Has Silicon Valley stopped being really innovative

Growing criticism of Silicon Valley's ability to innovate

The number of venture capital firms in the United States increased from 946 in 2007 to 1,328 in 2019, and the amount of funds they manage grew from $ 170.6 billion in 2005 to $ 444 billion in 2019. Venture capital is the most important driver of innovation in the US - especially in Silicon Valley. However, a growing number of experts doubt this is a good thing, reports TR in its latest issue.

Venture Capital for Remedies?

Admittedly, in view of growing social inequality, the debate has been around for some time. However, as Covid-19 took over the world, the question became even more pressing: Is venture capital even producing the kind of inventions a society needs? Where was the cure for the virus, or at least better protective equipment, and why had venture capital not financed such products?

One of the main reasons is that venture capitalists favor software companies in their investments. Software companies are attractive to investors because they can generate high returns, often by replacing people in industries where these software companies dominate - such as travel agencies, whose work is now done through flight booking websites.

75 percent in software

In the United States, therefore, 75 percent of venture capital goes into software, says Carol Dahl, executive director of the Lemelson Foundation, which helps inventors and entrepreneurs build physical products.

People who are genuinely concerned with innovation systems "realize that venture capital may not be a perfect model for everyone," says Dahl. "Investors lack innovation because the people who run these VCs cannot imagine what the needs of other people who are not part of their culture are," adds Lisa Green Hall, Fellow at the Beeck Center for Social Impact & Innovation in Georgetown and former CEO of Calvert Impact Capital. "In white male culture, these needs are extremely narrow."

The Think Tank Information Technology and Innovation Foundation (ITIF) therefore advocates expanding state research funding. According to the ITIF, the share of federal funds for research and development in GDP is now below the level of 1957 - internationally the USA ranks 28th out of 39 nations. We have "replaced breakthrough innovation with incremental innovation," said Rob Atkinson, founder of ITIF. "And thanks to the excellent marketing of Silicon Valley, we confuse increments with breakthroughs." (wst)

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