Where's the Capital To Develop New Products?

Market View

John D. Sanders, Ph.D.,

"Where's the Capital To Develop New Products?"

The amount of capital being generated by "the stock market" is enormous. In my years in investment banking, we used to reference each point on the Dow Jones as a change in value of approximately $1.5 billion on the New York Stock Exchange. Just think wit h a 3000 point increase on the Dow since 1990, that's an increase in investment capital of almost $5 trillion. Not including over-the-counter markets.

Product innovation is being generated from the combination of many factors, and technology is the b ackbone of most efforts. Computers and communications have opened new vistas for combinations of these technologies: wireless communications, the Internet, data warehousing and client-server computing are just a few of the new markets. Robotics and process controls are driving new types of manufacturing. Biotechnology developments and the changing economics of health care are increasing the momentum of medical and health products. Education and entertainment are new partners in the burgeoning developmen ts for multimedia. Finally, the true awakening of the so-called "third world countries" now also provides vast new sources of buyers into the marketplace.

But, the fuel is capital. And, the world is awash in it.

I just returned from the inaugur al CEO Summit of the National Technology Fast 500, where many of the CEOs of the fastest-growing technology companies were meeting. The innovation of their companies is truly exciting. As they spoke of the developments and the organizations that produced them, there is a true adventurous spirit for conquering new markets that infects the atmosphere. The CEO of the Number 1 company for the 1995 list (65,472% revenue growth over the preceding five-year period) spoke about his pride in seeing the "new millio naires" working late on the factory floor to meet delivery commitments of the company. Yes, millionaires are being created by the thousands in these entrepreneurial companies as stock prices have soared and companies have tapped the public markets for ca pitalÑ and they will reinvest their capital in the types of products and services that they understand and love. Mutual funds and venture capital organizations have such a positive cash flow that they are struggling to find value situations for investment .

Although the drive for quarterly earnings still is prevalent with the bigger companies, the need for innovative products and services is ever more important to compete in the global markets. Look at the changes in the telephone companies. See how the Internet is influencing product marketing. Study the partnerships and joint ventures that are being forged. These acquisitions you read about every day are also pouring capital into the pockets of the investors of innovative companies.

On the ot her hand, organizations just waiting for the federal government to sponsor R&D are being left in the wake from the dynamics of entrepreneurial activities in the large and small companies alike. The few hundred million dollars argued over about the ATP or TRP programs is a drop in the bucket compared to the capital that has flowed from the equity markets during the time these programs have been political footballs for the Congress and Administration. Any technologies that have stayed on the shelf awaiting the government to "do something" are already behind the power curve.

If you're a developer of technology and you are not pounding on the doors of these new breeds of capitalists, then what are you waiting for? These market-driven, capital-rich organi zations welcome innovation and technological enhancements. But they want to do business with other comparable explorers looking for the new worlds to conquer. The buzz among those CEOs at the Fast 500 Summit can only lead to new partnerships and market c hallenges: "With what I have combined with your resourcesÑwe won't add, we will multiply."

I would appreciate comments; contact me at Technology Transfer Business magazine: phone: 703-848-2800, ext. 151; fax: 703-848-2353; InterNet: ttb@t echnews.com.

prepared for the April, 1996 Issue of the Federal Laboratory Consortium NewsLink