U.S. Innovation Competitiveness Summit: Reorienting Venture Capital to the United States

welcome to csis online the way we bring you events is changing but we'll still present live analysis and award-winning digital media from our drakopolis ideas lab all on your time live or on demand this is csis online hello everybody um this is john hammery president here at csis and we welcome you to this really is going to be a wonderful conversation it's the fourth day in our sequence of conferences the first day we focused on the imperative of innovation for america going forward and on day two we look deeply in the question of intellectual property protection and the crucial role that the government plays in helping inventors protect the rights to their ideas and what we do about that yesterday we had a fascinating discussion about tech transfer where these big engines of innovation universities how do they get their ideas into a commercial marketplace and how do we balance that dynamic between public good and uh and private good and it was a very interesting day today we now round out the most you know whether it's the most important but money is always the most important when you get right down to it and we're going to discuss that today looking at the way that we can we bring capital to this enterprise and how do we look at innovation in the sense of the way venture capital plays such a crucial role we have a fascinating lineup today of speakers and i will i will rely on uh kathleen gallagher for running that part and i will but right now we have the privilege of talking with steve case and steve i want to say thank you for for joining us today it's it's a real privilege to have you um you know you you are now in a very new phase of your professional journey you're running a company called revolution it's a venture capital company with social purpose but before we get to that i'd like the audience to know you a little bit better of course you are so famous for having founded aol america online i i grew up with that iconic bell ring and you have mail you know it was it was an exciting start every morning uh but before that you you were in a very different line you were a product development guy for pizza hut and so you've had a very interesting journey would you just share a little bit of that with us for our audience sure great to be with john thanks for hosting this whole week good obviously important topics for the country and its competitiveness so i'm delighted to be part of it during my own journey i grew up in hawaii and went to college in massachusetts and worked moved to ohio worked for procter and gamble then moved to kansas to work for pizza which at the time was the division of pepsico and then moved to virginia to join a startup that promptly failed but thankfully two of the people i met there and i ended up co-founding america online in uh in 1985 what's that you know 30 36 years ago uh and back then it was still pretty early days in terms of the the idea of the internet actually from a public policy standpoint it's worth noting that in 1985 it was still illegal for consumers or businesses to actually be on the internet it was restricted to government agencies and educational institutions so we had to do some work for a few years to essentially commercialize the the internet open it up to everybody uh and back then only three percent of people were connected uh and they're only online an average of an hour a week so it's kind of the early days of of the idea of the internet but it's been amazing to see what's happened over the last really three plus decades you know that's it's really fascinating but how did this now bring you to this new phase of your professional journey to the world of venture capital help us understand this latest uh part of your trajectory well the aol journey was about 15 years from the time we started it and as i mentioned in 1985 then we merged with time warner in the year 2000 to 20 about 20 years ago and as part of that deal i agreed to step aside as as ceo uh and so then had to figure out okay what am i going to do next and and decided rather than just start another company i would work to back entrepreneurs mentor entrepreneurs and invest in entrepreneurs and initially did that just sort of informally and then formed a revolution about 15 years ago and then we decided to turn into much more of an institutional platform with outside investors as well outside limited partners uh about 10 years ago and so for me it's been a great uh kind of next chapter uh because we do have the opportunity really the honor of working with some of the greatest entrepreneurs building some of these amazing new companies that are improving our our lives and we particularly are interested in doing that in a more inclusive way in terms of trying to back entrepreneurs you know not just the usual suspects who graduated from stanford are sitting in silicon valley but you're trying to find entrepreneurs everywhere and back them and help them take their companies and you know their ideas and turn them into significant uh businesses steve amplify on that you you've indicated that you had a different vision you know for revolution and it was it it was not just a venture capital company that was going to concentrate on the hot spots but it was going to have a different mission would you would you amplify on that well really for a couple of reasons first is uh just purely from an investment you know kind of return standpoint uh we believe there's kind of an arbitrage because so much venture capital focuses on places like uh silicon valley evaluations there tend to be on the high side those same companies if there are other parts of the country valuations would be lower but when the companies are successful and they get acquired or go go public that kind of essentially that regional discount kind of evaporates so we think from an investment standpoint it makes a lot of sense and also just from an impact kind of purpose standpoint it makes a lot of sense we we that's the whole point of your uh your conference we need to kind of level the playing field in this country so we have an innovation economy that is much more inclusive of different people in different places uh and and we think that by you know kind of hitting the road and really finding entrepreneurs everywhere not just in the few obvious places uh that's a way to have an impact uh more broadly on on on the country some of this evolved from the work we did now over about a decade ago uh when i was asked by uh to to you know co-lead an effort called the national advisory council on information entrepreneurship that was part of the commerce department that kind of led to the launch of an initiative at the white house called startup america that president obama asked me to share that led to joining his jobs council and leading some of the efforts around entrepreneurship innovation which led to the jobs act and some other things and in the process it really frankly opened my eyes to the central role startups new companies play in job creation it's not the big companies it's actually not the small businesses it's the young high growth companies that really drive most of the job growth that was kind of news to me so therefore backing more startups is critical to creating more uh more more jobs and the other part that was was striking was the fact that so much capital goes to some you know so few places right now according to the nvca bobby will be on shortly 75 of venture capital dollars go to three states california new york and massachusetts so the other 47 states have 25 percent uh california alum by the way is 50 so venture capital is sort of the not every company needs it or wants it but most companies that want to grow fast and create a lot of jobs and and build significant businesses do decide to raise venture capital but it's much much harder to do that if you're in you know detroit or new orleans or or atlanta or a lot of these other cities and if you're in you know san francisco or new york or boston so that's the other piece that we're trying to to focus on from a business standpoint with revolution as well as trying to be an advocate for public policy uh for a more level playing field for a more inclusive uh innovation economy let me let me pick up exactly on that last point about uh having a larger public voice for all of us you you recently authored two very i thought very important essays uh one was in the wall street journal and the other one was in a newspaper called the hill you know which is really concentrates on capitol hill readership um we're going to by the way to our audience we'll make those available on our website so that anybody can just look you can find it with us you know so you don't have to go search it out but um can can i just ask again amplify what you were saying in those two articles because it speaks to this question about public policy and how we should approach venture capital as being a leverage point to improve innovation and prosperity in america well it really is the core of this whole conference this week which is why as i said in the beginning i'm delighted you're hosting basically if you look at the you know the data in terms of our competitiveness america you know kind of 250 years ago was just a startup really just an idea kind of a fledgling idea like many startups almost hit the wall almost didn't make it but the country kind of broke through and and rose to great prominence and and did that because it was a pioneering nation that was you know really embracing new ideas and and a variety of people and and kind we led the way as a nation in the whole agriculture revolution then led the way again with the industrial revolution more recently led the way with the technology revolution the digital uh revolution and some of that's because of the country we really committed to invest in the future and in 1960 almost 70 percent of the r d spending globally was by the united states uh and that's part of the reason we were led the way and we're able to invent all these wonderful things like the internet or some of the technologies that came out of the apollo space mission and and many other things now if you look at the data we've gone from nearly 70 percent of global r d to less than 30 percent of global r d other countries are figuring out that embracing the future is is a good strategy investing in r d is a good strategy and as others have stepped up their efforts we've actually pulled back on on our efforts so one thing that needs more attention and this is again part of what you're focusing on and part of what the the congress and the administration is looking at including with the endless frontier act but basically increasing the