VIVEK WADHWA FACTS AND MYTHS IN THE GLOBALIZATION DEBATE

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1 FACTS AND MYTHS IN THE GLOBALIZATION DEBATE VIVEK WADHWA Visiting Scholar, UC-Berkeley Director of Research, CERC Duke University Senior Research Associate, Harvard Law School Distinguished Visiting Scholar, Emory University Faculty and Advisor, Singularity University Columnist: Washington Post, BusinessWeek

2 8 Myths In Global Competitiveness 1. We re falling behind in graduating engineers (and scientists) 2. Companies are going where the skills are 3. Strong math and science education = Global Competitiveness 4. More investment in research = more innovation 5. Skilled immigrants fuel the economy: so more H1-B visas 6. Young college dropouts: typical Silicon Valley entrepreneurs 7. America world leader in workforce development 8. Clusters provide the magic formula for innovation

3 UNIVERSITY RESEARCH Untapped Goldmine of knowledge and Innovation $48.8 billion invested every year in U.S. university research with very few spinoffs and less than $2 billion in license revenue. European university investment is much lower than the U.S., but generates 3 times as many startups and far fewer patents COMMON PROBLEMS INCOMPLETE SYSTEM -- legal and finance in place, but corporate development, marketing, and sales are missing CULTURAL ISSUES -- academics want to disseminate knowledge and publish papers rather than inhibit it s use. WHAT COMES FIRST -- students or commercialization? What about the conflicts of interest? UNIVERSITY TECHNOLOGY IS HALF-BAKED -- proof of concept not funded

4 Entrepreneurship Research BASED ON 3 PROJECTS: Survey of 652 CEO s/cto s of 502 tech companies Interviews with 144 Immigrant tech company founders Detailed survey of 549+ founders of companies in 12 high-growth industries COMMON MYTHS: Tech entrepreneurs: unmarried, rich, college-dropouts obsessed with making money Ivy-league education provides huge advantage Venture Capital prerequisite for economic growth

5 Founder Age Tech Entrepreneurs: Not Young! US Tech Founder Age at the Time of Startup Establishment % % % % % % 0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0% 35.0% 40.0% Percentage of all Respondents

6 Married with Children 69.9% 40.3% Average Number of Children 28.0% 24.9% 16.4% 11.0% 4.5% 0.7% Single Married Divorced/Separated Widowed 3.4% %

7 Entrepreneurs: Not from Rich Families 36.9% 34.6% 21.8% 5.4% 0.7% 0.6% LOWER-LOWER CLASS LOWER-MIDDLE CLASS LOWER-UPPER CLASS UPPER-LOWER CLASS UPPER-MIDDLE CLASS UPPER-UPPER CLASS

8 Tech Entrepreneurs: Not College Dropouts Associates Degree, Certification, Some College, 2.3% PhD, 10.0% MD, 3.8% JD, 3.5% High School Diploma or Lower, 5.9% Economics, Arts, 1.8% Humanities and Social Sciences, Law, 2.8% 4.2% Healthcare, 5.5% Other, 4.6% STEM Fields 46.5% Applied Sciences*, 9.0% Engineering 27.6% Masters, 31.0% Highest Completed Degree Bachelors, 44.0% Business, Accounting, Finance, 33.4% Mathematics 1.5% Computer Science, Information Technology 9.0% Fields of Highest Degree

9 Average 2005 Sales (Millions of USD) Average 2005 Total Employees Education Counts, Not necessarily Ivy League $8 $7 50 $6 40 $5 $4 30 $3 20 $2 $1 10 $0 All Startups Startups w/ an Ivy-Leauge Founder Startups w/ a High School Founder 0 Average 2005 Sales Average 2005 Employment What makes the difference is higher education: not the degree or school.

