As regular readers will know, for the last two weeks, I've been interviewing technology policymakers, VCs, government investment agencies, incubators, and innovation/concept-design consultancies in Denmark and southern Sweden (Skåne) -- the new, high-tech “Øresund Region” -- to explore how ideas and concepts are born and how they then are converted into usable products and services.

The two nations, and especially Denmark, have garnered a lot of kudos in the press for their innovation initiatives. They execute better than almost anywhere else on earth.

But even in these societies where a large portion of GNP is strategically reinvested in innovation, product development, and new company formation, often no spark crosses over from innovation to product or service, as it does from God's hand to Adam's in Michaelangelo's fresco. A fatal gap remains that separates the innovation process from the development process. Innovations often fail to become IP because no investor who will fund the transformation of the idea into its usable embodiment. The result is that there is no demonstration of the innovation's worth and hence, no way to argue for investment in innovation services or activities.

One solution is to extend the innovation consultants' responsibility to include guidance and assistance regarding how to valorize and promote the innovation to investors, and then helping to find investors -- but this solution costs time and money. Few innovation consultancies can afford the stretch. Most seem happy to diddle in the innovation zone anyway, leaving their clients to fend for themselves once the brain games are over, a self-defeating strategy that devalues the consultancies' own work. There aren't enough incubators to go around -- and these mostly enter the fray after a company has a product at least in prototype, too late for the moment of creation. Business angels aren't many nor are they able to make large investments. And local VCs, like VCs everywhere, have taken the uptown route, preferring to fund companies that have made it at least to mezzanine stage. In Denmark, the state-funded Vækstfonden attempts to fill in, but like the early-stage VC that it is, VF has limited resources and can only support a handful of innovators. The situation is more dire in Sweden, where angels are almost completely absent and VCs, including the state established (but self-financed) Industrifonden and its subsidiaries, must adhere to the bankers' rules that govern most VC activity.

Within many companies and public agencies, similar processes play out that result in lack of internal funding for transforming innovations into IP.

This flaw isn't unique to the Scandinavian economies, where at least it's recognized and solutions are being sought. It's evident on a larger scale, and is more damaging, in Silicon Valley, a place familiar to me. The proportion of unrealized opportunities in the Valley must be huge. Given the dynamism of invention in the Valley, funding announcements are relatively few and far between. A few VCs, like Charles River Ventures with its QuickStart program, have tried to help out, but they're a drop in the bucket. The only place this problem isn't pronounced, I suspect, is China, where investment capital is copious and investments are available for almost any buildable product/service idea (although the inventor may not hold on to his or her rights very long).

I'll have more to say about this in a following entry. I'm still catching up and getting over jet lag. Thanks for your patience.