The Valley of Death is a much-suffered phenomenon in the financing of early-stage science-based start-ups: ideas too late for basic research funding, but too early for venture or industrial financing. Less talked about, but just as real and painful, is a related Talent Valley of Death. Critical to the viability of such early-stage ventures is attracting a founding CEO who can articulate a compelling and fundable vision for the concept.
But the difficulty of finding such talent and connecting it to promising early stage ventures is as frequent a failure point as early financing. Innovation geography obeys cluster economics. Start-ups, venture backers, entrepreneurs, skilled workers, service providers, and acquirers co-locate around a small number of zip codes. This creates deep labor markets for skilled workers, ready availability of expertise and resources, and collective learning. The ability to conceive and execute start-up concepts is significantly enhanced, the perceived and actual risk proportionately lowered.
But what if you are outside an innovation cluster? The geographical dispersion of basic research funds to research universities does not overlay innovation clusters. Indeed many, if not most, inventions arising from basic research are born outside of them. They are geographically marooned, potentially exciting and viable in the right hands, but much less likely even to get to the starting line.
When I was at the University of Chicago, we managed a portfolio of inventions from Prof. Susan Lindquist which we pitched aggressively to venture in the late nineties and early 2000’s, with consistent feedback that this was too early and too risky. In 2001 Dr. Lindquist moved to MIT as Director of the Whitehead Institute. Rapidly thereafter a start-up called FoldRx was founded around the portfolio and venture funded, going on to successfully develop the drug tafamidis, and to be acquired by Pfizer in 2010. The only thing that changed in this story was the zip code of the inventor.
The lens of executive search is a particularly instructive one with which to look at this founding CEO challenge. To power an effective search, 200 candidates that meet the spec might be approached, 20 might be qualified, interested, and available, and 5 may be interviewed to result in one successful hire. Such a search in Chicago might yield 2 qualified candidates. In Boston or San Francisco: 200 readily: at least a two order-of-magnitude different in talent density.
It’s not practical to use executive search for university start-ups. Among other factors, there is no money. But it speaks to a feature of the valley of death: the need for expensive resources when they are least likely to be available. And it helps quantify just how underpowered the talent search is in this situation, even if there was money and bandwidth for it.
What is the cost of this geographical mismatch? I’d warrant hundreds if not thousands of lost projects and start-ups, lives not saved or improved; swathes of wasted research dollars, wasted effort and talent, lost opportunity, lost economic value.
Small improvements could make a big difference. Basic research funding into North American universities (including some $35 billion/yr of combined NIH and NSF extramural funding) yields about 25,000 inventions per year, 16,000 patent applications, and 1000 start-ups (here). Currently enough invention “baby turtles” hatch on the beach and make it to the water to keep the innovation economy humming. But the number unnecessarily eaten by the “seagulls” of distance and isolation from resources is, I’d observe from experience, shockingly high.
So what are those outside of innovation clusters to do?
- Recognize reality. In cluster economics, the rich get richer. Build the best possible connection to cluster regions, become effective satellite feeders to them and allies with them;
- Funds and talent are attracted to critical masses of invention and opportunity: well-curated, well-articulated, accessible;
- Look for unserved niches where you can build your own cluster that can compete at a national level.