Federal Government funding is critical to early stage technology
development, providing important cost-sharing funds.1
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“Early
stage technology development” refers to
the phase between invention and innovation; otherwise
popularly known as the “Valley
of Death” or
the “Darwinian Sea.” During this
phase, the product specifications appropriate
to an identified market are demonstrated, and
production processes are reduced to practice
and defined. |
- The Federal Government funds 21 to 25 percent of civilian
early stage technology development or $1.4 to $7.3 billion
annually, depending on assumptions made (see Figure 1).2
Figure 1. Funding Sources for Early Stage Technology Development
(restrictive estimate: $5.4 billion)
Click to view large-scale version of
chart.
- The Advanced Technology Program (ATP) is an important source
of funds for civilian early stage technology development.
Individual
private equity “angel” investors,
corporations and the Federal Government are major funders
of civilian early stage technology development—not venture
capitalists, as might be commonly believed.3
- Between
$5 billion (2 percent) and $36 billion (14 percent)
of overall R&D
spending in the United States in 1998 was devoted to
early stage technology development.
- Most
R&D funding
is dedicated to either very risky basic research or incremental,
low risk product development. That leaves a funding gap
for early stage technology development where risks are
still high, but if technology development is successful,
the applications may be broad.
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1These
findings are taken from Branscomb and Auerswald’s report
to ATP, Between
Invention and Innovation: An Analysis of the Funding for
Early Stage Technology Development. Branscomb
and Auerswald created two models based on different interpretations
of their definition of early stage technology development—one
with very restrictive estimates and the other with more inclusive
estimates (see Figure 1).
2 The proportional distribution across the main sources
of early stage technology development funding is similar
regardless of the use of restrictive or inclusive definitions.
3 Most venture capitalist
money goes into product development and business development,
as opposed to early stage technology development.
Factsheet 1.C3 (September 2002)
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