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EDITORIAL Fueling innovation for the 21st century

Gov. Murphy recently unveiled the state’s new economic development master plan that includes a number of initiatives that should excite technology innovators. One of these, the New Jersey Evergreen Fund, addresses a critical need faced by innovators since the birth of our nation — access to capital needed to finance the growth of new…

Gov. Murphy recently unveiled the state’s new economic development master plan that includes a number of initiatives that should excite technology innovators. One of these, the New Jersey Evergreen Fund, addresses a critical need faced by innovators since the birth of our nation — access to capital needed to finance the growth of new ideas into commercial products and services. 

Over the centuries we have parlayed proximity to the capital markets of New York City, open space to build factories, a high quality workforce and globally connected transportation systems into a robust state economy. However, significant changes in the industrial landscape undermine past success as the route to future prosperity. Reclaiming our innovation economy is critical to New Jersey’s health across all aspects of life in this state. 

The New Jersey Evergreen Fund recognizes important changes in the commercial sector’s approach to bringing ideas to market and offers a thoughtful model with benefits for the state’s entrepreneurs, large corporations and venture capital firms.

Throughout the 19th century, innovation came from individuals like Newark’s Seth Boyden, who invented patent leather; John Hyatt, who perfected celluloid, a precursor to today’s plastics; and Thomas Edison, who began his inventive career in the city with the stock ticker tape and whose later accomplishments are legendary. These innovators relied on private investors to sustain them through the fits and starts of bringing something new to market.

During the 20th century, companies institutionalized innovation in the form of corporate research and development centers like AT&T’s Bell Labs, RCA Laboratories, DuPont’s Experimental Station, IBM’s Watson Research Center, Xerox’s Palo Alto Research Center and many more. Such globally dominant companies had the resources to self-fund technology developments that might require long times and large investments before reaching the marketplace.   

Reclaiming our innovation economy is critical to New Jersey’s health across all aspects of life in this state. 

Now, Wall Street expectations for quarterly performance, B-school models that narrowly define core competency and global competition are all factors that make merger and acquisition a safer route to innovation than internal research and development. That approach outsources risk and expense to those least equipped to carry the cost, such as individual entrepreneurs and startups. The cost of specialized equipment, complexity of manufacturing and imposition of regulatory requirements all make it difficult for these innovators to survive scale-up and scale-out to market without significant institutional investment.

Venture capital has become the jet fuel powering modern innovations and is today indelibly associated with the growth of Silicon Valley. 

The New Jersey Evergreen Fund will serve to attract more VC funding to New Jersey through a dollar-for-dollar match, and may allow for more capital-intensive programs than the cloud- and app-computing companies that have grabbed the attention of Valley investors. This is important for the governor’s plan that seeks to reforest our production sector, recapturing manufacturing jobs that always have been an important ingredient of a healthy middle class.

The Evergreen program stipulates that companies buying tax credits that form the fund must also take an active role in the growth of the small companies receiving venture investment.  Such an approach is a perfect complement to the innovation model that the New Jersey Innovation Institute — an NJIT corporation — has structured to foster the growth of technology hubs across the state. NJII is part of an NJIT/industry ecosystem that includes the state’s oldest and largest tech incubator, NJIT’s Enterprise Development Center; the newly launched Makerspace at NJIT; and the Medical Devices Industry Cluster that is currently under development.

One of NJII’s core beliefs is that clustering innovators around sector-specific assets that are critical to scaling to market and too expensive to replicate will make it much easier to build relationships with large companies seeking both technology and talent. It also makes it easier for investors to “shop” for companies that meet their fund preferences.

When all the pieces come together, you have a virtualized R&D network that borrows from the best of the previous two centuries to form a new model accelerating innovation for the 21st century. This is a model that can be applied across multiple industry verticals and locations throughout the state.  The governor’s plan is an important step toward a future that is as promising as our past is impressive.

Donald Sebastian is president & CEO of the New Jersey Innovation Institute, an NJIT corporation that applies the intellectual and technological resources of the state’s science and technology university to challenges identified by industry partners.

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