Innovation Economy Outlook 2014 - Global Report

Innovation Economy
Outlook Global
2014 Report
ENTER

Welcome to Innovation Economy Outlook 2014, Silicon
Valley Bank’s annual study of executives’ perceptions
in the innovation sector. Each year, we take the pulse of
these companies to find out how they’re doing, from past
performance to future prospects, and the challenges and
opportunities they foresee.
This year we expanded our survey to include companies
in innovation centers around the world and, in addition to
startups, larger companies with revenues upward of $1 billion
USD. With insights reflecting the more than 1,200 survey
responses, I’m pleased to offer the most comprehensive look
yet at the state of the global innovation economy.
Our prognosis is, in a word, momentum. We see abundant
potential in the pace of new company formation, global
expansion and availability of capital, and in the emergence
of new products and solutions that will change the world.
Many of the executives surveyed are SVB clients, which
should come as no surprise to those of you who know us. SVB
is the bank for half of all venture capital-backed technology
and life science companies in the United States, two-thirds of
those companies that went public in 2013, and a majority of
the investors who fund them. The makeup of our client base
is growing increasingly global and has expanded over the
years to serve companies of all sizes.
As the bank of the global innovation economy, we are
committed to bringing clients the connections and tailored
financial solutions they need to succeed, and we also consider
ourselves champions for innovation. With studies like this one,
we can build a better understanding of what it takes to disrupt
an industry or launch a high-growth company. And with that
knowledge we can help create a better environment in which all
innovators can thrive.
Thanks for taking a look at this year’s report. Reading between
the statistics, insights and observations, you’ll find stories of
the phenomenal intelligence, courage and determination it
takes to build a successful company.
Greg Becker
President and Chief Executive Officer
Silicon Valley Bank and SVB Financial Group
Letter from the CEO
INNOVATION ECONOMY OUTLOOK GLOBAL REPORT 2014
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I N T R O D U C T I O N I N T E R C O N N E C T I O N A B O U T T H I S R E P O R TA B O U T T H I S R E P O R T

3 Executive summary
5 Report at a glance
3
Introduction
8 Pervasive optimism
12 Tapping into opportunity
abroad: Sales and
revenue growth
8
Interconnection
32 About Silicon Valley Bank’s
Innovation Economy
Outlook 2014
34 A snapshot of
survey respondents
32
About this report
CONTENTS
15 Establishing a global
footprint: Production
and R&D
19 Attracting capital
24 Seeking talent
29 Protecting intellectual property
INNOVATION ECONOMY OUTLOOK GLOBAL REPORT 2014
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I N T R O D U C T I O N I N T E R C O N N E C T I O N A B O U T T H I S R E P O R T

Executive summary
When Silicon Valley Bank opened its doors in
1983, the United States — and Silicon Valley
in particular — was the epicenter of an emerging
innovation economy. Indeed, the Silicon Valley name
has become synonymous with the spirit of innovation.
Today, the United States and Silicon Valley remain
home to the largest concentration of innovation
economy companies and attract the lion’s share of
global venture capital.
But change is afoot. People around the world share
the desire to create and transform. Capital is mobile.
Challenges worth solving exist in every economy and
every society. Innovation is inherently global.
That’s why this year, for the first time, we extended our
annual survey of innovation economy executives to
business leaders from around the world.
The vast majority of respondents still come from the
United States, where the ecosystem is most developed
and SVB’s network of relationships is deepest. But this
year’s survey also offers a first look into the views of
C-level executives from Europe, Asia, the Americas, the
Middle East and Australia.
Around the world, innovation economy executives are
optimistic. They have a positive outlook on business
conditions and see growth and hiring coming from
new products, new markets, scaling their operations
and capitalizing on business conditions in their
existing markets.
Yet international executives also offer a unique
perspective — a broader and more interconnected
view of how to build their businesses.
The future global innovation economy will cut across
geographies, bringing together people who share
a passion to transform. Some regions will become
epicenters with their own clusters of entrepreneurs
and investors. Many more will become part of the
global mosaic high-growth companies construct to
bring together the talent, capital and markets they
need to grow from startup to success. All can share
in the transformative ideas and economic growth
that have made the innovation economy, and
Silicon Valley, an icon.
INNOVATION ECONOMY OUTLOOK GLOBAL REPORT 2014 3
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The future global innovation economy
will cut across geographies, bringing
together people who share a passion
to transform.
