2013-01-25 10:03:40
By Robert Marcus Chief executive, QuantumWave Capital
As the global economy continues to stagnate - with all the US and European
economies reporting slow growth or recession, and China decelerating - the
surge in technology mergers, acquisitions and investment activity reveals one
path out of the current slump.
The mobile internet - the fifth wave of computing - is a revolution. And it is
easy to see why: the convergence of mobile systems with the internet has
created a near-universal market of six billion users generating $2.5 trillion
( 1.8 trillion) in annual economic value.
Activated by third-generation mobile communications (3G) and the smartphone,
the market is now expected to explode with the current global rollout of
fourth-generation communications, known as 4G or LTE.
In the UK alone, one report puts the 4G/LTE gross domestic product impact at
75bn before 2020.
This includes 5.5bn of direct private investment into the economy by 2015,
creating or safeguarding 125,000 jobs.
The mobile internet combines the massive economic and social power of
networking with the force accelerator of more than six billion personal mobile
devices - not to mention an estimated 50bn networked machines by 2015.
Its size, commercial potential and ease of developer access is fuelling a
powerful new wave of global innovation, decentralising research and development
into distributed hubs around the globe.
Democratising innovation
The Connected Generation, rejecting notions of the centralisation of power and
closed systems and organisations that maintain it, is democratising innovation
itself, and rising up to challenge the Silicon Valley monopoly.
Disenfranchised from the corporate workforce by the economic crisis, inspired
by the legend of Silicon Valley and its iconic leaders, a new generation of
talented and resourceful entrepreneurs is emerging.
From centres as far afield as New York, Toronto, London, Berlin, Santiago, Tel
Aviv and Beijing, these entrepreneurs are proving that they can innovate as
aggressively, create as ingeniously, and work just as hard as their
contemporaries in California.
The mobile internet is an innovator's dream.
Robert Marcus, QuantumWave Capital Stop propping up old industries, says Robert
Marcus
No-one can fully envision the future applications that will emerge atop new
mobile platforms.
The potential is so great that this worldwide flowering of technical talent
could well offer one solution to the world's current economic crisis.
The struggling economies spending billions in infrastructure improvements or
attempting to prop up old industries as a way of increasing employment, could
spend a fraction of that amount to seed mobile internet start-ups.
This would ignite a wave of innovation that can revamp economies and produce
high-paying jobs and capital growth with a phenomenal return.
The impact would be particularly great among young people, who as a group
suffer the highest unemployment.
This assistance could come in the form of small investments, public/private
partnerships, tax incentives and grants.
As we have seen from the UK government's recent focus on tech start-ups and
entrepreneurship, the formula clearly works.
This investment has produced the booming Silicon Roundabout, attracting
hundreds of start-ups.
Elsewhere, New York has the fastest growing tech sector in the US. Berlin is
teeming with innovation.
Israel, which has also provided numerous innovation incentives, has more
start-ups than any other country in the world except for the US.
End the traditional cycle
The programmes don't just help nascent firms get off the ground.
They help create a complete ecosystem of companies and individuals with the
technical, business and investment backgrounds and capital required to create
the critical mass of support from which the industry can blossom.
The original start-up dream was to work like crazy, bring in angel investors
and venture capitalists to productise the new technology and finance growth,
before exiting a sizeable company via an initial public offering (IPO) or trade
sale.
This traditional cycle has failed over the last decade. Venture capitalists are
moving to safer, later funding rounds. IPOs have plummeted. The vast majority
of start-ups struggle to find any meaningful funding.
Meanwhile, the rate and pace of innovation is accelerating.
A few very bright people can develop something of great value in an incredibly
short period of time, but they can become irrelevant just as fast.
In parallel, the sector leaders with hundreds of billions of dollars of cash on
their balance sheets are under pressure to reposition their technology assets
to address the mobile internet.
Google's Larry Page Google has launched various start-up campuses across the
globe
Facebook's 50% share price collapse and Google's disappointing earnings
originate in their failure to effectively pivot to mobile.
Technology is needed to affect this change, and large organizations, unable to
innovate fast enough, increasingly embrace mergers and acquisitions as a
complement to in-house R&D.
Google alone spent nearly $2bn ( 1.3bn) on 79 technology and talent
acquisitions in 2011.
Silicon Valley is no longer a region. It is a platform and a state of mind.
Decisive action by government, in the form of targeted and modest investments
and tax incentives, can activate these new platforms worldwide and set in
motion a virtuous circle of technology innovation, investment and return.
These companies can emerge as a key strategic driver for worldwide economic
transformation and recovery.
Robert Marcus is the chief executive of QuantumWave Capital, an investment bank
for technology start-ups.