Innovating Through the Downturn: The View from the Nantucket Conference

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finance, insurance, and real estate rather than by the traditional cycles of production, employment, and government investment. Unrestrained credit at low prices created a huge supply of “fake money” that drove up housing prices, which led to such brilliant inventions as collateralized debt obligations, which…well, you know the rest.

Janszen said the way out is for governments to direct spending in ways that will nurture a productive economy, shrink the financial economy, and increase personal and national savings. In the ideal new “TECI” economy of the future—dominated by transportation, energy, communications, and infrastructure—there would be hefty incentives for private investment in innovation, he said. “The last thing we want to do is anything to put the golden goose at risk—the chain of entrepreneurship from education to culture to property rights to financing to liquidity through IPOs and mergers and acquisitions,” Janszen said. Adding credibility to his whole argument is the fact that he laid out much of it in a February 2008 article in Harper’s—before the global financial markets really seized up.

In many ways, New England is in good shape to lead the recovery. Rod Brooks pointed out that between iRobot and Foster-Miller, New England has a virtual lock on the military robot business. He said Governor Deval Patrick and the Massachusetts Congressional delegation are quickly getting up to speed on the industry’s importance, and that education efforts like Dean Kamen’s FIRST Robotics competitions are helping to get young people excited about the industry. Brooks wouldn’t give details about what his own company, Heartland Robotics, is up to—but he did say that it’s working on systems that will help American workers be more productive, and that unlike iRobot, it’s “not doing anything with batteries or wheels.”

Sea plant on Siasconset Beach, Nantucket IslandThe video game industry is another regional strong point. The industry is going through tough times overall, with many small and mid-size studios closing down in the last 18 months, said Ian Lane Davis of Rockstar New England (formerly Mad Doc Software) in Andover, MA. But there are also more new gaming companies sprouting up in New England than in any other region, he said. Studios aligned with big game publishers “are growing rapidly, probably more in Boston than anywhere else,” Davis said. Brett Close, CEO of 38 Studios, agreed, citing big anchor companies like Turbine, Harmonix, and Rockstar and calling the local gaming industry “recession resistant” (“No one says recession-proof anymore,” Close added).

It takes courage to be an entrepreneur these days—but to win, you might have to bet big. While most of the Nantucket Conference focused on information-technology entrepreneurship, an excellent closing-day panel, chaired by Nick d’Arbeloff of the New England Clean Energy Council, took a sober look at the cleantech and energy sectors. Hemant Tenaja of General Catalyst said energy startups need to search for new ways to scale up. While venture investors are used to investing $100 million in return for an eventual 20 percent share of a market, he said, they’re not used to investing that much in return for a share of a fraction of a percent—which is the portion of the nation’s ethanol currently coming from cellulosic biofuel producers like GC’s own portfolio company, Mascoma.

Unfortunately, Tenaja predicted, venture funding for more innovation to solve the scale-up problem is going to be scarce throughout the rest of 2009, and it’s going to take the Department of Energy several years to staff up to the point that it’s capable of disbursing stimulus money at a worthwhile rate. What the industry therefore needs, he says, are people who can afford to make big bets. “The typical profile of the entrepreneur who comes into the space is someone who says, ‘I’ve already made enough money—now I want to go for something massive, and I’ll take that risk.’ Those are the guys who resonate with me.”

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Wade Roush is a freelance science and technology journalist and the producer and host of the podcast Soonish. Follow @soonishpodcast

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2 responses to “Innovating Through the Downturn: The View from the Nantucket Conference”

  1. Wade,

    Great recap. Glad you shared the well-written product of all that fast and furious typing you were doing–you were clearly the hardest working guy on Nantucket for those three days. (beyond the conference organizers)

    Re. your other posting on “Travels with Rhody”, I too was struck by the anachronistic display of wealth on Nantucket. I was actually glad for it, in these days of sackcloth and ashes. But the real estate prices ($750K for a single-car-garage-sized house in Sconset) still absolutely shocked me. I had no idea. I am going to be incredibly impressed by anyone who buys a house on Nantucket this decade. I thought Boston was expensive! (OK, I know I sound like a cow-girl.)