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Highlights page
82%
20
30
40
50
0 10 20 30 40 50
15%
35%
◻ U.S. executives
◻ U.K. executives
◻ Executives in other innovation economies
HIGHLIGHTS
Across the globe, executives in innovation economy companies look
within and beyond their borders to grow.
Tappingintoopportunityabroad
Executives outside the United States
think globally as they decide how to grow
their top line.
• More than 8 in 10 executives outside the
United States are or will be selling products
and services outside their home market in
2014, compared with fewer than 6 in 10
U.S. executives.
• Executives outside the United States are as
likely to project that the majority of 2014
revenue growth will come from outside their
home market as within.
• Forty-two percent of executives outside the
United States expect the majority of their
growth in 2014 will come from the United
States, 35 percent expect it will come from
Europe and 15 percent expect it will come
from Asia.
The interconnected global economy
Report at a glance
Eighty-two percent
believe business
conditions in 2014
will be better than
in 2013.
Highlights page
82%
10
20
30
40
50
0 10 20 30 40 50
Highlights page
82%
10
20
30
40
50
0 10 20 30 40 50
Three-quarters expect to grow their workforce.
Regions driving projected
revenue increases in 2014
NON-U.S. COMPANIES
2% 42%6%
◻ United States
◻ Europe
◻ Asia
◻ Central/South America
◻ Other
Establishingaglobalfootprint
The United States may be the market
of choice for growing the top line, but
executives outside the United States
look more broadly when it comes to
research, development and production.
• For executives from outside the United
States looking to engage in research and
development outside their home country,
28 percent say the United States is
most appealing, while 21 percent look
to Europe and 13 percent look to Asia.
• For production, Europe tops the list
with 27 percent, followed by Asia with
20 percent and the United States with
16 percent.
Asia
Europe
Preferred locations for international production in 2014
Central and
South America
United States
Middle East
Africa
27%
48%
26%
7%
2%
2%
4%
27%
23%
4%
12%
30%
7%
0%
0%
0%
0%
Pervasiveoptimism
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View of fundraising environment
BY THOSE WHO RAISED PRIVATE CAPITAL IN 2014
◻ North American executives
◻ European executives
Filed a patent in 2013
42%
Other innovation
centers
56%U.S.
22%
U.K.
Biggest challenges in hiring
◻ U.S. executives
◻ U.K. executives
Skillsand
education
ExperienceSalaryand
benefits
0 5 10 15 20 25 30 35
10
20
30
40
50
60
70
80
0
10
20
30
40
50
60
Biggestchallengesinhiring
Howchallengingisittofindworkerswithskills
24%
31%
28%
29%
27%
33%
4 in 5
say their filings included a U.S. patent
21%
25%
24%
View of the fundraising environment
0
10
20
30
40
50
60
50
60
19%
24%
33%
58% 59%
24%
7%
19%
57%
Attractingcapital
Around the world, finding the risk capital needed to reach scale
isn’t easy.
• Venture capital remains the most looked-to source of capital for
innovation economy companies in the United States, while angel
capital tops the list in the United Kingdom and elsewhere around
the world.
• Four in 5 executives who successfully raised capital in 2013 still say
the fundraising environment is somewhat or extremely challenging.
Seekingtalent
Executives around the world are focused on finding
people with the right experience and skills.
• Executives outside the United States are more likely to
say hiring is a challenge and more often look for talent
outside their home market.
• A well-trained workforce tops the list of factors in siting
research and development (R&D) facilities. For siting
production facilities, cost is top of mind.
• Executives outside the United States appear to be dealing
with hiring challenges in part by turning to entry-level
workers and workers without expertise in the core fields
of science, technology, engineering and math (STEM).
EXTREMELY
CHALLENGING
SOMEWHAT
CHALLENGING
NOT VERY
CHALLENGING
Protectingintellectualproperty
In addition to capital and talent, one additional critical
input for innovative companies is defensible intellectual
property (IP).
• U.S. executives are more likely to use the patent system
to protect IP. Fifty-six percent of U.S. executives say their
company filed a patent in 2013, compared with only 22
percent of those in the United Kingdom and 42 percent of
executives from other innovation centers worldwide.
• When companies file for patents, the United States has
the go-to patent system globally. Even among non-U.S.
executives, 4 in 5 whose company filed a patent in 2013
say their filings included a U.S. patent.
Report at a glance
HIGHLIGHTS
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Around the world,
innovation economy
executives are optimistic.