amount of money going into r d so we can maintain our competitiveness and remain the most uh innovative entrepreneurial nation in the world that's number one number two is we need to do that in a more inclusive way as i said before right now our innovation economy really helps a small number of people in a small number of places most people in most places are feeling left behind because they kind of are being left behind and part of the reason is because of you know the lack of venture capital in those places that makes it harder to start and scale companies therefore a lot of people in those places leave there's a brain drain going from the middle of the country to the coast because that's where the action is that's where the money is and so it makes the places like silicon valley super vibrant and they continue to launch a lot of amazing companies but many parts of the country in the last 20 30 years have have struggled and you know and and instead of being in growth mode have been in kind of decline mode we have to address that and it's not just about the money there's some you know cultural aspects around creating kind of risk-taking kind of vibrant startup communities and there's a lot of things that need to be done around celebrating uh the entrepreneurs a lot of things that need to be done around the talent side how do you keep the people you have and and try to get back to people who left and create a place where people really want to kind of kind of live but the capital is a key part of that and that's why it is so important to to make make an effort there and again some of the the discussion now in congress is around creating investments around regional hubs which i think could be very transformative in terms of kind of leveling the playing field in terms of more of those uh places so we got to increase our investment in r d if we're going to remain the you know kind of the leader of the pack in terms of innovation we've got to do that in a much more inclusive way and not just in terms of place but also in terms of people so one my last question because i we have a marvelous panel coming but you you just mentioned uh your advocacy for regional hubs you've been working on this a bit uh if you were testifying right now in front of congress what what do you say they should be doing to help us create regional hubs well i think the big some of the legislation has been introduced particularly around uh investing in regional hubs so this r d investment spending doesn't just go to the same places but goes to some other places and ties in with some of the work around some of our national labs ties in with some of the innovation happening at universities one of your panels talked yesterday about tech transfer doing a better job of taking ideas that are invented and getting them into the marketplace into the hands of entrepreneurs is is is critically uh important but it starts with understanding that the country is at risk that there is a risk that we will lose our lead as the most innovative entrepreneurial nation uh unless we really step up our our game and we can't just do that by backing you know more people in places like silicon valley we need to do that by backing more people in other parts of the country and do that by also backing more female entrepreneurs even though our country half are half the population is women less than 10 of venture capital goes to female-led companies uh you know uh 13 of our population are black americans less than one percent of venture capital goes to black founders so there's a lot of work to do to really create a truly inclusive innovation economy so the message that the congress is we have the opportunity to continue to lead the way america has the opportunity to continue to be the most innovative entrepreneurial nation but now now we really need to step up our our game others have figured out that the secret sauce that sort of powered the american story is innovation is is entrepreneurship uh and it's sort of game on so we have to step up our game and do it in a much more inclusive way and focus particularly on on really trying to establish this broadening of venture capital going to to more places we've now visited with our rise arrest bus tours uh 44 cities uh our rise arrest seed fund has invested in nearly 200 companies in over 70 cities and we're seeing remarkable things happening in in these cities just this week there's a company in atlanta mailchimp that got acquired for 12 billion most people didn't think a company in atlanta could could create that kind of uh value we're seeing that all across the country so this is a great opportunity but we have to expand our aperture and not just do more of the same uh and as we think about the pandemic recognized it does create an opportunity now that we're kind of unbundling uncoupling uh where you live and where you work that creates opportunity for a lot of these different uh different cities and when we get through this pandemic we don't want to go back to normal because normal doesn't work that well for a lot of people we need to do better than that and this is the opportunity to really embrace the future and really level the playing field josh what a marvelous introduction for this session steve case you've uh you've set the stage uh you've been very inspirational i'm very grateful that you took the time to be with us uh let me turn to you kathleen gallagher kathleen is the executive director for uh five lakes uh in in uh initiative uh or institute forgive me i and uh what a really a dynamic thinker i mean i when we were planning this conference i looked around to and asked people and boy your name came up all the time kathleen so we're delighted that you're here let me turn to you now and and uh to for the rest of the panel this is gonna be fun thanks dr hamrick i would say i'm a dynamic information collector not thinker so uh i'll be a good moderator uh that you said you guys set the stage i would say you set the bar really high and um this panel i think has the ability to uh to uh take that challenge and act on it um why don't we start out by i'd like each of the panelists to introduce themselves why don't we start with bobby franklin from the nbca bobby can you tell us who you are absolutely thank you kathleen it's great to be with everybody very much appreciate it i'm bobby franklin i'm president and ceo of the national venture capital association where we represent the investors in the entrepreneurial ecosystem but i would say our entire policy agenda is all about entrepreneurs and what's important for startup and scale-up countries companies sorry um i'm going to ask if we can get bobby in the spotlight with me i don't like being here alone and i'll keep going too next we have bill slattery from deerfield bill can you tell us about you well good morning it's nice to be with everyone this morning i've been a partner at deerfield management which is a healthcare investment firm for over 22 years prior to that 10 years also in venture and crossover early stage investing entirely in my career in the life sciences field and life sciences is going to be very important part of this this entrepreneurial spirit as we're experiencing today and have for the past uh 20 decades but they have some very unique aspects and obstacles that may be unique from other aspects of entrepreneurship and venture funding so it'll be a pleasure to participate in today's conversation thanks bill and i want to say bill is in the in new york city and um bobby is in the dc area we should say where we are because we have a geographically diverse panel next we have zach ellis from new venture capital fund good morning everyone my name is zachary ellis i've worked in the venture capital space for a little over the last 10 years um primarily in the middle of the country in places like wisconsin and ohio and i recently launched a new venture fund in texas it's not yet been down so i can't say too much about it but we're going to be focusing on the representative founders in in south texas thanks zach and last but not least we have bryce butler from access ventures bryce you want to introduce yourself sure good morning from louisville kentucky um so i'm a little bit unique i actually run a private operating foundation that does venture investing so we uh that's one of the things i think we need to talk about as it relates to capital is the amount of money that sits under management in endowments and pension funds that could be used uh to really spur some of this innovation in mid-america uh through creative kind of structure of capital and so we're trying to spearhead some of that through an initiative called render capital uh regionally in louisville and southern indiana as well as some of our blockchain investments as well so more to follow oh as we can see is there any way to get everyone in the spotlight just to the organizers it'd be nice if we could look at all of us together but i'll keep going um let's start out we've got this group of money people and and we all know you know there are initiatives going on in at the federal level to get money into um oh oh i'm hearing everyone can be seen to get money into the rest of the country and money's important uh but let's talk about other other challenges that you you see in parts of the country um that that might that that other parts of the country might need to think about along with um how do you how do you use the money once you get it and by the way everyone we're going to have a conversation no like question and then everybody answers so jump in someone and let's uh keep going with each other uh maybe i'll start kathleen i think one of the things that's important for different parts of the country i mean zach's in texas and bryce is in kentucky i mean think about what it takes to support entrepreneurs and in different regions bills in new york there's a lot going on there we just heard steve talk about where so much venture capital is concentrated and and mainly three geographies i think there's there's several aspects to this but it's important to think about what it takes to help entrepreneurs be successful capital is one part of it but it is an ecosystem that is important so you've got to have talented people to work at those companies you need to have great ideas coming out like it sounds like was talked about in previous days my apologies for not being able to join all the the previous sessions but you've got to have great universities you've got to have great tech transfer commercialization you got to have people focused on the idea to support this very risky endeavor most entrepreneurs fail right so how can we help the entrepreneurs who are spread out all over the country what can we do to help them it's not just