Tech innovation alive but cash scarce

By Andrea Orr

SANTA CLARA: Recession, political turmoil and gloom and doom in Silicon Valley did not stop Indian and Asian entrepreneurs from turning out in force here to hobnob about new business ideas. There was just one ingredient missing -- the money.

Kailash Joshi, who heads the Indus Entrepreneurs, a powerful Silicon Valley networking group, said he saw just as many software, semiconductor and biotechnology innovations as in past years, but that venture capital, critical to bringing these ideas to fruition, was in short supply.

"It's definitely down," he said. "Back in the crazy times, we'd see perhaps 150 entrepreneurs coming in with great ideas and getting funding. Now, we see 100 or 150 people who have a good idea but are having difficulty raising funds."

Joshi spoke about the challenging atmosphere for high-tech entrepreneurs shortly after a key Bush Administration official gave a rousing speech, congratulating the group for its role in reviving the world economy.

Glenn Hubbard, who chairs the Council of Economic Advisors, told a crowd of more than 2,000 conference attendees that he believed a recovery in the U.S. economy was well underway and that many of the lone entrepreneurs and small start-up companies deserved the credit.

"While so many people have been wringing their hands over the economy, two thousand of you have come to discuss entrepreneurialism," said Hubbard. "That is an extremely hopeful sign."

Hubbard conceded the world economy still had a number of wild cards that could stall growth, including world political tensions and shaky economies in Japan and parts of Europe. But he stressed the importance of financial incentives to encourage small businesses.

Confessing that the economy had proven more resilient to September 11, war, and the corporate accounting scandal than he ever would have predicted, Hubbard told the crowd, "It has little to do with Washington, and almost everything to do with you."

But many of those in the crowd said privately they were not sure where they would find the cash to back their fledgling businesses. "There are three ingredients to innovation: 1) ideas, 2) entrepreneurs and 3) funding," said Joshi. "But what makes things happen are two and three."

(C) Reuters Ltd.