They have a positive outlook
on business conditions
and see growth and hiring
coming from new products,
new markets, scaling their
operations and capitalizing
on business conditions in
their existing markets.
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Throughout the global innovation economy, companies performed well in
2013. Across regions, 2 in 3 executives say their company met or beat 2013
revenue targets. U.K. executives reported the strongest performance, with
77 percent saying they met or beat targets. U.S. executives came in second,
with 65 percent, and other innovation economies came in strong with 62
percent meeting or beating revenue targets.
Heading into 2014, 82 percent of the executives
in this year’s survey expect business conditions
to improve over 2013. This enthusiasm spans
geographies and markets. Those outside the United
States and the United Kingdom are particularly
optimistic, with 92 percent of executives saying they
think business conditions for their company in 2014
will be better than in 2013.
PricewaterhouseCoopers (PwC) recently released its
17th annual Global CEO Survey, which helps to put
this level of optimism in context. PwC asked CEOs of
major companies in 68 countries (including 162 U.S.
CEOs) whether they were confident the global economy
would improve in the coming year and whether they
plan to hire. Confidence in growth and hiring were
both up dramatically from a year ago, but were still far
below the level we see in the innovation economy. Only
40 percent of those U.S. CEOs surveyed said they are
confident the global economy will improve, and only
62 percent expect to hire this year.
Although the questions were not identical to those in
our survey, the magnitude of the different levels of
optimism highlights the strength and growth potential
in the U.S. innovation economy as compared with the
overall global economy in the eyes of executives on the
front lines.
Upbeat expectations translate into jobs: 77 percent of
all respondents expect to grow their workforce in 2014.
As with enthusiasm, plans to expand are pervasive
across geographies. That said, U.K. executives are most
likely to say they will expand in 2014, though they are
the least likely to believe business conditions for their
company are on the upswing.
1 2 T A P P I N G I N T O
O P P O R T U N I T Y
A B R O A D : S a l e s
a n d r e v e n u e
g r o w t h
1 5 E S T A B L I S H I N G
A G L O B A L
F O O T P R I N T:
P r o d u c t i o n
a n d R & D
1 9 A T T R A C T I N G
C A P I T A L
2 4 S E E K I N G T A L E N T
2 9 P R O T E C T I N G
I N T E L L E C T U A L
P R O P E R T Y
Pervasive optimism
Silicon Valley Bank’s
Innovation Economy Outlook 2014 Global Report
INTERCONNECTION
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0
10
20
30
40
50
60
Outlook conditions
60%
50%
40%
30%
20%
10%
0%
Much better Somewhat better About the same Somewhat worse Much worse
Outlook on business
conditions in 2014
◻ Executives in other
innovation economies
Executives outside
North America
and Europe are
particularly
optimistic, with
89 percent of
executives saying
they think business
conditions for their
company in 2014
will be better than
in 2013.
39%
14%
3%
0%
42% 41%
1% 0%
57%
43%
15%
4%
2%
32%
5%
INTERCONNECTION
Pervasive optimism
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0 20 40 60 80 100
We will grow
We will stay
the same
We will reduce
Plans to hire in 2014
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
77 percent of
all respondents
expect to grow
their workforce
in 2014.
76%
22%
2%
80%
20%
1%
81%
19%
O%
INTERCONNECTION
Pervasive optimism
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To understand the
future of innovation,
we must pay attention
to the voices of
those creating new
ecosystems.
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Sales Service
0
20
40
60
80
100
International activities
100%
80%
60%
40%
20%
0%
International activities (current or planned for 2014)
◻ U.S. executives
◻ U.K. executives
58%
78%
86%
69%66%
44%
Innovation economy companies in the
United States typically start by focusing
on the robust domestic market, and
then expand internationally as they gain
scale. Fewer than 6 in 10 U.S. executives
will be selling products and services
internationally in 2014.
Innovation economy executives from other parts
of the world don’t have that luxury, and thus are
much more likely to look beyond their home markets
for sales and service. More than 8 in 10 executives
outside the United States and United Kingdom are or
will be selling products outside their home market
in 2014. Executives in the United Kingdom fall
somewhere in between, at 78 percent.
This affects global executives’ expectations for revenue
growth in 2014. While many non-U.S. executives expect
the majority of revenue growth in 2014 will come from
their home market, fully half expect it will come from
other markets.