the idea and just the capital it's a lot of things that go into an ecosystem to help them be successful and bobby i'd add to that observation which is spot on that there have been some natural hubs where the talent has been uh has been aggregated and because of it in particular in my field in healthcare and life sciences because the failure rate is so high when you have an ecosystem that has optionality that doesn't require you to have to you know displace your entire family in order to find an opportunity similar to one that you're pursuing that is a major factor it was it's been a major driver for why in life sciences there's still only two or three major hubs and ironically when companies get aggregated some of those hubs go away so we've seen san diego emerge and then contract we've seen baltimore emerge and contract so there's a an ecosystem that has to be able to re replenish itself and that ecosystem requires that critical mass yeah one point i'd like to add is you know in addition to the ingredients of an ecosystem that bobby and bill just named um culture is a big part of it specifically risk taking in and collaborative culture steve talked about this a little bit and i don't just mean risk-taking on the part of the entrepreneur although that's critical a lot of the corporates who serve oftentimes serve as the early customers to a lot of startups they have to embrace a risk-taking and innovative culture and not have a you know not invented here mentality or well you know their technology isn't as good as dire technology uh sort of mindset right and embrace the opportunity that supporting some of these startups might actually help transform their and future proof their businesses so let me throw in though uh you know think about the nest thermostat why why wasn't the nest thermostat brought to market by honeywell or by johnson controls or by emerson electric all these companies in the middle of the country that make thermostats and instead it was a guy in california who by the way went to university of michigan who who did it i i think it was the vcs i think it was what the vcs helped that guy do with the company but what do you guys think bryce you should talk because you haven't yet yeah and i think um i would just add to the previous conversation as well i think one of the things in mid-america that we think we've seen is when we talk about supporting startups with an ecosystem it needs to also encompass an ecosystem of the capital itself only one percent of companies ever take venture 83 figure out some other form of capital to scale and grow their business uh the example steve steve used of mailchimp one of the largest private exits from atlanta across the country uh was a bootstrap and so we've got to get creative as we think about ecosystems around the structure of capital and not assume that entrepreneurs only take venture and ventures the only form of capital helped them grow and scale but i think to to your question on on nest i think i think you're spot on i think the the coast and silicon valley specifically have figured out this culture of failure that is permissible there's a permission to fail um and when i do ecosystem tours when i'm visiting miami or other things i'm sure steve would say the same with the rise of the rest there's there's a reticence to failure uh and in a lot of communities uh because of what that means uh and i think the communities that have figured out how to embrace failure as a part of the journey as a part of the learning experience of these entrepreneurs and i think that's where venture capitalists come in and really support that you see success and so i think that's one of the things as ecosystems that i think zach was spot on with is a culture and a culture that permits failure how do you change a culture then i mean that's such a squishy thing to talk about well one thing i think you could do is help folks in different regions understand that at you know writ large the united states does embrace failure far better than many other cultures and it's why it's one of the reasons we have had far more innovation come out of the u.s than our uh competitors around the world so it's helping these these local regions get what zac and bryce are saying it's like it's okay to fail that's a it's a stepping stone towards success but let me go back to your question kathleen talking about an example of somebody that graduated michigan if we had more venture capital investors in michigan which i hope we can help create which takes capital it takes access to education information about venture investing that's why we created vc university over the last couple of years we have people that now we've democratized access to information education about venture investing and we want to see that expanded we want to see more underrepresented minorities see more women start funds and be located closer to where entrepreneurs are and if there had been more vcs and more capital that had been formed in michigan perhaps the the person you talk about wouldn't have left wouldn't have to go somewhere else right so i do i agree with the premise of your question that when entrepreneurs and capital are connected great things can happen now looking at the question from the standpoint of honeywell or other companies that's another great thing about the entrepreneurial ecosystem to continue to disrupt to continue to compete against incumbent players to keep them sharp on their edge and understand that you have to continue to up your game if you're going to be successful over a long period of time it's why at nvca we have many corporate venture members a lot of corporations have a venture arm and they make investments into companies sometimes to see what's out there that might be disruptive to them sometimes it's just to stay on the cutting edge of what is happening and i think that's also a healthy part of a business environment and ecosystem in a way you're making an argument that having more vcs in your community will drive some of this disruption do you guys agree with that well i think having more vcs in different areas will help entrepreneurs are everywhere let's just take it on face value unless somebody wants to argue that entrepreneurs are in every state and every congressional district those are the folks i talk to and so you have to make sure that they have access to the capital they need to take the chance they may fail but they may help them come to success to realize a dream a new product or new service bobby i think you hit the nail on the head too with around education in louisville we see that a lot there's there are there are people that have the financial capacity to invest but they lack the sophistication to do it and so therefore if i don't understand it and i'm going to look like an idiot if i walk into that room and i don't know what i'm talking about it's easier for me to leave my money on wall street and so how do we get more of these executives working at major corporations to get personally involved because they have the financial capacity to do it they need they need the support to get in the game and we need to be communities that encourage that and how do we get our pension funds to stop sending money all their alternative investments to the coasts and put some of it i mean it's a chicken and egg thing right it is well and even even the the funds that are exist in these communities in louisville kentucky alone there's over uh almost two billion dollars under management in the philanthropic community and i will tell you none of it is doing venture investing and so that there's a problem when we have these communities that have the financial capacity to support ecosystems and the entrepreneurs that are creating jobs um we've got to start asking ourselves of these of these these pension funds and these endowments what are you doing with the 95 percent that you're investing for returns only to support the communities that you care about and the communities that you're supposed to be supporting so bobby you're good at getting politicians to do stuff how do you get those pension fund people to do it well it's a great question i i guess if i i knew how to do that i might be in a different line of work uh you know i think it's not only the lps i really what bryce said is really important um actually steve case and i've had this conversation in the past look at family offices look at wealth that's in every state and you know most of those entrepreneurs at one time that created wealth maybe it's in real estate maybe it's an oil and gas or something there is this this dichotomy they'll have a family office they'll make investments for a return get it they'll also give lots of philanthropic support to their region their city they care about it to their state and and you know i wish we could find a way to help them understand that hey there's actually a hybrid here you could really help your state by providing some of the support that you like helping your state with in a way that's focused on helping support the entrepreneurs that could come up with the next great in the entire industry not just company that could support your region so can can you think about philanthropy and investment returns in some hybrid way i think we have to have that conversation so that the capital that is out there in addition to the lps the pension fund stuff like that recognize the opportunity they have in their backyard so bill you're bill you're in new york what do you see when when you're looking at you look at health care deals why are the deals in boston better than the deals in chicago well there's a number of reasons starting with the ability for those entities that come out of the cambridge community to attract uh critical dollars you know large large series a's in order to fund the very expensive platforms that they're establishing so number one you have the attention of the venture community and number two you have uh and they're they're immediately surrounding you number two you have a very talented pool of of discoverers as a substrate in academia so it's a very rich area for discovery and because it's all in bra embraced in a community of professionals that are very involved in drug discovery you have the ability to very uh easily recruit talent it's not it's not inexpensive but you can recruit and retain the appropriate talent there so you're bringing great ideas from great institutions that are well supported by venture capital that have the access to the human resource that is going to deliver the execution but that model just because good companies come from the the boston area doesn't mean that that's the only place to find good ideas and i think some of the lessons that we've learned uh that steve was touching