Kevin Maney writes: I read this morning about a new book by Judy Estrin, former CTO of Cisco, called Closing the Innovation Gap. In it, she apparently cites a long list of reasons why real innovation is drying up in Silicon Valley. This includes such sins as entrepreneurs starting companies with the sole purpose of flipping them to big companies like Cisco or Google, venture capitalists getting overly cautious, and too many hot new entities (like Facebook) built on years-old technologies.

As I read the story about her book on the Times' site -- admittedly, I have not seen Estrin's book itself -- I felt she was flat-out wrong. In fact, I see amazing deep technologies and ideas being developed, from Rearden Commerce to Glassdoor to NetSuite to Ning. Bad economic times are almost always good for innovation -- robbed of easy money, entrepreneurs have to hunker down and come up with something special. So I have hope for another blitz of breakthroughs in coming years.

I wondered if it was just me thinking this way. So I asked Zach Nelson, CEO of NetSuite, and David Sifry, founder of Technorati, what they're thoughts are. Here's what they told me:

From Zach:

I don't really agree with her.  Maybe that was true in the dot com era when companies were making IPO millions based on business plans, but I think if you look at our story, it's exactly the opposite.  We were founded in 1998 based on the idea of delivering SAP-like capabilities to mid-sized businesses, and providing that software as a service over the Internet.  At the time, no one believe either was possible.  We had investors who, during the next decade,  funded our operations to the tune of $125 million, significantly more than what was required to fund traditional software companies, again because of the complexity of what we were doing.  In 2007, we went public on the NYSE with a billion-dollar valuation.  That doesn't sound like a get rich scheme to me :)
 
And to say the iPod and Facebook and NetSuite were developed years ago and nothing is innovative today misses the point that overnight successes take years to develop.  The next overnight success is still in development, and hence can't be cited as innovative!
 

From David:

First off, I haven't read the book or talked to Judy, so I'm just going by what I read in the article in the NYT.  Frankly, it strikes me as end-of-cycle alarmism. There's an extraordinary amount of innovation going on in Silicon Valley (and in other parts of the
world) that isn't just built-to-flip crap.

I've never really believed in the whole model of built-to-flip, it actually seems much more risky an investment strategy than building something completely new, because:

   (a) the buyers market that's out there - one or two companies get lucky, but the other 50 companies that get funded to build and then flip will fail miserably.
   (b) there's just so much more opportunity and potential upside in green fields.

Take bioinformatics, or nanotechnology, personalized publishing,  
solar power, fuel cell technology... The list goes on and on, there's lots of fundamental research going on right alongside commercialization of the innovations.

Like Judy, I'm concerned about the reduction in research dollars into American universities, and I'm very concerned about our immigration policies post-9/11 - we once were a welcoming country for folks from all around the world - they came here, learned at the greatest universities with the best minds, and often started companies to commercialize their innovations right here. The last 7 years have seen a dramatic change in our stance towards immigrants, and that is very worrying to me.

I'm also very concerned about the state of science and engineering education in this country. There are long term issues that Judy brings up that are important structural challenges that we need to tackle as a country. But I also fundamentally believe in the USA's innovation culture and our country's deep commitment to freedom. Of course, we need to protect it and nurture it - that's our job as citizens.

Deep in someone's garage or lab, the next Google is being born, the next Facebook is being born, the next Intel is being born. We just need some time to let the business cycle ride itself out, and those great companies, born today, will flourish and thrive tomorrow.