Tapping into opportunity abroad:
Sales and revenue growth
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Expectations for rev growth 2014, non US companies
Regions driving revenue increase
2%
6% 42%
15%
50%
35%
50%
Expectations for
revenue growth in 2014
NON-U.S. COMPANIES
◻ Majority will come
from country
where I am located
◻ Majority will come
from another country
Regions driving projected
revenue increases in 2014
NON-U.S. COMPANIES
◻ United States
◻ Europe
◻ Asia
◻ Central/South America
◻ Other
Four in 10 of these global executives are looking
to the United States to drive top-line growth in
2014, followed by Europe (35 percent) and Asia
(15 percent).
As we’d expect, U.K. companies are more likely to
look to Europe (and the United Kingdom specifically),
with 62 percent seeing their home region as the
primary source of revenue growth in 2014, 36 percent
looking to the United States and only 3 percent looking
to Asia.
Conversely, nearly half of executives outside the United
States and the United Kingdom see the United States as
the primary driver of 2014 revenue growth, a quarter
look to Asia and only 14 percent look to Europe.
Tapping into opportunity abroad
INTERCONNECTION
CONTINUED FROM 12
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International executives
reinforce the views of their
U.S. counterparts, but also
offer a unique perspective —
in particular, a broader and
more interconnected view of
how best to seize business
opportunities.
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0
10
20
30
40
50
60
Production & RD, international activitiesProduction and R&D: International activities
(currently or planned for 2014)
◻ U.S. executives
◻ U.K. executives
R&D Production
40%
49%
38%
43%
56%
45%
While U.S. executives are less likely
than other executives to drive top-
line sales by turning to international
markets, they are more alike when it
comes to production and R&D. Here, it
is the United Kingdom that stands out,
with executives in that country much
more likely to say they are going abroad
for production and R&D.
When companies do look abroad for R&D, the
United States is a top choice among executives
outside the United Kingdom, while U.S. and U.K.
executives are split fairly evenly across regions. For
production, U.S. executives have a strong preference
for Asia, while the United Kingdom favors Europe as
well as Asia.
For international production activities, executives
look first to Asia, with 43 percent listing it — and in
particular, China and India — as the preferred choice.
Europe, specifically Eastern Europe, is cited by 26
percent as a top choice. The Americas (North, Central
Establishing a global footprint:
Production and R&D
60%
50%
40%
30%
20%
10%
0%
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UNITED STATES
7%
U.K.
27%
Other innovation
economies
ASIA
48%
U.S.
27%
U.K.
12%
Other innovation
economies
EUROPE
26%
U.S.
30%
U.K.
23%
Other innovation
economies
Production: Most appealing international location
◻ U.S. executives
◻ U.K. executives
◻ Executives in other innovation economiesProduction top locations
Production top locations
Production top locations
and South) are named by only 9 percent, and only
3 percent specifically select the United States as
most appealing.
Research and development, in a sense, yields the
crown jewels of the innovation economy. R&D brings
together creative, highly skilled employees to develop
products and services that will drive long-term
growth for companies and that will build a skilled
workforce for regions. Because R&D sits at the core of
innovation, executives’ views about where to conduct
R&D (and why, as we discuss later in the Seeking
Talent section) may have significant implications for
the long-term makeup and distribution of the global
innovation economy.
Within Europe, Eastern Europe is the favorite among
executives globally who are looking internationally,
whether to conduct R&D or for production. Within
Asia, India is the preferred location for both R&D
and production.
Establishing a global footprint
INTERCONNECTION
CONTINUED FROM 15
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UNITED STATES
16%
U.K.
41%
Other innovation
economies
R&D top locations
R&D top locations
R&D top locations
EUROPE
34%
U.S.
20%
U.K.
23%
Other innovation
economies
ASIA
33%
U.S.
16%
U.K.
9%
Other innovation
economies
R&D: Most appealing
international locations
◻ U.S. executives
◻ U.K. executives
Establishing a global footprint
Because R&D sits at
the core of innovation,
executives’ views about
where to conduct R&D
may have significant
implications for the
long-term makeup and
distribution of the global
innovation economy.
INTERCONNECTION
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Capital is mobile,
transcending currencies
and borders in pursuit
of higher returns.
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One of the essential ingredients for
high-growth companies is risk capital.
Regardless of how we segment the
global innovation economy, one
message is clear: The fundraising
environment is challenging.
Access to equity financing is one of the top three
challenges executives identify for 2014 (the other
two are scaling operations and recruiting employees/
managing talent). Twenty-one percent say access to
equity financing is their top challenge.