on earlier is that we've had technologies and we've also had the virtualness of say drug discovery so the idea that that uh an institution in the midwest let's just call out for a moment notre dame notre dame has an excellent biochemistry department and they have some of the best expertise and a particular type of a neurodegenerative disease uh that's uh that's in the pediatric setting those ideas will get recognized very quickly now the difficulty for the the community surrounding that the university in that setting is that there isn't much of an infrastructure to support advancing those ideas but because of this virtualness that we now have we can engage our thought leaders virtually in person or for using technology but more importantly we can deploy a development plan across a variety of the best places cross that are capable of taking on the individual steps that are required at least in my field in drug discovery and development so so you're we're getting more ideas and and i try to uh it kind of goes to bobby's point i i i want to make sure that i'm i'm not confusing uh regional economic development with entrepreneurship and company creation the ideas will come from across the country but where they're deployed is going to really depend on where the human resources and the expertise uh exists so that may be in new jersey it may be in upstate new york or it may be uh in chicago and i think one thing that we've alluded to but haven't really focused on that contributes to all of this is density right like one success free to second success which breeds a third and the fourth and these things happen exponentially so you know boston is a great example of you know healthcare density but you know there are you know emerging examples of that same type of success in other areas uh to give a shout out to wisconsin you know all the work that was discovered around vitamin d in madison um in ohio in columbus there's a lot of advancement taking place in gene therapy a lot of success around that so as you look around the country people talent and capital tend to coalesce around density of competitive advantage and then you grow that competitive advantage in whatever sector that is in that location um i i think an interesting question would be that in this new world of uh working remotely and and being able to do so many things virtually can the country become one big dense area itself can you simply have density of network and that be sufficient because capital is becoming increasingly fluid like i think that might be something worth exploring and it's probably critical in order to continue to drive inclusion in this space i was talking recently with a coastal vc we were talking about quantum and i was asking him about the chicago has this chicago quantum exchange which is university of chicago led a bunch of midwest universities and i said to him what do you think of that and he said well i don't think anything of it if it were in boston i would know what all the use cases were i'd know that it would be life sciences use cases i'd know the people who'd be working on them i'd know what they the midwest is one big blob to me i don't know what anybody's good at anywhere what do you guys think of that i think there's also um i think that's well on one hand i almost it's offensive and somewhat of an ignorant comment because it's someone that's not really done any research um but on the other hand i think if you know for louisville and in kentucky and indiana one of the things we've looked around is you know it's it's basic you know asset mapping like in our region if you think about like we've got to get more specific around how we define our strengths as well so like i think governor beshear right now is big on ag tech and making us innovative around ag tech we actually had the first in the nation accelerator on agriculture four years running um and i think one of the reasons it's not running anymore is because there was a lack of focus around what within agriculture are we specifically doing uh but what we have is we have two of the top ten engineering schools in the country in our region purdue and rose holman uh in kentucky alone we have 83 percent of farms are still small shareholder farms because of tobacco and the ability for a small farmer to make a good wage and when you compare that to india where 80 of farms are still small shareholder farms how do we actually make it more successful for businesses to for for these businesses these small farms to be successful if we can do it in kentucky we can do it in india and so then i just want to push back on that a little what i see when i look across the middle of the country i i can think of two um areas that i think have really defined themselves one is current one is uh pittsburgh with carnegie mellon and with robotics and and the proof of that is uber putting a big facility there a lot of institutes bring up and the other is wichita with that aerospace institute you can see that all the big aerospace companies are coming because of it but you know it to what else is defined in the middle of the country you know because you define it by having all that stuff coming around it right well you do but i think you've got to start like so for instance we've been doing a lot of work around agriculture for a long time and what you're starting to see are companies that are co-locating because they see those those asset values so for example in kentucky memphis is right across the border and they have the fedex port in louisville we've got the ups world port and in northern kentucky we've got the amazon port so when you think about it it's like logistics so then if we're thinking about agriculture and we want to narrow and really refine it uh it's logistics supply chain management related to agriculture so that's why app harvest for example that just ipo'd and as a rise of the rest portfolio company is in moorhead kentucky building massive greenhouses so i think you start to see that st louis you see monsanto and you know even in minnesota so you start to see some food densities or seed derivation densities so i think you've got to figure out what are those assets within the region and how do we build density around that how do we leverage that so that we can create the wichita's uh and attract some of that anyone else know of it i mean that's part of the problem is it's not very defined what those assets are in in the middle of the country right well i think generally speaking nationally this is a relatively new topic right people have to understand silicon valley is you know 50 some odd years old and a lot of other regions of the country are just awakening to the possibility of um [Music] you know high growth entrepreneurship and technology as something that you didn't spray embraced in order to transform its local economy and so people are increasingly saying yeah why don't we have that why don't we do this and so as they learn i think they then go through the exercise of mapping their ecosystems and their geographies and so on and so forth so one of the things i'm trying to take advantage of with my you know new frontier in texas is preaching that same message to organizations like the texas medical center right that's 61 different institutions that include places like md anderson texas women's texas children's and others and and preach that same message like look all this medical and life science talent is in the same place we just need to start having a more coordinated conversation about the things we want to achieve and uh and success will follow so you know it's it's simply a matter of bringing innovation you know in the terms that we understand the people who follow venture capital uh to the rest of the world because also remember that even when silicon valley was um and on the rise it was still a fairly elitist and esoteric and little known thing right like it's it's become more popular through the rise of companies like google and facebook that have come ubiquitous in our everyday lives but before that all the major successes like genentech when it first happened we're like all off the radar and now no one no one's front page news you could make an argument that silicon valley was um has has has been built on consumer sas businesses facebook and google etc and that now that that um has been exploited in the best in the nicest way possible uh the it's time to take those tools and apply them to uh health and to industry etc and and that maybe there's a tension going on like who's gonna who's gonna own that you know is the industrial heartland going to drive the application of these new tools to the to industry or is silicon valley going to do it do do you guys see that playing out or do you have opinions about it in short yes so i'll speak on that because i saw a lot of this when i was still in ohio so the thought is that a lot of that enterprise sas related technology gets adopted and then transforms all of our legacy industries right advanced manufacturing and logistics and all the things that the heartland is known to be good at ag et cetera um [Music] because now a a pathway has been defined by those who are more specialized in software as that then permeates the people who are more sophisticated in agriculture and agronomy now they can use those tools to advance their own industries and so i think it's simply a matter of adoption and growth and and expanded understanding but it's more complicated it's more complicated to apply those tools to agriculture than to consumer business models and who does it does does the agriculture industry in the middle of the country do it or do the tech people on the coast do it that's a fun battle right i think those industries are increasingly overlapping i think people who are getting phds in agronomy are learning about various types of software and artificial intelligence it's part of their increasingly a part of their curriculum you know people who have become software engineers but grew up on the farm in indiana uh are going back home and partnering with their friends who stayed on the family farm and they're forming companies together like i think those are the trends that we have seen or there are proof points of those things happening and they just need to happen enough that they become trends and then become more obvious to people who maybe aren't studying these things on a daily basis kathleen there's a great example uh in in the field of life sciences uh the discovery uh in and around of crispr editing the ability to to manipulate genes these discoveries early on the main hubs of those discoveries were the west coast berkeley and the east coast the mit harvard community but that technology has applications across all types of biology and where