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Hurdles to Innovation, Part 6

Originally published April 17, 2008

Previous articles have discussed the state of innovation and entrepreneurialism in today’s world. In many ways, the picture for the innovator is dreadfully bleak. There are little or no funds, there is little possibility of building a large and encompassing product, and the prospects of working as a consultant to pay the bills while doing development of the innovation are dreadful.

So does this mean that innovation is dead? Not at all. Innovation is one of those irresistible and mighty life forces that cannot be denied. Innovation is as strong as the life force that pushes up new flowers and plants in the springtime sun. As long as there are people who are intelligent and motivated, there will be innovation. What has changed is the way that innovation must find its way into the marketplace.

There is an interesting footnote to all of this, and that footnote is a question. When will the venture capitalist stance toward start-ups revert to where it once was? In many ways, the experiences and attitudes of venture capitalists are like a pendulum. The pendulum first swings one way, then another. There is no question that the bursting of the dot-com bubble violently shook the venture capital world, pushing the pendulum for the venture capitalists as nothing before. However, the pendulum will again swing, and the venture capitalists will return to investing in start-ups because it is in investing in start-ups that the most money can be made. Currently, venture capitalists are investing in deals that have somewhat limited paybacks. The upside potential for venture capitalists today is simply nowhere near as great as it is for an investment in start-ups – and upside to venture capitalists is like catnip to a cat. It is just irresistible.

With one or two well publicized innovation start-up successes, venture capitalists will be back like dandelions in spring.

There is another open question that relates to the return of venture capitalists to investing in start-ups, and that question is whether the venture capitalist community is going to be any smarter this next time around in evaluating start-up technologies in which to invest. In the past, venture capitalists have been guilty of “fad” investing in which people decide they know the wave of the future. First one venture capitalist invests in a technology. Then, another venture capitalist invests in a similar technology. Soon, several venture capitalists are all looking to invest in technology of the same ilk without asking critical questions. Is this a sound investment? Is this a sound technology? The logic the venture capitalist uses is: If it was good enough for the ABC venture capitalist firm to invest in, then it surely must be good enough for me to invest in. The motivation for investment is competition with other venture capitalist firms, not anything to do with technology itself.

I sincerely hope that some lessons were learned from the dot-com bust.

  • Bill InmonBill Inmon

    Bill is universally recognized as the father of the data warehouse. He has more than 36 years of database technology management experience and data warehouse design expertise. He has published more than 40 books and 1,000 articles on data warehousing and data management, and his books have been translated into nine languages. He is known globally for his data warehouse development seminars and has been a keynote speaker for many major computing associations.

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