Category: Statecraft

The Information Technology and Innovation Foundation (ITIF) is led by its president and founder, Robert D. Atkinson, Washingtonian Magazine has called a “tech titan,” and it is a nonprofit think tank. “Its mission is to formulate, evaluate, and promote policy solutions that accelerate innovation and boost productivity to spur growth, opportunity, and progress.”

It’s august research publication produced recommendations on accelerating “Collaboration Between Start-Ups and Federal Agencies”

Collaboration Between Start-Ups and Federal Agencies: A Surprising Solution for Energy Innovation

The climate-tech start-ups take more “patient capital,” and this report aims to identify “approaches that help ease barriers faced by climate-tech start-ups can ultimately catalyze their role in accelerating clean energy innovation.” The report claims collaboration with federal agencies and laboratories, such as co-development and technology-licensing agreements to yield better results than their collaborations with universities or other firms, as measured by patents received and follow-on financing.

The authors also note the willingness of the policymakers and the wealth of federal research expertise, infrastructures, and technologies to mandate more effective technology transfer policies for federal agencies and laboratories. “But present practices have not fully capitalized on the synergies between start-up potential, federal resources, and the technology transfer mandate.“

Here are the summarized recommendations.

Most start-ups don’t have access to federal experts or laboratories because they lack networks and knowledge, or they confront bureaucratic barriers and high costs. Federal agencies have weak incentives to work with start-ups, with no metrics to reward collaborations and few ways to cover costs. Finally, there is a lack of coordination on climate and energy technology transfer within DOE and its laboratories and across other agencies.

Scale-up mechanisms for start-ups to collaborate with federal agencies and laboratories.

• DOE should partner with incubators to organize annual climate-tech start-up challenges involving federal agencies, industry partners, and private investors focused on specific topic areas. These peer-reviewed competitions should be fast and streamlined. Finalists should win awards to use laboratory infrastructures, and be assigned a federal expert to serve as a consistent point of contact. Such challenges would be scaled-up versions of individual lab-linked incubators and one-off programs.
• Congress should appropriate increases in funding for federal lab-linked incubator programs to scale them up. In parallel, Congress should authorize federal agencies to award grants for the creation of new lab-embedded entrepreneurship and lab-linked incubator programs. These programs would provide more innovators with access to laboratory facilities as well as expertise and mentorship. Programs such as Cyclotron Road, Chain Reaction Innovation, and IN² that work with DOE national laboratories have shown great promise.
• The DOE OTT should invest more in start-up-centered communication and convenings, building on existing models such as NREL’s Industry Growth Forum. Such convenings bring together diverse stakeholders, build awareness about federal technologies and experts, and lay the groundwork for future collaborations.
• Congress should authorize the extension and expansion of the DOE SBV program across the entire federal government. Competition for these vouchers could be administered by DOE with the participation of other relevant agencies. The vouchers should be available to any start-up or small business working on climate-tech commercialization. The SBV program can help reduce costs and red tape for start-ups and was recommended by ITIF and others before it was piloted in 2015.50
• Building on NASA’s model for start-ups, Congress should authorize agencies to waive fees for start-ups that seek to license federal clean energy technologies.

Incentivize federal agencies and laboratories to work with start-ups.

• Congress should provide DOE OTT a budget line outside department administration and increase funding to laboratory technology transfer offices. Most of the labs today are funded out of overhead, which imposes strict limits. With greater resources, these offices would be able to more actively evaluate whether technologies are ready for commercialization, and market them to start-ups.
• Congress should authorize entrepreneurial-leave programs for federal experts in agencies and laboratories. These programs allow government employees to explore entrepreneurship without giving up their positions for a fixed period of time. Entrepreneurial leave reduces the risk of taking the leap into a start-up by providing job security. These programs would build on experiences from the ESTT program at Sandia National Laboratory, among others.
• Congress should authorize the Energy I-Corps program, which connects laboratory researchers with industry mentors, to also involve experienced climate-tech entrepreneurs.
• DOE should incorporate metrics on technology transfer in the national labs’ PEMPs that capture collaboration with start-ups. These metrics should include measures of both codified knowledge transfer, such as licensing to start-ups and co-development contracts, and tacit knowledge transfer, such as the number and frequency of informal interactions with start-ups. ITIF and others have previously recommended similar improvements to these metrics.

Improve coordination between federal agencies, laboratories, and other entities in support of climate-tech start-ups.

• The National Science and Technology Council, under the White House Office of Science and Technology Policy, should lead an interagency effort to develop a repository of collaboration opportunities across major federal R&D agencies that is targeted to climate-tech start-ups. The repository should be made available through an online portal, which could be housed and managed by DOE or the Small Business Administration.
• Technology transfer offices of federal agencies should encourage laboratories, federal research facilities, and regional offices to maintain active relationships with regional economic development agencies, incubators, and nonprofit industry networks that work with clean energy start-ups. For instance, technology-transfer offices can invite regional entities to participate in federal convenings focused on technology transfer, or represent their agencies in regional innovation convenings. When federal programs engage with regional innovation ecosystems, they can become more relevant to economic advancement and develop a larger network of start-ups across the United States.
• Congress should establish a nonprofit Energy Technology Commercialization Foundation to would work closely with the DOE and entrepreneurs to help bring clean energy technologies to market. By catalyzing its connections with DOE, entrepreneurs, regional partners, and incubators, this foundation would foster collaborations among start-ups and federal entities.

