Apple has $160bn of net cash and has paid $153bn to shareholders, for a total of $313bn. US private tech funding 2006-2015: $258bn (real)
— Benedict Evans (@BenedictEvans) January 27, 2016
Jon Bradford, founder of Techstars UK, once said to me that corporate innovation budgets dwarf venture capital. This tweet from Benedict Evans gives an insight into how much. The excess cash from Apple from 2006-2015 was greater than US VC funding in total.
That got me thinking, so I took a look at corporate R&D spend and it turns out that 2014 spend in the US was over $250bn and in Europe it was over $200bn. That compares with $86.7bn in global venture capital investment in the same year.
The interesting thing is that large companies are increasingly looking to the startup world to help achieve their innovation objectives. They, run accelerator programmes, and open ‘labs’ in startup hotspots and make acqui-hires.
These activities are interesting, but small scale. Over the next few years I expect we will see a lot more experiments as large companies work out how to harness the power of entrepreneurs. They have to. New markets are spinning up much faster than they can plan for and exploiting those opportunities requires a tolerance for failure and risk-reward balance that I don’t believe can exist inside large company structures.
I think truly innovative companies will get more sophisticated in the way they monitor the startup-ecosystem, get close to interesting companies, partner with them when appropriate, and know when they can acquire them effectively.
When they do that I predict a sizeable percentage of that R&D spend will flow into the startup ecosystem.