Forty-eight percent of all executives in our survey
raised capital in 2013, while another 13 percent tried
and failed. Although these findings demonstrate that
many companies do find the right investors, 81 percent
of those who succeeded still describe it as challenging.
Executives outside the United States and the United
Kingdom are particularly likely to see the fundraising
environment as extremely challenging.
Overall, venture capital funds remain the primary
provider of risk capital to the innovation economy, with
46 percent of executives who successfully raised capital
saying they raised venture capital, and 43 percent of
those who expect to raise additional third-party capital
saying that they will look to venture capitalists (VCs).
Outside the United States, executives are much more
likely to say they turned to angel investors than VCs
for their 2013 fundraising, though they too will look to
venture for their next source of funds.
Private equity (PE) also plays a meaningful role,
particularly for companies outside the United States and
the United Kingdom. Twenty-four percent of executives
from other innovation economies say they raised capital
from private equity investors in 2013, compared with
20 percent for the United States and 12 percent for the
United Kingdom. Looking forward, more U.K. executives
say they see PE playing a role compared with those who
said it was a source of funding for them in 2013, while
fewer U.S. executives say they will turn to PE for their
next source of funds than raised it in 2013.
Corporate investors are an increasingly important
player in the innovation economy. In 2013, 9 percent
of U.S. executives and 6 percent of executives in the
United Kingdom and other innovation economies say
they raised capital from a corporate investor. Across
regions, executives see corporate investors playing a
bigger role in their future fundraising, with the number
Attracting capital
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70%
65%
60%
55%
50%
45%
40%
35%
30%
25%
20%
15%
10%
5%
0%
EXTREMELY CHALLENGING SOMEWHAT CHALLENGING NOT VERY CHALLENGING
View of fundraising environment
BY THOSE WHO RAISED PRIVATE CAPITAL IN 2014
24% 24%
57% 58% 59%
7%
19%
33%
19%
81 percent of executives describe fundraising as challenging. Executives outside
the United States and Europe are particularly likely to see the fundraising
environment as extremely challenging.
Attracting capital
INTERCONNECTION
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0 10 20 30 40 50 60 70 80
Global sources of capital raised 2013
0% 10% 20% 30% 40% 50% 60% 70%
48%
41%
20%
9%
4%
2%
6%
47%
61%
12%
6%
10%
2%
4%
31%
55%
24%
6%
12%
6%
0%
of executives projecting they will raise funds from a
corporate investor nearly doubling the number who
listed this as a source of capital for their company
in 2013.
Though the overall probability that companies raised
capital in 2013 is fairly consistent across geographies,
executives outside the United States are meaningfully
more likely than their American peers to have raised
that capital internationally. This reflects the deeper
pool of venture capital available in the United States,
and is yet another indicator that innovation economy
companies outside the United States must embrace an
international mindset to succeed.
The reliance on venture capital to meet the needs of
growing companies around the world could be a cause
of concern to entrepreneurs outside the United States
if global investors shift their focus back to the U.S.
market. Evidence suggests that this may be occurring
now. In a 2013 survey of 403 venture capital investors
from around the world, Deloitte and the National
Venture Capital Association concluded that “U.S.
venture capitalists [are] more confident in their own
backyard” and “enthusiasm [among U.S. VCs] for Brazil,
China and other emerging markets is fading.”1
Attracting capital
Venture capital
Angel investor
Private equity
Corporate investor
Government grant
Crowdfunding
Other
Sources of capital raised in 2013
◻ U.S. executives
◻ U.K. executives
1 2013 Global Venture Capital Confidence Survey, www.deloitte.com/view/en_US/us/Industries/technology/
85d3d015d8b78310VgnVCM3000001c56f00aRCRD.htm?id=us_furl_tmt_general_survey_071512#.
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INTERCONNECTION
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43%
49%
Projected next source of capital
◻ U.S. executives
◻ U.K. executives
41%
Attracting capital
Venture
capital
Angel investor Corporate
investor
Organic
growth
Bank debt Private equity IPO Merger Crowdfunding Government
grant
Public
solicitation
Other
50%
45%
40%
35%
30%
25%
20%
15%
10%
5%
0%
INTERCONNECTION
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Innovation economy
companies outside the
United States are more
likely to look beyond their
borders both to drive their
top-line growth and to tap
into pools of talent and
capital that they need
to succeed.
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Languages and cultures may differ
around the world, but innovation
economy companies share two basic
facts when it comes to people. First,
in order to grow they need people with
the right skills and experience. Second,
it's difficult to find those people.
