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Technology startups, especially those in Silicon Valley, love to talk about innovation. But how good are they at actually inventing and commercializing important technologies? Not as good as they should be, says Max Levchin, a computer scientist who cofounded PayPal (earning him TR’s “Innovator of the Year” award in 2002) and is now an angel investor. Levchin, along with fellow PayPal founder Peter Thiel and former chess champion Garry Kasparov, is completing a book called The Blueprint, which will outline how and why startups should tackle much harder problems. Levchin, 36, says too many of the country’s best programmers are working for companies that have little prospect of doing anything ­transformative.

Levchin’s own startup record is mixed. Although building PayPal’s online payments technology into a trustworthy system was a technically difficult and risky project that ultimately prospered, he later founded Slide.com, which was best known for creating a somewhat silly series of Facebook applications such as Superpoke! Pets. Google bought Slide in 2010 for about $200 million but shut down most of its services last year.

Levchin discussed his ideas with Technology Review reporter Conor Myhrvold.

TR: What concerns you the most about the startup culture today?

Levchin: I feel like we should be aiming higher. The founders of a number of startups I encounter have no real intent of getting anywhere huge. They just want to build a company that is likely to get acquired for a meaningful, but not necessarily enormous, amount of money. The acquisition price doesn’t really matter, but it serves relatively well to measure the consequence of the startup and therefore indirectly measures the ambition of the founders at the outset.

What’s wrong with building a company in hopes it will be acquired?

I think it is less likely to result in truly revolutionary or groundbreaking companies being created. In Silicon Valley, the number of startups that could be easily confused with a feature [of some other service] is increasing relatively rapidly.

But what about big innovations in recent years like the rise of smart phones and social media?

There’s a fair amount of disruptive technology going on. In general, the train of innovation is rolling along. I’m not too worried about innovation at large. The point I was trying to make is that there’s an awful lot of effort being expended that is just never going to result in meaningful, truly disruptive innovation. And I think that’s a problem. A lot of resources are getting soaked up by these lesser companies—most importantly, talented engineers, talented builders of things.

Why is this happening?

Typically these things go through the sieve of scarce resources—e.g., capital. When you try to raise money and your pitch sounds like “I’m going to look at that video game, clone it, and make it a little bit cheaper,” under the right circumstances—under most circumstances—the potential backer says, “That’s a terrible idea. I’m not giving a penny to this. Why don’t you go invent something interesting?”

But the overabundance of capital that resulted from just enormous successes in Silicon Valley over the last few years has actually made it possible for such things to get funding, and they do. And so people are building things that are, at times, trivial.

In many respects, Slide seems as trivial as these other companies you think should be aiming higher. Do you wish you hadn’t spent those years creating virtual pets?

Games and entertainment can aim pretty high. The world can occasionally be changed by an amazing piece of art or music or writing. At Slide we did some great work, but the result did fall short of my ambitions. I think the lesson learned for me was that I’m not that good at changing the world through art, and should stick to what I know: science.

Have you shaped your investments accordingly? Tell us about a startup you’ve backed that has a truly big idea.

I’m really excited about Kaggle. It’s essentially a platform [that can tap the minds of the world’s top data analysts]. People are frequently employed in places where they make great impact on their employer’s data sets but are unavailable to make great impact on other data sets, so creating a platform where these people can be literally rented out per problem is really fabulous. Because then you have people that can still keep their jobs at NASA and solve radio telescopy data set problems, and on occasion dig into things like human genome projects and cancer research. I think that’s a very powerful concept.

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Credit: Tim Wagner | Zuma Press | Corbis

Tagged: business, startups, Silicon Valley

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