where it's being applied in terms of agriculture those applications are occurring outside of berkeley when they're not in berkeley not in in the cambridge community but in the midlands so this is there where conventional ag intersects with this you know emerging life sciences field and that's that's kind of the expansion that naturally occurs so we may see just new hubs come up uh similar to what was described earlier in in memphis and across the river where hubs naturally occur and if i could i think when when zach was talking about you know the the the planning around like you know it takes time and you know silicon valley is around for 50 years i think there's a danger a lot of times there's an ideological shift that has to occur a philosophical discussion around do we want to be silicon valley i think some people do like ooh that's cool like we need the next tech hub the danger of that direction is um you get the silicon valley also which has all of its problems so you kind of joked that um that they've you know they created a lot of of problems in the bay area um and so do we want that in our community that's a conversation i hear in mid-america like is do we actually really want to replicate silicon valley and then the other side of it is should we replicate silicon valley is the other question and so i think we've got to we've got to get past that but then what zach was saying around like how do we build this we've got to actually look around and say what assets do we have and then how do we take those assets and build the type of ecosystem and what's the capital to support that ecosystem that's good and works for us in in the market that we're trying to to impact um and so i think the danger is cookie cutter in silicon valley and saying well they're doing it there and let's just chase that the danger on the policy side and at the state level for example in kentucky the only type of venture dollars that can go to companies is traditional equity and so and it's on the same terms that you see in the bay area and they want the same return as a facebook or a google and that just doesn't happen here and so we've got to have policy changes at the state level and the federal level to really allow for some innovation and capital to support these entrepreneurs and their growth bobby you're ballywick what kind of changes well i i was loving the listening to the responses here and what it reminds me of is you know to me don't box yourself in right i mean understand what you do really well i mean heard the examples about being close to ports i know i'm from arkansas northwest arkansas is known for supply chain you've got walmart headquartered there you got tyson's food headquartered there you got jb hunt trucking company headquartered there so they you know my alma mater turns out a lot of supply chain management um experts and certainly there can be innovation there but don't let that preclude you from just thinking about the ingredients of a healthy entrepreneurial ecosystem and imagine that something else could be created that you will be known for you don't have to be stuck for what you've always been known for whether it's agriculture whether it's something else if you if you get the right ideas if you get the spirit of entrepreneurship in the right place if you have capital formed if you have investors ready to deploy capital i mean a lot of things a lot of great things can happen and and what i hope is it's that general sense of we need a healthy entrepreneurial ecosystem everywhere across the country and let's see what happens that to me is what we have to to kind of think about and adopt and it's it's a lot of different places so economic development today shouldn't be what economic development was a decade ago shouldn't be about i'm gonna go recruit the you know new toyota plant come build cars here and get a thousand jobs or whatever it needs to be thinking about what can we do as a region what can we do to help foster this entrepreneurial spirit how can we bring people together to care about this what do they need to support them from a policy standpoint you get into a lot of questions either the state or the federal level you think about well we need to be talking about benefits and and being able to have people be able to change jobs and take a chance somewhere else uh in universities we need to be thinking about well why shouldn't we be encouraging professors to leave their comfortable professorship and go try to help create a company here but if they fail which there's a high likelihood they perhaps can come back let's look at tenure let's look at conflicts of interest let's look at all of the things that could be holding back an entrepreneurial spirit in different regions and in different aspects of what that ecosystem and all the players in it need to be thinking about so who should be leading that discussion what i see in the middle of the country a lot is like the fake people lead the discussion and the entrepreneurs and the successful entrepreneurs in vcs no one listens to them so how do you how do you have the right i mean there are there's a lot of innovation theater around all this how do you get the right discussion going and drive the right intention you have csis put on nice panels for a few days and you have this conversation get more people pay attention to it look if it were easy it would have already been done right it is difficult it is tough it is a lot of people having to rethink kind of their role in in what it takes it's getting a lot of people to buy into a vision it's it's governors it's state legislators it's federal policy makers i mean i'll give you an example there's a bill that was signed into law earlier this year it's called ssbci there's about to be billions of dollars sent out to states and right now treasury is trying to write rules we would have hoped that those would have already been out then states are going to make applications on what they will do with this block granted money from the federal government and in many cases to get the type of return that the program's looking at it's going to require venture type equity investing and that's going to be a shot in the arm we've been talking about you know capital formation in lots of states a lot of capital is coming from the federal government and this was done back in the obama years but it was less than 2 billion now the overall is 10 billion it's already been approved and so you know here here comes some dollars pretty soon starting next year and so states and governors and economic development commissions and others are going to have to think about how do we deploy this in the in the best way how can this help our entrepreneurial ecosystem here in our state get more developed so i've heard a lot of the preliminary discussions about this and i've seen the way a lot of states have deployed that money in the past i realize i'm asking a certain audience but what is the best way for states to deal with that money i mean for me it's easy it's making sure that it has a venture capital type equity-based model to deploy there are also provisions in there that are have some reserves for underrepresented minorities being able to get in here so we need more check writers well so the one of the questions there is you know there are a lot of variations of venture capital model and is it better you know in wisconsin for example we have something called the badger fund of funds which was a uh one of our successful vcs in the state had this vision of we need to grow our own venture capitalists so he started this thing he got 25 million from the state there are now five new funds with new managers they in their 30s and 40s came from you know one was recruited from wall street one was working at a money management firm here etc should states think about that do they need to grow their own vcs should they invest in vc funds that'll put an office in the state uh you know there are a lot of ways to do it and there are a lot of state bureaucrats who don't know much about venture capital the answer is all the above and uh we're actually us on the angel capital association are going to be participating in a webinar for state folks just next week to help them understand and to learn there were a lot of learnings from the original ssbci program from years ago there was a significant report written at the end of it so there's a lot for folks to learn about what worked and what didn't work and where do states where can they people that's in states learn about that how do they get that information to attend i don't have the answer off top of my head but i will certainly look for that awesome um let's switch to you know i know one of the other things we all wanted to talk about is kind of um creative ways to fund companies and you know there there's traditional venture capital but you've pointed out very few companies get that but uh bryce why don't you start you've got a partnership with we funder why don't you tell us about that yeah so we funder uh steve mentioned at the jobs act and so jobs act kind of loosened um what was permissible for investment into startups and initially you can invest up to a million dollars through crowdfunded equity so platforms like we funder or republic uh kind of popped up recently in april though there was an adjustment that now startups can raise up to five million dollars uh through crowdfunded equity um which is which is not insignificant i mean a million dollars is still kind of like an idea stage company maybe no revenue five million dollars is pretty significant and we've already seen really interesting things like uh mercury which closed on a series b 100 million dollars led by andre from horowitz that opened up five million dollars on we funder um to allow their customers to invest and so it's an interesting way to kind of everybody wins the community can invest the startup's able to access capital and so it democratizes access to capital and it democratizes the ability for people to get involved in a game of investing and so mercury was over subscribed they raised seven million dollars on their five million dollars target in one hour as one example and so what we've done in louisville is we try to take some of that and we've created the first in the nation uh match fund to try to incentivize adoption of new ways of deploying capital uh and so if you're raising um on we funder will match your first twenty thousand dollars on whatever terms you set as an entrepreneur and now we've we went from zero companies aware of or using crowdfunded equity to now um a six in the last uh 12 months of have raised we who's the we that's matching uh we raised a regional uh investment fund that kind of is is it's a strategy that's across the