Viewpoint: The start-up fuelled path to recovery

Job seekers speak with company recruiters at the New York City Start-up Job Fair
Image caption Young people clamour for jobs at a New York start-up fair - a scene being played out all over the world

As the global economy continues to stagnate - with all the US and European economies reporting slow growth or recession, and China decelerating - the surge in technology mergers, acquisitions and investment activity reveals one path out of the current slump.

The mobile internet - the fifth wave of computing - is a revolution. And it is easy to see why: the convergence of mobile systems with the internet has created a near-universal market of six billion users generating $2.5 trillion (£1.8 trillion) in annual economic value.

Activated by third-generation mobile communications (3G) and the smartphone, the market is now expected to explode with the current global rollout of fourth-generation communications, known as 4G or LTE.

In the UK alone, one report puts the 4G/LTE gross domestic product impact at £75bn before 2020.

This includes £5.5bn of direct private investment into the economy by 2015, creating or safeguarding 125,000 jobs.

The mobile internet combines the massive economic and social power of networking with the force accelerator of more than six billion personal mobile devices - not to mention an estimated 50bn networked machines by 2015.

Its size, commercial potential and ease of developer access is fuelling a powerful new wave of global innovation, decentralising research and development into distributed hubs around the globe.

Democratising innovation

The Connected Generation, rejecting notions of the centralisation of power and closed systems and organisations that maintain it, is democratising innovation itself, and rising up to challenge the Silicon Valley monopoly.

Disenfranchised from the corporate workforce by the economic crisis, inspired by the legend of Silicon Valley and its iconic leaders, a new generation of talented and resourceful entrepreneurs is emerging.

From centres as far afield as New York, Toronto, London, Berlin, Santiago, Tel Aviv and Beijing, these entrepreneurs are proving that they can innovate as aggressively, create as ingeniously, and work just as hard as their contemporaries in California.

The mobile internet is an innovator's dream.

Image caption Stop propping up old industries, says Robert Marcus

No-one can fully envision the future applications that will emerge atop new mobile platforms.

The potential is so great that this worldwide flowering of technical talent could well offer one solution to the world's current economic crisis.

The struggling economies spending billions in infrastructure improvements or attempting to prop up old industries as a way of increasing employment, could spend a fraction of that amount to seed mobile internet start-ups.

This would ignite a wave of innovation that can revamp economies and produce high-paying jobs and capital growth with a phenomenal return.

The impact would be particularly great among young people, who as a group suffer the highest unemployment.

This assistance could come in the form of small investments, public/private partnerships, tax incentives and grants.

As we have seen from the UK government's recent focus on tech start-ups and entrepreneurship, the formula clearly works.

This investment has produced the booming Silicon Roundabout, attracting hundreds of start-ups.

Elsewhere, New York has the fastest growing tech sector in the US. Berlin is teeming with innovation.

Israel, which has also provided numerous innovation incentives, has more start-ups than any other country in the world except for the US.

End the traditional cycle

The programmes don't just help nascent firms get off the ground.

They help create a complete ecosystem of companies and individuals with the technical, business and investment backgrounds and capital required to create the critical mass of support from which the industry can blossom.

The original start-up dream was to work like crazy, bring in angel investors and venture capitalists to productise the new technology and finance growth, before exiting a sizeable company via an initial public offering (IPO) or trade sale.

This traditional cycle has failed over the last decade. Venture capitalists are moving to safer, later funding rounds. IPOs have plummeted. The vast majority of start-ups struggle to find any meaningful funding.

Meanwhile, the rate and pace of innovation is accelerating.

A few very bright people can develop something of great value in an incredibly short period of time, but they can become irrelevant just as fast.

In parallel, the sector leaders with hundreds of billions of dollars of cash on their balance sheets are under pressure to reposition their technology assets to address the mobile internet.

Image caption Google has launched various start-up campuses across the globe

Facebook's 50% share price collapse and Google's disappointing earnings originate in their failure to effectively pivot to mobile.

Technology is needed to affect this change, and large organizations, unable to innovate fast enough, increasingly embrace mergers and acquisitions as a complement to in-house R&D.

Google alone spent nearly $2bn (£1.3bn) on 79 technology and talent acquisitions in 2011.

Silicon Valley is no longer a region. It is a platform and a state of mind.

Decisive action by government, in the form of targeted and modest investments and tax incentives, can activate these new platforms worldwide and set in motion a virtuous circle of technology innovation, investment and return.

These companies can emerge as a key strategic driver for worldwide economic transformation and recovery.

Robert Marcus is the chief executive of QuantumWave Capital, an investment bank for technology start-ups.