Jeremy wrote:

] The IP policies of universities have become so complex and
] money-oriented that companies find it increasingly difficult
] to structure deals.

I think this is one of the most telling statements of the article, and it only hints at the larger problem. Throughout the 70s and 80s, universities contributed a tremendous amount of R&D to the system. Both directly and indirectly. That tide started to change in the early 90s. When you had startups like SGI, Sun, Cisco, Bay, etc - all of which were directly born out of research done at universities - becoming viable and then going public, I think the sense was that the universities felt like they weren't getting their fair cut of the action. While this may or may not be true, the point is that the level of 'action' that they want today is unrealistic.

A good example of this is Vanderbilt's technology transfer organization. It's been pumped with millions of dollars, had several very smart people attached to it, had at least a dozen projects under its wing, and absolutely nothing has come of it. Why? The university wants too much equity in the deals that it's generating.

This is symptomatic of the entire system's collapse. Everyone got greedy. Despite the bust and all its lessons, the money side of the equation has not relented. They are still expecting ROI's that are too high, exits that are too soon, and IRR's that are not grounded in the previous 30 years of venture capital experience. Because of this now huge imbalance of supply and demand (in the other direction), most entrepreneurs are staying on the sidelines. It's not worth killing yourself with all the risk and hard work, if you're not going to get the valuations that make it worthwhile (because the institutional investors are still commanding more).

Why does all this matter? Because we will not have a lengthy economic recovery if innovation is not greased up along with existing industry. Bush's tax cuts are all well and good to spur activity within the mainstream economy. But that nitrous spray on the engine of commerce will only last so long, unless we crank up the innovation supercharger. Most of the gains that we're seeing are productivity gains, not real economic gains. We are not selling more, or making new markets. We are simply being more efficient. In and of itself, that is not enough to sustain growth. In fact, I would argue that it's not providing growth at all. It's just evening out the recessing economy with an aparition of statistics.

RE: Our Innovation Backlog