spectrum everything from first dollar initiative for black and brown founders in louisville to uh patient debt financing for small businesses all the way up through to traditional equity it's about a 15 million regional strategy called render capital and so trying to look at ways to bring different types of capital to the table and incentivize other partners how do we get banks re-engaged that are not have historically kind of retracted from startups um so uh because i think that's the other thing is entrepreneurs start at different places they don't just build a company and go out and raise venture uh an example there's a company in louisville their first dollar was a kiva loan at zero percent and they literally last year in the last 12 months closed on three million dollars of venture and so i think as we think about building driving uh whole entrepreneurial ecosystems um we've got to look at kind of the continuum of capital to support the growth let me push back a little not because i disagree with you just because for the sake of argument that this badger funds that i mentioned is very investor friendly and and that's the complaint that a lot of the entrepreneurs have that you know it's focused completely on roi and investors you know have a really good shot at great returns um and that will probably draw in more investors right the kinds of things you're talking about might not be as focused on roi and and then what does that do to your ecosystem i mean isn't this all about making money in the end for the people you want to put money in i think it's starting with what's the expectation of capital and so within render as a strategy we have we have multiple different vehicles that have different expectations of capital and so we try to be as honest as possible at what the goal of that capital is and then the type of entrepreneur or type of company that's going to support and so i think as an ecosystem we've got to then build a pretty robust stack of capital to support entrepreneurs and that's going to include below market lending that banks aren't doing and so how do we create that pool of capital that might be a program-related investment from one of these endowments in the region that you know one percent or even zero percent return is better than a charitable contribution that gets them no return so is the negative return isn't the concern that like i i was looking the other day at renaissance funds in michigan which you know get corporations to all put money in and then they run demo days and bring in outside funds um so they started they're on their fourth fund they just raised their fourth fund their first was 40 million they kept going up to i think 81 and now the most recent one was 79 and you know i used to be a reporter whenever you see that a fund doesn't raise as much the next time you figure they have bad performance so don't you run the risk of these investors kind of um you know losing them by attrition over time if you don't have great returns yeah and that's where i think it it becomes somewhat of a marketing challenge to be honest because render capital is multiple types of capital within one one one office so to speak and so what we're working on right now is how do we actually get really thoughtful about articulating this is our traditional equity fund within our regional strategy this is our below market lending fund this is our this is our venture debt strategy and so then we can go and have you know conversations that are apples to apples with both the investors that are open to those types of returns and the entrepreneurs uh and so i think you know the pie in this guy would be that we could create a strategy that's going to support an entrepreneur across their entire journey and that that's just not uh that's not possible because the blended return is is something that's not uh gonna attract the capital to to grow and scale so what do you guys think of this can you build an ecosystem long term with those kind of strategies i think i think the part of bryce's uh point it depends upon how honest you are about setting the expectations and so um this is one of the topics that often comes up when we talk about being inclusive in venture capital and and tech entrepreneurship and including women including minorities suddenly the conversation shifts like oh well you know it's more like philanthropy which is kind of giving everybody a chance it's like well no like you know certain communities certain groups of people have been excluded from uh from capital and other you know opportunities purely based on you know not being in a certain certain circle or not going to stanford or whatever the case may be and what the data has shown overwhelmingly is that when these people with the same grit same educational opportunities etc etc get an equal shot to start a business grow a business because they're funded and they're supported by their ecosystem they have the same if not greater success right we know that more diverse uh management teams yield greater results you know specifically due to the fact that they've got women on them and minorities on them etc etc so um managing the expectations as to and making sure that you're still investing in people who have solid business plans and or in making sure that they have training to develop a good business plan or whatever the case may be you know that's what underpins the success and or de-risk the investment opportunity for your capital and so as long as you're going in with that explicit strategy that you're expecting 10 returns as opposed to 30 returns and i think everything works out so just to pick at this because you know that's my background picking it thing yeah okay but but is that that seems different to me from a strategy to win a strategy to like build deep tech startups and have um have a focus like we were talking about earlier that competes globally like i'm not saying that's a bad thing doing all that stuff i'm just saying if you wanna if we want the middle of the country to compete globally doesn't it have to be like roi focused and and figuring out where the strengths are and all that stuff well everyone's got a different return profile that they're looking for right like real estate doesn't expect the same as venture capital which doesn't expect the same as a bank so um yeah i think you get in where you're fit in you stay in your lane and as long as if you decide my lane is going to be venture capital and i want genuine venture returns then that's what you focus on but you still make sure that you are giving all of the good ideas within that bucket of opportunity a fair shake to earn those dollars kathleen let me let me pick up on something that i think is inherent your question and you're talking about the terms and you said something earlier about kind of investor friendly terms and things like that i will say that there is i have witnessed a conversation within our industry people that were on the coast that actually ended up moving to the middle of the country and raising funds and investing there brought term sheets that were they were used to on the coast and on the coast to it's such a competitive environment many times you have to have very founder portfolio company friendly terms in order to to win the deal right to get into the entrepreneur or the idea that you really want to get into and i've had this question to some of the folks i meet with the mill the country and they're mad that you know oh i wish we had more cap and all that stuff and i said well have you looked at yourself in the mirror are you you you complained to me on one hand that entrepreneurs run to the coast to get money yet isn't it evident that sometimes your terms are less founder-friendly than the ones that you're mad that they're going to so you have to sort of be honest with yourself about some of those terms and i think that's a healthy conversation to have at the same time i get your point that at the end of the day if you're going to continue to have capital come in there has to be some expectation and i think what you know bryce and zach are talking about is as long as you're transparent about what those expectations are and understand you know kind of what we can do i mean i bet if steve we're still on this he would talk about i think he did mention in talking to john that there there is a misunderstanding sometimes that there aren't great returns in companies off the coast because the cost for those companies tends to be a lot lower for the talent and other stuff and so you know i think there's a lot of misperceptions and biases that are built in that you know we all need to do a better job of of kind of rooting out and helping with data helping with understanding um you know we now just in terms of some stuff zach was talking about for black and brown and others i mean we're getting a lot more data now with our human capital survey to understand what's happening in the industry and we've done this now every two years for the last six years and we're making progress in some areas and we're not making progress in other areas one of the learnings from this has been that when firms are intentional about being more diverse and about recognizing the opportunity to have diverse teams making better decisions having better financial outcomes then they then the data follows and so intentionality is very important here by everybody in the ecosystem so there's a there's a one of these badger funds i'm in milwaukee and one of them that recently closed um is run by an african-american woman engineering background used to be at a big company and she was able to raise money from the greater milwaukee foundation which has never put money into venture before so it's interesting i think part of it was that this was this diversity opportunity but she's totally roi focused so maybe that's the best of both worlds i don't know i just that my frustration in this discussion is you know the these big pension funds and all this money in the middle of the country for the last 10 years i'd say there have been discussions about um putting money into different types of vehicles and they still don't do it they still just go to the coasts where the returns are the best so how can you argue that i mean it seems like that's what they they go after those returns so don't you have to have them in the middle of the country to get those investors or can you change their minds somehow i think you do have to have it but i i i think it's a false assumption that you can't get great returns outside the coast kathleen we touched earlier on the entrepreneurial risk-taking culture and uh one possible solution has been and we're trying this in some of our academic collaborations reducing the cost of failure so with each