[malchow]

Not a great article, and I think it misses the one big thing that is genuinely revolutionary about the Silicon Valley form of entrepreneurship. And that's that venture-backed entrepreneurial companies are, by and large, the new Research & Development Departments. Acquihires can in fact be great deals for VCs, founders, employees, and acquirers. Many companies are curtailing their own research agendas and relying upon smart technology investments to position them for the 5-10-15 year time horizon. I suspect we will ultimately consider this a vastly more efficient form of capital allocation than the old-fashioned "R&D Department" at IBM, GE, DuPont, AT&T, etc.

[TTPrograms]

Which Silicon Valley companies are pursuing the high risk R&D these days? I can only think of a few that are building high risk hardware (Theranos, some of the small photonics shops), and even many of those have proof-of-concepts already built in academia. Many of the medtech startups I've seen revolve around algorithms, which is kind of hard to compare in terms of risk profile to Bell Labs putting a bunch of researchers in a room to figure out how semiconductors work or needing a couple million to build a prototype.

When I think of R&D departments these day I think of non-silicon/non-electronic computing, lab-on-a-chip, and maybe some other medtech stuff. I'm under the impression that companies doing these sorts of things are currently a minority of "Silicon Valley entreprenuership".

[malchow]

Others here can better answer this than me. All I would say is that "5%-better-marketing-dashboard-optmization-platform" type companies get far more attention from the tech press than they probably merit. There is a lot of high risk R&D going on here: medicine, medical devices, transport, semis, crypto, and insurance, to name a few disparate areas.

[demian]

By which metric would you measure this "efficiency"?

The difference between VC-backed-startups vs traditional R&D departments is that the first one seems more short sighted, and with a tendency towards a narrow subset of IT problems with high scalability and disruptive potential, while the second one works on a wide array of industries and applications where the parent company already has the benefits of economies of scale.

[malchow]

"By which metric would you measure this "efficiency"?"

Good question. A few ideas:

-- ROIC -- Competitive advantage versus peers (hard to measure, but one attempt: http://web.mit.edu/is08/pdf/Parrish.pdf) -- Share of market -- Enlargement of market -- Quality of hiring versus peers

These are the things that can make a company last for centuries. The hunch I was stating -- though admittedly without a clear way to prove it yea or nay -- is that enterprises that invest in small nimble VC-backed technology companies will begin to outperform, on these measures, traditional in-house R&D departments.

[Dwolb]

I generally agree with your statement but personally I'd pull back on calling start-ups as R&D replacements. There are certainly a few start-ups taking big R&D-type gambles, but I think most people are working in some sort of technology-applied-to-old-industry role.

Therefore I'd liken start-ups to product team replacements or consulting + validation as seen from a big company's perspective.

[jsprogrammer]

What is so genuinely revolutionary about that form?

A large land owner could raise a small army and supporting farms, then join the local nobility. The land owner and his tenants could then enjoy the benefits of being part of the larger realm.