HFS Data Viewpoint: The race for innovation advantage: Tech company R&D spend versus VC investment in US start-ups

• If you want to know the future – invent it – so the saying goes. And if you invent it, there’s a good chance you own it. No wonder R&D and VC investment is accelerating.
• Salesforce’s total R&D spend of $2.8B may be comparatively small – but the rate of growth is extreme: close to 300% since 2015.
• The catch-up challenge is put into perspective when you note that Salesforce, SAP, IBM and Alibaba’s R&D spend put together totals little more than Microsoft. $19.3b spent on R&D by Microsoft in 2020 amounts to a record high for them.
• Google is largest of the pure-tech spenders but Amazon’s overall R&D investment dwarfs them all and its rate of increase shows no sign of slowing. The $42.74b it spent in 2020 in total was up nearly 19% on the year but nearer 24% in the final quarter.
• But beyond the giants looms the collective future-shaping potential of the US Start-up industry. 2020 marked another record in VC investment with $156.2b – and this was in domestic-based start-ups alone.

The Bottom Line. Sitting on cash and hoping for a better future is a fast route to failure and a place in the business history books.

Tech giants and VCs are all banking on a future of innovation and investing in it with record sums. They aren’t waiting and hoping for innovation, they are investing to build it.