Across this year’s survey, the vast majority of
respondents plan to expand their workforce,
including 84 percent of U.K. executives and 76
percent of U.S. and other global executives. Plans to
decrease workforce size were virtually nonexistent.
Yet executives worldwide also say it is challenging to
find workers with the skills they need to grow their
business. Fifteen percent of U.S. executives and 20
percent of executives elsewhere around the world
see recruiting employees and managing talent as
their greatest challenge in 2014. Overall, 91 percent
of executives say it is either extremely or somewhat
challenging to find workers with the skills they need
to grow.
Why is it so difficult? Most executives say their top
challenge is either finding workers with the right
experience or the right skills and education. Salary
and benefits, the third most cited challenge, shows
up more often outside the United States.
Yet while hiring challenges are fairly consistent, the
solutions vary. Outside of the United States, executives
are willing to seek talent abroad — with the United
States as a prime location for finding talent.
Ninety-six percent of U.S. executives say they will
hire the majority of their employees in the United
States in 2014. In the United Kingdom, the number
of executives who plan to do most of their hiring at
home drops to 89 percent, and in other regions it falls
to 85 percent.
Seeking talent
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0
20
40
60
80
100
2%
19%
0%
22%
20%
1%
76%
81%
80%
This relatively heavier focus on hiring internationally
among non-U.S. executives is even stronger when
we look at companies’ top two hiring destinations
in 2014. Only 24 percent of U.S. executives even list
a second country. More than double that number of
other global executives — 56 percent for the United
Kingdom and 58 percent for other innovation centers —
cite a country outside their home country as one of
their top two destinations.
When non-U.S. executives look abroad to hire, the
United States is a top choice. Forty percent of U.K.
executives and 45 percent of other global executives
list the United States as one of their top two hiring
destinations, significantly more than any other country
or region.
Labor force issues are also an important driver when
executives decide to locate R&D and production
facilities abroad.
For R&D, the availability of people with the right skills
is top of mind for executives. Forty-three percent of U.S.
executives and 42 percent of other global executives
say this is the primary appeal of a foreign R&D location.
If we also consider other talent issues (labor costs,
proximity to the existing team and office, language and
culture), the number of executives saying talent issues
drive where to site R&D jumps to 77 percent for U.S.
Seeking talent
We will grow We will stay the same We will reduce
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
◻ Executives in other
innovation economies
executives, 58 percent for U.K. executives and
71 percent for other global executives.
Cost is top of mind when executives decide where
to site production facilities. Fifty-one percent of
U.S. executives, 80 percent of U.K. executives and
24 percent of executives in other regions say cost is
what makes a foreign location attractive for coding,
manufacturing or other production. But for U.S.
executives, the spectrum of labor-related issues
described above beats cost as a driver, with 65 percent
of executives listing a talent issue as what makes a
foreign country attractive for production abroad.
INTERCONNECTION
CONTINUED FROM 24
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60%
50%
40%
30%
20%
10%
0%
Job positions planning to hire in 2014
0
10
20
30
40
50
60
Likelihood to hire for entry-level
and non-STEM skills
◻ U.S. executives
◻ U.K. executives
Entry level Non-STEM skills
17%
26%
52%
27%
40%
38%
If talent is top of mind and competition is fierce, how
are executives coping? U.S. executives have a strong
preference for experienced employees, primarily those
with STEM skills. This is less true outside the United
States — including in the United Kingdom where
companies may be coping with the skills challenge
in part by looking to more entry-level employees and
employees without STEM skills. While it is possible
that the differences reflect divergent beliefs about
the optimal skill sets needed to build a breakthrough
company, we believe it more likely is a response to the
relatively shallow pool of employees with STEM skills
and experience in younger ecosystems.
Taken together, executives’ responses to the questions
concerning jobs and talent present a very interesting
opportunity for countries trying to build their
innovation economies. Four issues emerge:
1. There is a widespread need for relevant talent.
2. That talent is difficult to secure.
3. Companies are willing to source from locations
where talent exists.
4. Skills and experience — not pay — are top of mind
for executives, particularly when it comes to the
critical research and development function.
Regions that build talent pools populated by motivated
workers with relevant skills have the chance to become
a destination of choice for rapidly growing companies,
and to provide their citizens with high-quality, well-
paying jobs.