10 Entrepreneurs: Highly Experienced Approximately how many years did you work for another employer prior to starting your first business? Approximately how many years did you work for another employer prior to starting your first business? 24.6% 27.6% 23.3% 14.3% 10.3% 0-5 years 6-10 years years years 20+ years

11 Entrepreneurship wasn t necessarily in Genes or Pre-planned Which Members of Your Family Started a Business Before You Did? How interested were you in becoming an entrepreneur while you were completing your higher education? 51.9% 38.8% 34.7% 27.5% 24.5% 15.2% 6.9% 7.2% 6.1% I was the first in my immediate family to start a business Father Mother Siblings Not at all interested Not very interested Didn't think about it Somewhat interested Extremely interested

12 Reasons for becoming an Entrepreneur Entepreneurial friend or family role model 2.1 Always wanted own company 3.1 Startup company culture appealing 3.0 Developed a technology in lab 1.4 Wanted to capitalize on a business idea 3.1 Co-founder encouraged to start company 1.7 Wanted to build wealth 3.2 Working for someone else didn't appeal 2.9 Couldn't find traditional employment 1.2 1= Not important factor, 5 = Extremely important factor

13 Bootstrapping is the Norm, Not VC-Funding Corporate investment 6.2% Bank loan(s) 14.6% Private/angel investor(s) 9.2% Venture capital 10.8% Business partner(s) 15.4% Personal savings 70.0% Friends and family 13.8% Other 10.0% 0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0% 70.0% 80.0%

14 Success Factors Your prior industry/work experience 4.4 Lessons you learned from your previous successes Lessons you learned from your previous failures Company's management team 3.8 Good fortune Professional/business networks Availability of financing/capital Your university education Personal/social networks 3.0 Location 2.5 Advice/assistance provided by company investors 2.2 University/alumni contacts/networks 1.7 Assistance provided by the state/region 1.3

15 What stops others from becoming Entrepreneurs? Difficulties in recruiting co-founders 2.5 Availability of health insurance/risk of losing existing coverage Family or financial pressures to keep a traditional, steady job Knowledge about how to start a business 3.3 Knowledge about the industry and markets 3.4 Lack of business management skills 3.6 Difficulties in raising capital/financing 3.8 Amount of time and effort required 4.0 Willingness or lack of ability to take risks

16 Common formula for Regional Innovation Pick a hot industry Build a magnificent tech park next to a research university provide incentives for chosen businesses to locate there add some venture capital And watch the magic happen As prescribed by management consultants touting the "cluster theory" developed by Harvard Business School's Michael E. Porter.

17 Every such experiment in the world has failed or is on life-support, every single project!

18 What about Silicon Valley and RTP? Silicon Valley has reinvented itself many times since WWII Govt. investments in aerospace and electronics research Raced ahead of Rt. 128 because of its high rates of job-hopping, new company formation, and culture of information exchange and risk-taking Silicon valley is one giant diverse--network Research Triangle Park is a 50-year-old project that achieved success decades ago but lost momentum in the Internet era.

19 Babson Professor Daniel Isenberg: Zebras are beautiful. They are powerful. They exist in nature. But if someone told you that you could paint a white jackass with black stripes and call it a zebra, you would send them packing. Economic clusters are effective. They are powerful. They exist in nature. So why do most economic policy makers think they can take some real estate, paint it with an anchor tenant and a name, and call it a cluster?

20 Ideas for boosting regional entrepreneurship Remove bureaucracy/obstacles to entrepreneurship Remove stigma associated with failure. Teach experimentation/risk taking paths to success, preceded by failures. Teach entrepreneurship to university students/experienced workers Encourage diversity/immigration Improve education. Focus on quality/freedom of thought/expression Create mentor networks. Successful entrepreneurs usually mentor others/give back by providing advice and connections. Bring together entrepreneurs and connect with other networks. Provide global business connections for local entrepreneurs Facilitate seed financing. VC will follow innovation

21 Ideas for U.S. Competitiveness Move workforce up the ladder rather than just graduate more Bring and keep the worlds best and brightest Make our investments in research more effective Foster entrepreneurship at its source the workforce Understand globalization and create new business models which leverage innovation abroad Compete on American strengths -- In other words, let s do what we do better

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