Change, New Technology, and the Role of Venture Capital
By Cynthia Cannady
May 2024
As we face the climate crisis, the human species must make an abrupt change, perhaps the greatest change in human history: from global dependency on fossil fuels that cause greenhouse gas emissions (GHGs) to a net zero-carbon world. This change must happen fast, since the international scientific consensus is that we have only a limited time before we reach a tipping point when damage to the Earth’s ecosystem will be irreversible.
Scientists agree it’s not too late to turn things around, but new technologies will be critical to the success of this transition, and to help us adapt to changes that are irreversible. Examples include:
- Renewable energy technologies that can generate electricity.
- Storage technologies that make it possible to employ intermittent power sources.
- New materials to replace petroleum-based materials.
- Sustainable aviation fuels.
- Foods and agricultural products that will help reduce GHGs.
Success depends upon two important variables: funding and multiparty collaboration. And funding is where venture capital comes in.
New technology requires funding at three stages: research (R), development (D) and commercialization (C). Historically, the United States government has given funding at the research stage by helping to finance basic and applied science at universities. The seminal Bayh-Dole Act provides the legal framework for technology transfer (intellectual property licensing contracts) from these federally funded research institutions to the private sector — handing off the innovation baton from the R stage in academia to the D stage in startups and large companies. The C stage kicks in when the technology is ready for distribution and marketing. At this point, large companies often take over, either through licensing and collaboration contracts or acquisition.
A good venture capital firm can spell the difference between technological survival and abandonment.
Government funding is still available at the D stage for Small Business Innovation Research and other grants. However, as technologies are still not ready for commercialization at this point and may have a higher risk, venture capital is often the primary funder. Venture capital is well-suited to evaluate and manage intellectual property assets and risk at the D stage.
Without venture capital, the D stage is precarious for technology companies whose most valuable assets are intangible intellectual property and human capital. That is why the term “Valley of Death” has become a common name for the long slog through the D stage.
Venture capital firms can provide more than funds during the D stage — they also offer financial, accounting, IP and marketing advice, as well as moral support. A good venture capital firm can spell the difference between technological survival and abandonment, with unused IP languishing on the “valley” floor, unable to continue to the C stage.
It is no exaggeration to say that our survival depends on new technologies. And new technologies depend on venture capital.
Cynthia Cannady is a member of Endurance28’s advisory board, as well as the California Bar, and is a founder of IP*SEVA, an international network of IP professionals providing services to sustainable energy ventures.