ R&D COST CENTER into a PROFIT CENTER, too. Welcome to my GovIQ™ Venture Capital recommendations…

GovR&D™ Venture Capital To The Rescue

A huge part of todays’ innovations is still happening at the proverbial “garages” — large and small. The founders end up knocking on the doors of the Institutional VCs and a small percentage of successful pitches — gets funded.

But what if governments mandated all the VCs within their borders to take 1% of their LP capital from… the government. So, every VC fund of $100MM would be injected with $1MM from the government coffers — in exchange for a 1% of ownership.

Now, what if the government did own 1% of Microsoft today? A back of the envelope calculation quickly shows that a 1% stake in Microsoft is today worth $19 billion…It would have allowed the government to invest $1MM in 19,000 VC funds of $100MM each…

NVCA & CVCA Perspective

To put it in perspective, The National Venture Capital Association (NVCA) proudly lists 450 member firms in the USA. Similarly, The Canadian Venture Capital and Private Equity Association (CVCA) lists 270 member firms in Canada. So, a single investment in Microsoft would allow the government to finance 19X as many VC firms as Canada and the USA have to offer — COMBINED…

And if you are looking for scalability, check the PitchBook’s database and reach the 18,000+ VC funds all around the world. Such would gladly take the government’s money collected from monetizing a single investment in Microsoft…

Throw Amazon’s Market Cap of $1.6T into the mix and Apple’s $2.2T — and realize that the Profit Center based on my GovIQ™recommendations, is as realistic as it gets — come hail or high water…

Democratizing R&D Access

Previously, I wrote extensively about how the governments can do more & help the SMBs. You can find my Set Aside Rules recommendations in a LinkedIn post: Can $17 Investment Double $15B R&D Budget?

In addition, the governments can also deploy SMBs’ CEOs as… Independent Directors at the BODs of VC-financed startups. Such contracting would generate additional revenue streams to the SMBs and enhance SMB/VC interactions. In addition, it would also protect the government’s interests at the BOD table…

A stronger VC/SMB interaction would facilitate the adoption rate of the innovation at SMBs, enhance their productivity, and raise SMBs’ profitability. The best part: SMBs will be PAID by the government to do so. Once more, we can turn COST into REVENUE center using innovative GovR&D policies…

Levers Are Not Exclusive To Rock-Lifting…

You can view my recommendations as a classic case of leveraging the government’s equity investment. I financed over $1B of renewable energy projects using the Debt to Equity (D/E) ratios of 90/10. In each case, the returns on invested equity were far more superior to any returns achieved without the debt utilization.

In my proposal, the leverage is around a 99/1 ratio — which will offer a great source of sustainable revenues to the government. Using Other People’s Money (OPM) makes a lot of sense in such Public-Private Partnerships (PPPs) — aimed at boosting R&D competitiveness.

In Conclusion…

Big problems require a multitude of solutions and one size seldom fits all… It was Warren Buffett who once said: “Predicting rain doesn’t count; building arks, does” …

So, I am calling on all the ark builders out there to join me in my quest to find an alternative to costly subsidies. Profitable and sustainable funding policies will lead to renewed and reinvented R&D excellence…

And while talking about excellence, in homage to Jim Collins’ masterpiece: “Good to Great”, I call it the: The GovR&D™ Flywheel:

· Government invests in more VCs

· VCs invest in more Startups

· More Startups turn into Unicorns

· More Unicorns successfully exit

· Government collects more profits

“The Flywheel effect is a concept developed in the book Good to Great. No matter how dramatic the end result, good-to-great transformations never happen in one fell swoop. In building a great company or social sector enterprise, there is no single defining action, no grand program, no one killer innovation, no solitary lucky break, no miracle moment. Rather, the process resembles relentlessly pushing a giant, heavy flywheel, turn upon turn, building momentum until a point of breakthrough, and beyond” — Jim Collins.

For More Information…

For more information, please see my posts on LinkedIn, Twitter, Medium, and CGE’s website.

AI Boogeyman

You can also find additional info in my book on amazon: “AI Boogeyman — Dispelling Fake News About Job Losses”, and on our YouTube Studio channel… Thank you.

I offer hands-on AI investment advice to Venture Capital & Private Equity portfolio companies. Hence, I am in the business of joining Advisory Boards (ABs). And in many cases, I deliver results in 90 days by structuring JVs to bring untapped revenue streams — just as I did w/ Verizon 20-yrs ago…

A good Advisory Board improves the decision-making process by helping the CEOs to consider different perspectives. More importantly, there is not a single top athlete who does not have a coach. And yet, only 20% of CEOs are coached by Advisors. The other 80% — may never become the top performers they could have been. Thus, my advice to CEOs: “Amateurs don’t use coaches, professionals do… and so should you”.

I used advanced BusinessAI™ strategies in Renewable Energy for 12 yrs. Now, I help VC/CVC/PE funds to maximize their returns in Healthcare, Fintech, Transportation, Construction & Manufacturing, too. And I apply the same structured finance expertise I acquired through financing over $1B of Renewable Energy projects.

As a 30-yr BusinessAI™ veteran, I Propose, Design, Structure, Finance, and Deploy state-of-the-art Joint Ventures to bring RAPID & SUSTAINABLE REVENUES. And as a coach & mentor, I bring business savvy to separate the wheat from the chaff — through a unique process to beat the odds. Such pattern recognition abilities allow me to see what is still missing & how to maximize business offerings & profitability…

What I learned over the years is that it is not just technology innovation, but also the exponential increase in the value offered to clients at a much lower cost — that makes all the difference. Business Model Innovation is as disruptive as Technology Innovation and yet I see too many companies focused on pushing their product out the door — while losing ~70% of untapped revenue streams.

My LeanBOD™ recommendation? Mandate CEO Advisory Boards and create a pool of viable Co-CEOs to be chosen by the BODs. Co-CEOs offer the fastest way to accelerate Scale-Up & Expansion, Revenue Growth, Margin Enhancement & Opening New Channels.

SELECT ACCOMPLISHMENTS: Using AI in CT medical diagnostic, financial fraud detection, solar PV, wind, WTE, energy efficiency, etc. Finance skills: equity, non-recourse debt, balance sheet financing, and tax equity. I also took a tiny startup public, building a $135MM enterprise & received funding from NRC & DND. Academic R&D collaborations included: UW, UofG, UofT, and MCC Consortium in Texas.




I used #AI in #Technology, #Finance, & #Renewable #Energy for 30-yrs. Now, I help #VC/#CVC during due diligence of AI investments & advise their portfolio Cos.

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Oleg Feldgajer

Oleg Feldgajer

I used #AI in #Technology, #Finance, & #Renewable #Energy for 30-yrs. Now, I help #VC/#CVC during due diligence of AI investments & advise their portfolio Cos.

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