Innovation is flourishing despite a decline in venture capital funding. Silicon Valley veteran Adeo Ressi shares his predictions for life-changing technologies looking for funding.
Google in decline. Humans colonising Mars. Electric cars in your garage. Are these investment opportunities? Or simply outrageous ideas?
Both, says Adeo Ressi, a founding member of The Funded.com, an online community of about 14,000 executives and entrepreneurs who review, rate and discuss venture capital sources worldwide. It’s Ressi’s business to keep his finger on the pulse of innovation.
“Google is already in decline,” said the Silicon Valley-based Ressi, in an interview with INSEAD Knowledge on the sidelines of the Global Entropolis conference in Singapore. “Facebook’s advertising is vastly superior today to the Google advertising system. They are losing talent to the hot start-ups in Silicon Valley. And with giant networks like Facebook and Twitter coming on to the scene without any association to Google, I think you’re going to see their supremacy threatened and in fact diminished greatly over the next five years if not sooner.”
Forecasting the next innovations
There are plenty more “big things” to come. The development of tools like Facebook Connect, a universal login courtesy of the social networking behemoth, creates a host of opportunities for companies to release products and services that accept a user’s Facebook account to log in and sign up, explained Ressi. These companies can leverage a user’s social graph to generate more opportunities in other areas like retail and publishing, for instance.
“The internet provides an infrastructure that people are using in creative and new ways,” said Ressi. “You have things like social gaming which maybe delivered through a website but is not a classic website offering. It’s more of a gaming experience but it leverages the internet and the web.”
Innovations around the grid also featured in his list of game-changers including “major innovations” in electric generation and transmission, portable power, advancements in new models of electric cars and breakthroughs in the mundane but key functions like electric metering that enables households to intelligently cycle through appliances and thereby reduce electric bills.
Ressi, who also runs The Founder Institute, a technology pre-seed incubator that identifies and nurtures entrepreneurial talent and ventures, anticipates much for online education. “Classic education has students in classrooms learning through traditional means that could already be enhanced through games and other sorts of digital interaction,” he said. "The bandwidth and access is so widespread, you don’t even need the classroom.” Of the 192 companies that have graduated from the Founder Institute, nearly 25 percent are related to either facilitating education or online education, Ressi noted.
Who will fund the new ventures?
But with as much as a 75 percent decline in venture capital funding from its glory days of 2000, what does the sector’s trends mean for entrepreneurs and new business ventures?
“There’s no question that today, the money coming in to the venture firms is at a 15-year low,” commented Ressi. “What you’re going to see over the next 18 to 24 months is a massive shrinkage in the amount of venture capital being deployed, possibly half or a quarter as much as is being deployed today. So this is the last boom period for quite some time in venture capital. And probably by late 2011, early 2012, the amount of money being invested by that group will be negligible.”
The MoneyTree Report, a quarterly study of US venture capital investments, shows US$21.8 billion in investments for 2010, the first increase in investment levels since 2007. US venture investments reached dizzying levels of close to US$100 billion during the dot com euphoria.
However the sector’s dire predicament does not spell doom for entrepreneurial activity - there’s a lot of capital in the world looking for a place to go.
Angel investors have filled some of the void and brought funding levels back up to about 80 percent of what they were in 2008, explained Ressi, but it’s not a “zero sum game” where one asset class equally compensates for the other. Classic private equity firms have stepped in, and, in some cases governments that want to spawn innovation and entrepreneurship in a region have come in and funded new ventures.
“There’s no shortage of money to fund the companies,” he said. “It’s just a matter of who is going to be the white knight as the venture capital asset class declines to come in and fill the void.”
As for Mars, the 38-year old Ressi predicts that humanity will colonise Mars during his lifetime through some sort of public-private partnership. “It’s the single most important thing that humanity can do with the current state of technology,” he said in panel remarks at Global Entropolis. Ressi sits on the board of the X PRIZE Foundation that awarded a US$10 million prize for the first private spacecraft to successfully reach 100 kilometers in space, twice within two weeks. The Foundation’s other areas of highly-incentivised prizes include genomics, automotive efficiency and private space exploration.
“Entrepreneurship is never easy but I believe that as long as there are great companies being made in the world, they will find the funding to build and grow.”
This article was written by Mrinalini Reddy based on an interview for INSEAD Knowledge.