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Rush of money is 'threatening to kill Silicon Valley', says expert

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By Noel Young, Correspondent

May 29, 2012 | 2 min read

A leading California entrepreneur says that the rush of money into social media is in danger of killing Silicon Valley .

Steve Blank ...bring in the Government?

Steven Blank believes venture capitalists and angel investors have become too obsessed with the quick returns promised by social media.

"I believe it's pushing real innovation outside out of our country," he told Silicon Valley's own daily paper , the Mercury News . "It might be the demise of what we actually do in Silicon Valley."

Blank, who was speaking to columnist Chris O'Brien, is putting his money where his mouth is . He is working for free with the Innovation Corps, dubbed the I-corps, set up by the National Science Foundation at Stanford University.

Twenty-five teams of young entrepreneurs turned up there this week to present to him business plans built round their lab work . Blank said many would struggle to get commercial funding in areas as diverse as biological sciences and computer science when their research ended.

"We're investing in social media rather than this stuff. Imagine hundreds of these guys doing real science , making cancer drugs and they can't get an investment."

At he same time, Blank understood the dilemma. "Why should venture capitalists wait five or seven years to see if this will work when Instagram sold for $1 billion after 18 months."

To restore some balance, Blank believes investment decisions being driven by the free market need to be augmented with some type of government strategy or involvement.

O'Brien says the impact on the teams of Blank's input was "pretty stark". "Each of them fundamentally changed their product in some fashion."

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