Seeking talent
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Skills and education
Experience
Salary and benefits
◻ U.S. executives
◻ U.K. executives
0% 5% 10% 15% 20% 25% 30% 35%
0 5 10 15 20 25 30 35 0
10
20
30
40
50
60
How challenging is it to find workers with skills
Other innovation centers
70%
60%
50%
40%
30%
20%
10%
0%
60 70 80
25 30 35
0
10
20
30
40
50
60
70
80
0
10
20
30
kers with skills
How challenging is it to find workers with the necessary skills?
Executives planning to hire
outside of their country
United States United Kingdom
Extremely
challenging
Somewhat
challenging
Not very
challenging
60%Other innovation
centers
56%
United Kingdom
24%
United States
21%
25%
24%
24%
31%
28%
29%
27%
33%
30%
25%
6%
9%
60%
69%
61%
36%
3%
Seeking talent
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Regions that build
talent pools populated
by motivated workers
with relevant skills have
the chance to become
a destination of choice
for rapidly growing
companies, and to provide
their citizens with high-
quality, well-paying jobs.
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Filed a patent in 2013
42%
Other innovation
centers
56%U.S. 22%
U.K.
If capital and talent are two necessary
ingredients for a successful innovation
ecosystem, the ability to turn intellectual
property (IP) into a defensible market
advantage is a third.
Companies in the United States are much more
likely than their peers in other countries to turn to
the patent system to achieve this objective.2
Fifty-six
percent of U.S. executives say their company filed
a patent in 2013, compared with only 22 percent of
U.K. executives and 42 percent of executives in other
innovation centers.
But regardless of nationality, when a company
files a patent, its first-choice system is that of
the United States.
Ninety-eight percent of U.S. executives whose company
filed a patent in 2013 say they filed a U.S. patent.
Among executives from the United Kingdom and
other innovation centers, those numbers are 73 and
83 percent.
Other patent systems — in the United Kingdom, Europe
and elsewhere internationally — drew only about
half that level. After the U.S. system, U.K. executives
were most likely to turn to their home system, while
executives from other innovation centers were most
likely to turn to other international patents (including
their home system).
Protecting intellectual property
2 For a discussion about the role of the patent system in the U.S. innovation economy, visit SVB online:
www.svb.com/Blogs/Dan_Allred/Strengthening_the_U_S__Innovation_Economy_by_Ending_Abusive_Patent_Litigation.
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International patent filings
OF COMPANIES THAT FILED A PATENT IN 2013*
◻ U.S. executives
◻ U.K. executives
US patent
Euro patent
Other patent
UK patent
U.S. PATENT FILINGS
98%
U.S.
73%
U.K.
83%
Other innovation
economies
U.K. PATENT FILINGS
18%
U.S.
59%
U.K.
19%
Other innovation
economies
EUROPEAN PATENT FILINGS
39%
U.S.
41%
U.K.
43%
Other innovation
economies
OTHER INTERNATIONAL
PATENT FILINGS
36%
U.S.
23%
U.K.
52%
Other innovation
economies
US patent
Euro patent
Other patent
UK patent
US patent
Euro patent
Other patent
UK patent
* Locations where companies that filed patents filed at least one patent
US patent
Euro patent
Other patent
UK patent
Protecting intellectual property
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People around the world
share a universal desire
to create and transform.
Challenges worth solving
exist in every economy
and society. Innovation is
inherently global.
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Innovation Economy Outlook 2014 is Silicon Valley Bank’s fifth annual report based on
its survey of executives in the innovation economy.
When we launched the survey and report in
2010, we focused on United States startups —
companies with up to $50 million USD in revenue and
fewer than 500 employees. Not surprisingly, given our
focus, we named our findings Startup Outlook.
As SVB has grown by serving entrepreneurs and
high-growth companies of all sizes around the world,
so has our survey. In 2013, we added startups in the
United Kingdom. This year, we expanded the survey
to include executives covering the full depth and
breadth of the markets we serve, including executives
in larger companies and from around the world. In light
of our expanded focus, we’ve renamed our report the
Innovation Economy Outlook.
To help readers focus on the insights most relevant
to them, we are presenting our findings in three
separate reports.
In this report, we examine views from executives across
the global survey, highlighting the most important
issues and opportunities for growing companies and
comparing the views of executives from the United
States, the United Kingdom and the rest of the world.
Our second report focuses on the United States,
examining the outlook for growth and challenges across
different sectors and regions in the world’s largest
innovation economy. The third report in the series
explores the U.K. innovation economy, summarizing the
views of U.K. entrepreneurs and comparing those with
the views of their peers across the Atlantic.