idea and you think about what universities do well at least in life sciences and human health they identify novel biology it's a novel is high risk it's novel it's just discovered we don't really know what it means or they discover better ways different ways novel ways to target known targets validated targets sounds less risky but it's just the same risk these are all still very high risk if you look statistically you know at this stage in the in the university setting if this were advanced into some kind of a drugging activity it's about a two percent chance at that stage that it's going to actually work so if we think about building companies and the cost of building all this stuff we have a lot of expense with a lot of failure what if we thought about ways that we could reduce the cost of failure and you know there's no doubt the universities have lots of discoveries discovery substrate but if we developed a mechanism that allowed us to exploit those discoveries and do it in a highly leveraged way so you build and you just constantly bring it through this professional mechanism that can de-risk the program to the point where it can now stand on its own the odds of it of it failure uh goes from 98 to 60 you know we'll just imagine that these are major steps that we have within our possession today to to help improve the opportunities for wherever discoveries occur can we reduce that cost of failure that's a great point i think to piggyback the other thing is i think it's good to ask hard questions and say could we get better at this i think some of the some of the limitations i think we forget that venture capital is relatively new i mean and so how do we begin to question like are the term sheets exclusive how do we re-imagine what we think about in structuring this and and to to to evaluate saying like just the transparency between the investors and the entrepreneurs so that we all kind of are going into it eyes wide open but i also think we've got to ask some societal questions around the issues of private debt in america and the impacts on on people regular people's ability to start and take risk because of student debt or other private debt that's inhibiting their ability to take that risk or child care um you know the age of entrepreneurs is going up and so what are we doing to support entrepreneurs that might have children at home and providing these services early childhood education all of those are part of the story um and those are challenges that entrepreneurs face as they're trying to build and scale so i nominate bryce to be the middle of the country engineer to improve on silicon valley are you up for the challenge bruce i'm not sure i need your help you can form a team you just have to uh we had a really interesting question in the q a it was it's from lisa lorenzen and she is actually when we were talking about areas of expertise in the midwest she was talking about the animal health corridor in the kansas city area but one of the things she said is there's a lot going on in the midwest but it's hard to get anyone to listen even when you talk what do you think i couldn't agree more i mean it it there's so much noise out there and and there's uh you gotta try to break through and there are i i get to hear of examples every day from our members and some amazing opportunities we you know we've heard several on this panel today and and from the conversation with c case about what's happening in different parts of the country and it does need more publicity it does need more recognition because i think that's when you start to get these players of this ecosystem that you're trying to build to see the opportunity they have to be able to see something a lot of people have to be able to see something they can't just hear about it they have to see the success of something going on in their region which helped them imagine what could be and and so many players have to be able to see that to create that environment so that it just breeds more and more success that's part of the reason why the three epicenters of venture continue to do well because they have so many people that can see it on a day-to-day basis from their neighbors from their friends from their local press and it just feeds on itself and you need that you know positive spiral of innovation and encouragement of each player in these ecosystems i think you could argue those centers are have become almost national media markets too and we don't have those in the middle of the country you do but i i really you know a good story still a good story and i think there are a lot of really good stories out there and and we need help telling them do you think we should make a rule that every um coastal panel that happens should have a middle of the country person on it and should we call anderson cooper and ask him to like kind of you know switch it up a little bit sure who's going to make the call bryce i'm always in d all of the above right i mean because because there's no one answer to a lot of these challenges that we're all sort of identifying and we're we're thinking and talking about what could help these regions do better i i think it's all got to be all the above and i think you know it we don't know what the thoughts that are going to connect to have one region stand out more than it is today let's try it all so one of the reasons we're talking oh go ahead it's a great question and only thing i was going to throw out is because there's been a void i am also super impressed by just the scrappiness of people in the midwest to just kind of try to fill that void there's a middle tech podcast in kentucky that is really growing steam so some new media outlets elizabeth mcbride who's been featured in wall street journal in new york times and forbes she just started a new publication called the times of entrepreneurship uh to really highlight what's happening in mid-america so i think some of it is how do we get backing behind some of those efforts um to to really elevate these stories so that maybe those stories that are reposted in in the national media markets in a way that really does start to do that i was a reporter at the milwaukee journal sentinel and um my sister lives in chicago and one day she called me and she said oh you know john smith from dow jones says hi and i said who's that she said oh he said i saw him at a party he says he knows you i said i don't know that guy well it turned out what those people do is they sit and read uh local media outlets so he knew me because he was reading all my stories so you're right you get those stories out and they get picked up nationally yeah uh i'm just looking at our q a and um you know research triangle um there's jeffrey alexander who's with the research triangle institute is talking about you know how long it took to grow research triangle and can you build new centers he's asking in less than two decades let's hope so let me throw in one of the reasons we're doing this is because the federal government is considering putting big amounts of money into is it 10 now regional centers a billion dollars each maybe it was i don't bobby you probably know what what would you do if you uh you know uh louisville i think is interested in this i louisville probably can't absorb a billion dollars what would you do what are your recommendations for these centers if they get this billion dollars what what what are some of your best ideas for how they should go about managing it i should say madison wisconsin is another area in my neck of the woods trying to get one of these but none of them none of us have chuck schumer's right yeah i think louisville's interesting one of the things i think would be really interesting for louisville is uh trying to be a first in the nation model for a bi-state cooperation you talk to you look at the data and where there's a bi-state zone business doesn't see state boundaries there's 1.3 million people in global msa 30 of that lives in southern indiana southern indiana's three townships that together would be the third largest municipality in the state of indiana and yet we get ignored by indianapolis because we're not indeed indianapolis we're not west lafayette we're not notre dame uh and so they just kind of hand it off to kentucky well that creates a lot of problems when it comes to innovation and and support uh through investment and you can look at the latest data in indiana for example not a single dollar through their state-funded investment funds went to southern indiana and it's because they've got enough density in indianapolis and so i think for louisville a lot of that that money should be focused on building a bi-state kind of regional truly regional strategy that is independent of state boundaries because we're better together many of the the strengths that kentucky has related to agriculture and logistics and supply chain exist in indiana as well and so how can we how can we look at the assets between those two states or three states if we lumped in ohio and come up with a really interesting uh innovative solution i i have a growing appreciation for bobby's political abilities bobby how would you get three states to work together oh wow i guess it depends on the states right um could we enroll you in trying to make that happen would you help us yeah well you got to talk to my board and see if they would you know let me use my non-free time to do that i think bryce is willing to talk to your board okay uh i i do think there's a lot to that we we do have to think kind of regionally and and as you said the if endless frontier becomes law and these regional tech centers come together now some of it if you look at the legislation a lot of it is has a focus around areas that we want to see the us lead in so it's not all just geography focused sometimes it yeah i mean some of it speaks to we need we need to understand ai we need to understand machine learning we need to understand quantum computing we need to understand these things and that is going to take you know a coalition of many institutions and other players that are on the leading edge of the different ideas to work together sometimes it could be regionally and geographically sometimes it could be from an expertise standpoint and and where the expertise is and how we can use this as a way to help the country kind of lead in so many areas um you raise a great point that when you look at china what they do is they say you know this city is doing a.i and then all the ai ends up in that city and we don't you know have that kind of we don't we don't force our cities to just spring up and and stuff like they do in china you're right um so it is it's harder when you don't have um a party in control of an entire country so it it's