Innovation stands at a critical crossroads: scientific advances and technological ideas are flourishing, yet the flow of patient, diversified capital remains constrained. This imbalance threatens to stall progress on climate solutions, healthcare breakthroughs, and digital transformation across emerging markets.

By recognizing where funding gaps exist and deploying practical strategies, investors and policymakers can ensure that tomorrow’s breakthroughs receive the support they deserve—fueling growth, opportunity, and shared prosperity.

Why Innovation Needs Patient Capital

Global innovation metrics tell a paradoxical story. The Global Innovation Index (GII) 2025 reveals robust scientific output but subdued investment growth. While scientific publications exceed long-term trends, R&D, venture capital and patent filings all trail their historical pace.

Corporate R&D spending hit a record USD 1.3 trillion in 2024, yet growth was a modest 3% nominally (1% in real terms), far below the decade average of 8%. At the same time, aggregate revenues of R&D-intensive firms fell nearly 2.7% in real terms, boosting R&D intensity to its highest level since 2018 at 5.5% of revenue.

Meanwhile, foreign direct investment retreated 11% to USD 1.5 trillion in 2024, signaling broad investor caution. Ideas abound, but the scarcity of patient, diversified future-oriented capital threatens to slow the pace of innovation.

Unlocking New Geographies

Innovation leadership remains concentrated. Switzerland, Sweden, the United States and the Republic of Korea occupy the top four spots on the GII 2025 ranking. Israel leads in venture capital received, while Hong Kong excels in FDI inflows.

Yet middle-income economies are rising. Nations such as Namibia, Vietnam and Colombia are making strides, underlining a theme of unrealized potential in emerging markets. By directing capital toward frontier hubs in Africa, Latin America, and Southeast Asia, investors can tap into high-growth opportunities and support homegrown breakthroughs.

Mobilizing cross-border funds into these regions requires tailored instruments—blended finance, local currency funds, de-risking guarantees—and close collaboration with local institutions. Such strategies nurture ecosystems where entrepreneurs can thrive.

Sectoral Frontiers: Picks and Shovels

R&D growth is uneven. ICT hardware, software and pharmaceuticals enjoy roughly 10% annual expansion, while automotive and consumer goods retrench under revenue pressure. Companies like Broadcom, NVIDIA and Samsung Electronics are scaling R&D by more than 50%, reflecting a concentrated sprint in computing capabilities.

This concentration highlights two clear pathways for investors:

• Back foundational technologies—semiconductors, cloud platforms and advanced materials—that serve as the building blocks of multiple industries.
• Target underfunded “old economy” sectors—automotive, manufacturing and agriculture—and support their transition through electrification, automation and decarbonization.

By combining these approaches, capital can amplify impact, driving innovation across both frontier and traditional domains.

Reimagining Venture Capital Allocation

Venture capital rebounded 7.7% in value in 2024, thanks largely to U.S. AI megadeals, yet deal counts fell 4.4% to about 43,000. Without the USD 40 billion pumped into AI champions like OpenAI and Anthropic, total VC would have contracted by over 3%.

In Q1 2025, three AI funding rounds—OpenAI (USD 37 billion), Anthropic (USD 3.3 billion) and Infinite Reality (USD 2.8 billion)—accounted for over 30% of all venture funding. As a result, software’s share of VC climbed to a historic peak of 50%, and AI alone represented nearly 56% of deal value.

This hyper-concentration creates two critical challenges:

• Early-stage startups in climate tech, life sciences and manufacturing struggle to raise follow-on rounds.
• Geographic disparities widen, as most VC remains clustered in U.S. technology hubs.

Investors can address these gaps by establishing specialized funds, adopting milestone-based tranches, and leveraging co-investment syndicates to spread risk and channel resources into diverse sectors.

Policy Levers for Closing the Gap

Governments and multilateral institutions have vital roles in fostering an environment that attracts innovation capital. Key policy actions include:

• Implementing targeted tax credits and matching grants for R&D in climate, health and digital infrastructure.
• Enabling public-private partnerships to de-risk large infrastructure investments in frontier markets.
• Expanding innovation visa programs to facilitate talent mobility and global collaboration.

These levers, combined with streamlined regulatory frameworks—especially for emerging technologies such as synthetic biology and advanced AI—can help bridge the financing divide.

Key Innovation Indicators at a Glance

Conclusion: A Call to Action

Innovation’s promise is boundless, but without strategic capital allocation and supportive policies, breakthroughs may remain confined to a few advanced economies and a handful of sectors. Investors, policymakers and ecosystem builders must collaborate to expand the horizons of funding—championing frontier markets, strengthening underinvested industries and supporting high-impact early-stage ventures.

By embracing a holistic approach—linking cross-sector collaboration, patient capital and targeted policy—we can ensure that the next wave of discoveries transforms lives across the globe and builds a truly better tomorrow for all.