In addition to the three comprehensive reports, we are
issuing targeted reports that look at executives’ views
by industry sector, company stage and geography. Over
the coming months we will also examine key public
policy issues, the representation of women in the
innovation economy and the ties that link innovation
economy companies across regions and nations.
We are grateful to the 1,218 executives who took the
time to answer this year’s survey. Through them, we
hope we will encourage others to see how much the
future has to offer those who are willing to do the hard
work that drives the innovation economy.
BACKGROUND
About Silicon Valley Bank’s
Innovation Economy Outlook 2014
All reports are available
at www.svb.com
3 4 A S N A P S H O T O F S U R V E Y
R E S P O N D E N T S
V I E W R E P O R T S
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“The company has been growing
organically for the last four years at
an average of 25 percent year-on-year
and now has the opportunity to ̒break
out ̓ with the right partner/investor.”
— CEO, IRISH ENTERPRISE SOFTWARE COMPANY
“We are a struggling startup … Our
challenge is that domestic investors
have very low risk appetite … On
the other hand, it is an opportunity
for growth working in a developing
economy.”
— CTO, INDIAN ENTERPRISE SOFTWARE COMPANY
“The rise of MINT (Mexico, Indonesia,
Nigeria and Turkey) is a huge
opportunity. Emerging markets are
challenging but offer amazing value.”
— CEO, JAPANESE CONSUMER INTERNET COMPANY
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Survey respondents
We received 1,218 responses from executives around the world.
Of these, 1,004 are with U.S. companies, 100 with U.K. companies
and the remaining 114 with companies located in other markets
around the world.
22%
9%
4%
6%
PERCENTAGE OF
RESPONDENTS BY SECTOR
◻ Software
◻ Healthcare
◻ Hardware
◻ Cleantech
◻ Other
59%
79%
29%
of executives work for a company
that has fewer than 100 employees.
of respondents work
for a company that was
pre-revenue in 2013.
The vast majority of respondents come from the C-suite: 56
percent are CEOs, 18 percent are CFOs, and 9 percent are other
C-level executives.
The largest concentration of responses comes from the software
sector (59 percent), followed by healthcare (22 percent), hardware
(9 percent), cleantech (4 percent) and other industries (6 percent).
Outside the United States, the share of software companies
was somewhat higher (82 percent in the United Kingdom
and 70 percent in other innovation centers). That increased
representation may influence the responses somewhat, because
software executives tend to be more optimistic among U.S.
respondents. These differences are important in understanding
the survey responses.
As we would expect, given the nature of the innovation economy,
smaller companies predominate this year’s survey: 39 percent of
executives work for a company that has fewer than 10 employees,
and 79 percent work for a company that has fewer than 100
employees. The median number of employees is 20.5.
In terms of revenues, 29 percent of respondents work for a
company that was pre-revenue in 2013. Among those earning
revenue, 49 percent work for a company with revenue below
$5 million USD in 2013, and 44 percent work for a company that
was profitable in 2013. Overall, 96 percent of the respondents
work for a privately held company.
SNAPSHOT
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Special thanks to dcIQ for your collaboration on this study. Thank you for your support:
Angel Capital Association
Churchill Club
Cleantech Group
Computer History Museum
Engine
Entrepreneur First
Galvanize
Hattery
Illinois Venture Capital Association
Intelligent.ly
Level39
MassBio
MassMEDIC
Medical Device
Manufacturers Association
Mid-America Healthcare
Investors Network
National Venture Capital Association
Seedcamp
Software & Information
Industry Association (SIIA)
Startupbootcamp
Techstars
TechHub
Acknowledgments
©2014 SVB Financial Group. All rights reserved. Silicon Valley Bank is a member of FDIC and Federal Reserve System. SVB>, SVB>Find a way, SVB Financial Group, and Silicon Valley
Bank are registered trademarks.
A third-party firm, Q&A Research, conducted the survey online on our behalf from January 8 through January 29, 2014.
This material, including without limitation the statistical information herein, is provided for informational purposes only and is compiled from the survey that we worked on with Q&A
Research, a third-party source. The material is based in part on information from third-party sources that we believe to be reliable, but which has not been independently verified by us
and, as such, we do not represent that the information is accurate or complete. The information should not be viewed as tax, investment, legal or other advice, nor is it to be relied on in
making investment or other decisions.

Innovation Economy Outlook 2014 - Global Report

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