going to be harder i i do believe that it's possible i think you already see you know consortiums of leading universities in different areas bill's talked a lot about life sciences i mean there's a lot of of working together among institutions in different areas with crispr others i mean there's a lot that happens and a lot is going to need to happen and a lot is going to have a great opportunity if the endless frontier act um does become law it's got a different name now but that's that's what we're hoping for well and let's not let's remember two of the original sponsors on the endless frontier act were representative gallagher r wisconsin no relation uh and uh senator young from indiana so there there's there are midwestern fingerprints on it right absolutely bill you're trying to kind of address that by um by this i don't know how to almost putting together companies virtually right and pulling expertise out of different universities yeah well one of the methods that we're using to deploy capital uh is to engage universities uh at a very vulnerable time in their discoveries and this is usually around that moment where uh funding for a particular idea that's been funded by the federal government through nih grants uh no longer is uh eligible for that funding and yet it's still too early for the for the uh conventional venture or for industry for that matter so you know these ideas we call this this area the valley of death people refer to this in life sciences before lots of good ideas too few people too little capital into little patients so rather than try to solve for all these individually we decided to create some internal capabilities for drug discovery we created a group called 3dc which is a deerfield discovery development corp uh it's a group of very very experienced drug discovery professionals in gene therapy and small molecule antibody peptide therapy we partner with the university and we partner in a very formal way with a couple very unique distinctions um real real value creation i'm talking about monetary value creation is only going to occur if there's human human benefit true real impactful human benefit so things need to work we need to be able to fund an idea completely through the life cycle so it's a little bit different from a conventional where a venture firm will start an idea and then start to de-risk their investment by syndicating it out we're going to guarantee that the program that in the universities continue to receive funding as long as the scientific merit the development tractability continues to support that all the way through the the exercise and we're also going to create we'll create a model that allows the institutions to participate in the value creation of the equity that ultimately comes out of these ideas and i point to a couple of examples notably at the university of pennsylvania children's hospital so children's hospital of philadelphia some very groundbreaking work occurred in in the field of gene therapy for back of the eye led by dr katherine high and they created a company by the name of spark therapeutic spark was eventually acquired and it was a very profitable payday but children's hospital was able to hold on to roughly 10 of their equity stake and and that translated to about 600 million dollars coming back to children's hospital so we had a we had a human health uh transformative event we also had an economic event for children's hospital it was really great so we're trying to do this at scale and in a method in the process that getting back to my earlier comments and where failure rates are really high uh and you want to reduce the cost of failure so rather than creating all these silos we create a mechanism and then we partner with the university in a formal way it's still it's still an experiment uh so we'll we'll know in about 10 years how well we did because frankly that's the the time frame that life science drug discovery needs to be thinking of 10 years i bet you have a good read on who's good at what though uh well we we we know that there's a lot of great discovery and that doesn't uh exclusively reside in boston and south san francisco uh you know some of the best discoveries in human medicine uh washington university uh illinois chicago and these are not the con conventional names that you read about that also where venture capital hubs are situated and yet they've made a major financial impact and a human health impact well i try and get zach to talk again but before i do that there's a question um bobby people are asking about that event you're having next week do you have the information about it it's not it's not my event something we're trying to help on i don't have the information uh i will try to get it and share it with folks at csis i'm sorry i don't have it right so so anybody who's interested can go to the csis people and get the information but zach you must have thoughts about the last few minutes of conversation i thought i've been um kind of noodling on it and i i was trying to map out in my mind no you look pensive i was trying to map on my mind how long it took for research triangle part to to really become renowned and uh how long it took for austin to really become known as a a tech hub and it's still probably on the order of 15 years or if we want to give some more grace we could say 10 to 20. but i don't necessarily know that that's a bad thing because i think organic growth and the attraction of you know people to a new city and and for you know culture to change and all that sort of stuff to happen takes a while i don't know you can force it in two to five years well but what if you get a billion dollars well you might change you could change my mind you just give it to me and we'll see what happens well but i mean it could work and it could not work right so what do you do with it what would you do with houston got a billion dollars tomorrow i think you either shore up or create whatever is missing in your particular region right so we talked about the importance of academia for talent and uh research institutions um and uh you know successful companies right and customers and sort of creating opportunity for those things to collide uh and so you know i think you know innovation hubs innovation centers like you know large complexes of buildings where people can come together and you know share ideas hold pitch events have elementary students come have research labs all in one space i think those are uh additive to an ecosystem i think large sophisticated you know medical research centers are fairly additive um yeah and i think large research institutions within academia i think that's where all these things start and then organically your you know best and brightest students usually branch out start a company higher from within higher you know as they grow they hire more experienced talent from established companies in the region and these things feed on themselves and as they exit you know the top 15 20 to 50 however many people then go off and spawn new things um i think what this panel has proven is you know if you're going to get a billion dollars tomorrow bring vcs into the conversation um there is one more question that we've only got a couple minutes but someone's asking can we expound a little on the billion dollar thing that i've referred to and and i'm gonna turn this to bobby but i do know that uh there's a brookings institution paper that kind of started the whole thing about putting a billion dollars into these markets and there's an mit group is it called jump start america that has also and they both have lists of who they think should get the billion dollars but bobby why don't you um provide more context around that well there's one that's already passed congress and there's one that's been considered by congress so there's a couple of different things what i was referring to earlier is something called ssbci state small business credit initiative you can go to the treasury website and search for ssbci you can get information about that years ago there was a pot of money that was distributed to the state states did stuff with it some venture some different they all get to decide exactly what they're going to do and how they're going to do it and they submit that to treasury before they get the block grant in march of this year congress passed almost 10 billion dollars towards this program not all of it goes for the same thing but it will be block granted out to the state so capital is likely to come to states over the next several years that can help different areas of the country jumpstart a lot of this stuff then the other thing that we're talking about and steve case mentioned it in his comments is the endless frontier act where it's the idea of the regional centers and looking at you know different types of technology and making sure that we in the u.s jumpstart the r d that we used to spend a lot more of our gdp towards r d than we do today and so this is a way to try to you know catch up from a generation of reduced r d spending as a country to institutions of higher learning around areas that we want to not cede to china or other countries around the world we want to keep a innovative global leader position yeah and that is something that is that yours act turned into the us what is it called competitiveness innovation act correct which has passed the senate and now it's still in the house it has not become law yet and so that is the people referring to it as the china bill people it has lots of different names we had all of our uh you know advocacy when it was called the endless frontier exo i continue to call it by its original name and that's where as you said on a bipartisan basis a lot of people came together and said this is very important for the country to stay competitive so two different things ssbci's about 10 billion this is much bigger than that it's just not yet passed so you guys this was an awesome conversation thank you for all your ideas thank you for putting up with my popes and uh let's uh do this again sometime because i and and i think the takeaway though the big takeaway is you know if you're grappling with this in the middle of the country you gotta have vcs involved in this conversation you guys know a lot about it so thank you so much for sharing your knowledge thank you for having us thank you thank you [Music] you

Channel: Center for Strategic & International Studies

Views: 759

Rating: 4.8400002 out of 5

Keywords: Center for Strategic and International Studies, CSIS, bipartisan, policy, foreign relations, national security, think tank, politics, venture capital, economics, united states economics, steve case

Id: VUVUC43tmKQ

Length: 91min 39sec (5499 seconds)

Published: Thu Sep 16 2021