Who funds the future? The capital balance that fuels innovation

For most of the past century, the United States has not left innovation to chance. At the height of the Space Race in the 1960s, federal investment in research and development reached nearly 2 of GDP. Today, that number has fallen below 1. At the same time, total RD spending has grown to historic heights, driven primarily by the private sector. This isn’t a new phenomenon. It’s an ebb and flow that goes back to the private sector-led industrial revolution, which was followed by the post WWII boom of governmental agencies leading breakthroughs in science and technology. While private sector innovation can create and transform industries, public investment has historically unlocked the long-horizon solutions that didn’t just transform industries, but humanity as a whole. Now, the nation is grappling with how to increase U.S. science leadership of slower, deep technologies. This in an innovation economy increasingly driven by private capital and where federal agencies have been unwound. Will private capital step in to fill the lab-to-market gaps or will technologies on the cusp of commercialization be stalled? The parties that usher in the new era could very much determine what it looks like. A SYSTEM BUILT IN PHASES The modern innovation economy was built over time through distinct phases of public and private investment. In the early 20th century, innovation was largely decentralized and privately driven. Individual inventors and corporate laboratories tackled immediate technical challenges tied directly to commercial opportunity. This model transformed industries but created siloed systems. World War II fundamentally changed that equation. Federal investment surged, and a new model emerged that coordinated universities, industry, and national laboratories. This model carried forward into the Cold War, when public funding became the dominant force in American RD and a demonstration of might, supporting everything from semiconductors to aerospace and computing. By the 1960s, the federal government funded more than two-thirds of all research and development in the United States. FROM BREAKTHROUGH TO MARKET By the late 1970s, a different problem emerged. The U.S. was generating significant scientific discovery, but much of it was not translating into real-world applications. The Bayh-Dole Act of 1980 addressed that gap by allowing universities and research institutions to retain ownership of federally-funded inventions. This shift enabled private companies to license and commercialize new technologies, unlocking a wave of economic activity. This policy shift created conditions for companies like Google, Yahoo, and Qualcomm. And since its passage, university-led innovation has contributed more than 1.3 trillion to the U.S. economy and supported millions of jobs. The result was a more complete system. Public funding supported discovery. Private capital scaled and deployed those discoveries into the market. A SHIFT BACK TO PRIVATE LEADERSHIP Over more recent decades, that balance has shifted again. Business now funds roughly 75 of all U.S. RD, while the federal share has declined to 18. This is not the result of declining public investment in absolute terms, but rather the rapid expansion of private-sector research driven by global competition and the rise of technology-driven industries. At the same time, the federal government has narrowed its focus. As of 2021, it remained the largest funder of basic research, supporting 40 of foundational (basic) scientific work, while largely stepping back from later-stage development. In theory, this reflects a more efficient system. Private capital excels at scaling technologies, improving efficiency, and bringing products to market. It is less suited to funding research that is high-risk, capital-intensive, long-horizon, and without immediate commercial application. That role has always been filled by public investment. Now, the biggest structural tension is how to go from lab to market. Private investment depends on stable policy environments. Long-horizon technologies cannot be developed in markets where regulatory frameworks, incentives, and funding structures shift every few years. INNOVATION IS A SYSTEM, NOT A PROGRAM Framing who owns innovation as a debate between public and private funding misses the point. Innovation operates as a system. It depends on coordinated inputs across research institutions, industry, government, and capital markets. It requires continuity, infrastructure, and a clear pathway from discovery to deployment. When one part of that system weakens, the effects compound. Research capacity is not easily turned on and off. When federal labs or university programs lose funding, talent disperses, institutional knowledge erodes, and progress resets. Rebuilding that capacity takes years. At the same time, commercialization does not happen automatically. Without systems that connect research to industry, even the most promising discoveries can stall. This is where innovation ecosystems matter. Innovation hubs like Greentown Labs and my organization, mHUB, operate at this intersection by connecting startups, industry, and research to accelerate the path from breakthrough to commercialization. They provide the infrastructure, partnerships, and environment needed to translate breakthrough technologies into real-world applications. But the system only works when elements move in alignment, and all the players show up to the table under conditions agreeable to all. THE EXPERIMENT UNDERWAY The United States is currently running a real-time experiment as we enter a new era of emerging technologies. The question is whether the public-private balance will be actively maintained or passively eroded. We’ll see how this balance evolves with the 2 billion in incentives for the quantum ecosystem recently announced by the CHIPS Research and Development Office and newer initiatives such as the Genesis Mission. If private capital is going to play a larger role in the system, it cannot remain concentrated at the point of commercialization. It must move upstream. That means investing earlier in technologies before markets are fully defined. It means supporting research environments that may not produce immediate returns. And it means participating in systems that connect discovery to deployment, rather than waiting for those systems to deliver market-ready solutions. The future of innovation will be determined by how these forces align and by who is willing to step forward to build what comes next. Haven Allen is CEO and cofounder of mHUB and mHUB Ventures.