Investing in sound value-driven opportunities that can significantly reduce global threats are “good” investments, not only in a humanitarian sense but also in driving monetary value.

So how do we know what lies ahead of our future? What is the greatest crisis of our generation? What is relevant to us?

There is a lot of noise to screen out what is certainly dangerous or not. I would personally refer to the World Economic Forum’s The Global Risks Report. The attached link is the version for the 2019. A quick primer on risk management is that it starts with identifying and estimating the probability and impact of a given threat.

The first thing you will see is a map of different colors into the following categories of risks: economic, environmental, geopolitical, societal, and technological.[1] It will also show you the likelihood of the event happening as well as the magnitude of the risk inherent. On the top right of the corner of the graph, you can view the events that are most likely to happen with the greatest magnitude.

For your interest, the top three items all belong to a single category – Environmental. They are – “extreme weather events, failure of climate-change mitigation and adaptation, and natural disasters.”[2] Another one that is close to the three is cyber-attacks under the category of Technological. There are other interesting graphs in the report, but I’ll leave them to you for your own pleasure.

The companies with the new promise of a future are often misunderstood. Another way that we value the “good” or a potential “impact” of a company might be the assessing the potential of the companies to hopefully bring the imminent risks (indicated above are natural disasters, extreme weather events, and failure of climate-change mitigation and adaptation) lower on the graph spectrum. In other words, to have less impact when it happens or less likelihood of happening.

One thing I would note is that these categories refer to systematic challenges, where the identified problems are interconnected in every field of human activity. Therefore, the attempts to solve one issue may unintentionally contribute to another – like a technology that attempts to predict extreme weather events may put government employees out of work or potentially contribute to asset bubbles in a major economy.

In how companies create value, perhaps the first way of looking at sound companies is whether or not they are aimed at tackling systematic challenges or in a way to maximizes efficiency in a respective industry. In today’s globalized economy, often this is built upon a bedrock of transnational production, an inflow of people, goods, money, and ideas through multiple networks and other economic decentralization movements.  

Here’s an example. Cyber-attacks are happening more often in prevalence and disruptive potential. They present serious strategic critical infrastructure damage across the world including the government, railways, banks, and telecommunications providers, as the vulnerability to attacks increase with radical and systematic shocks.

One that may be well and alive in people’s memories is the North Korean government-sponsored hacking of Sony Pictures. North Korea could potentially hack into intelligence about nuclear deterrence in the United States or South Korea. Another adversary can also thieve nuclear material or sabotage nuclear facility by knocking out digital systems in nuclear facilities.

A growing trend that could mitigate this increased risk is the adoption of blockchain technologies. Blockchain technology can be used to protect systems and devices from attacks. They can protect data exchanges between IoT devices without a centralized authority and a data verification mechanism.[3] Implementing robust processes is essential for effective management of complex systems and is at the heart of long-standing quality management programs across the industry.

However, often technologies have been swept up in a web of restrictions, regulations, and international conventions. Innovators and investors can address the barriers in different ways, but more effective partnership mechanisms may be prudent. As technologies have been subjected to regulatory regulations or in scrutiny for a positive pricing environment, it might be more effective to identify shared priorities across stakeholders or finding a way to reduce costs in streamlining the industry.

For investors, this means having to navigate the policies of governments of uncertainties that require expertise. Perhaps this means providing early-stage risk capital for entrepreneurs to de-risk business models.

New technologies and dynamics have improved our ability to identify trends and assess risks. In investing into emerging markets, the way to realistically mitigate risk is to obtain insurance through Overseas Private Investment Corporation or partnering with government institutions, like USAID, which provides loan guarantees to encourage banks in poor countries to lend to targeted groups.

The goal for OPIC is to provide innovative financial solutions for private investors and provides upfront due-diligence to assess the ability to raise additional private equity capital. What is really interesting is that OPIC goes to the country to ask the locals for trends in local deregulation and indicators on how open the economy is to understand how returns will be made. They then connect with investors with the right skill set to capitalize on the opportunity in operating experiences, locale, and in the ability to add enough value for the entrepreneurs.

The proper risk mitigation starts with due diligence. Once we have vetted out what “issue” is interesting and is relevant, the investors conduct comprehensive due diligence covering legal, economic, technical, and others to assess eligibility criteria.

So, how do we invest in our most emergent crises? In sum, I would point to a business that can is operationally sound to curb its own organizational risks and systematically tackles inefficiencies in an industry in a given area – for instance, environmental or cyber. Match them with investors that are well-equipped for the operating environment to achieve its business objectives.

The role that promote a common platform for deals with risk profiles may be needed to build a momentum to build and scale. Investments could be better classified by factors such as performance, risk, expected return, and an exit timeline for investors preferences.

Greater collaboration among players can help lower due diligence expenses to realize synergistic potential. From a policy perspective, often this means supporting a more balanced analysis that helps companies and stakeholders to make strategic decisions about investment and collaboration opportunities.

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[1] http://www3.weforum.org/docs/WEF_Global_Risks_Report_2019.pdf

[2] Ibid.

[3] https://www.forbes.com/sites/andrewarnold/2019/01/30/4-promising-use-cases-of-blockchain-in-cybersecurity/#7a7eba293ac3