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“The Innovation Blind Spot” makes the case for VC in the heartland
Eli Dile   on Friday, December 29, 2017 at 12:00:00 am

By Marie Plishka

The Innovation Blind Spot: Why We Back the Wrong Ideas and What to Do About It comes at precisely the right time. With economic turmoil throughout the country, author and venture capitalist Ross Baird argues it’s high time for the entrepreneurial support networks that have clustered in coastal metros to branch out into Middle America. Baird writes that:

The idea that entrepreneurship is a meritocracy is a myth. In the real world, money flows to the ideas that are most convenient to find or the most familiar, not necessarily those that are best. Simply put, the blind posts in the way we innovate – the way we nurture, support, and invest in new ideas – make all our other problems even harder to solve.

Baird’s point is well taken in an era that has seen Silicon Valley entrepreneurs with no proven product or service easily access millions of dollars, e.g., blood-testing company Theranos. Meanwhile, entrepreneurs in Middle America with proven businesses cannot access the capital they need to grow their already successful enterprises. One such example highlighted in the book is Fin Gourmet, a fish processing plant in Paducah, Kentucky. Though it’s no glamorous tech startup, the company is growing rapidly, yet it cannot secure just a couple million dollars to expand its operations (a pittance in VC circles). Baird chooses these two stories to illustrate the misdirection of venture capital from real-world problem solvers and job creators to chasing Silicon Valley unicorns.

Braid breaks down the system that identifies, evaluates, and funds new ventures and exposes its biases. He points out that venture capitalists primarily come from a handful of elite schools and invest in others that have backgrounds similar to their own. So-called expert investors, Baird argues, should not be the ones deciding what a viable business idea is and is not, a process, he contends, should come from the bottom up.

Baird also introduces the concept of “one-pocket thinking.” For two-pocket investors, there is a separation between financial returns and social good; you cannot achieve both. But one-pocket investors believe you can make money by doing well. Baird convincingly argues that entrepreneurship, beyond enriching the innovator, can revive impoverished communities around the world.

Ultimately, economic developers will find this book interesting for a number of reasons. First, it lays bare the inherent inequality of American entrepreneurship, principally, the fixation on unicorn companies rather than less-glamorous but more-impactful businesses that keep small towns alive and increase their quality of life. Second, it is a useful reminder that other organizations and individuals outside of economic development are interested in solving some of the same problems as economic developers. By widening our support circles and networks, economic developers could find allies they did not know existed.

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