Earlier in the convertible debt series we talked about the “discounted price to the next round” approach to providing a discount on convertible debt. The other approach to a discount is to “issue warrants”. This approach is more complex and usually only applies to situations where the company has already raised a round of equity, but it still pops up in early stage deals. If you are doing a seed round, we encourage you not to use this approach and save some legal fees. However, if you are doing a later stage convertible debt round, or your investors insist on you issuing warrants, here’s how it works.

Assume that once again the investor is investing $100,000 and receives warrant coverage in the amount of 20% of the amount of the convertible note. In this case the investor will get a warrant for $20,000.

The 2011 Popular Mechanics Breakthrough Awards honor innovators whose work will transform the world in years to come. They are reinventing the wheel—or, rather, the cell tower and the internal combustion engine; reaching new heights in wind power and space exploration; and figuring out clever new ways to clean up and observe the environment. They’re even helping the paralyzed to regain use of their legs. They’re determined and brilliant—and we can’t wait to see what they’ll do next.

A recent study by the Martin Prosperity Institute (Creativity and Prosperity: The Global Creativity Index) makes it clear why a solid, intimate and fruitful transatlantic relationship is needed. While many frantically point to China’s stellar economic growth and hunger for innovation, according to the institute it is actually “Old Europe” which continues to lead the way in economic and creative innovation.

The study takes a look at 82 key nations and their data on technology, innovation, human capital and other measures of economic competitiveness.

Richard Florida, director of the Martin Prosperity Institute and professor of business and creativity at the Rotman School of Management (University of Toronto) takes the works of Joseph Schumpeter and his focus on technology to help set up the study. The study measures innovation according to “three main metrics – research and development effort, scientific and research talent, and the level of innovation.”

In 1980, when I came to the United States to study, this was the only land of opportunity for skilled immigrants like me. It took less than 18 months for me to get a permanent resident visa, and I became a citizen as soon as I became eligible five years later. I came here to study, but ended up founding two technology companies, which employed hundreds of Americans. Later in life, I decided to give back to America by becoming an academic.

If I was arriving today, I would not have taken the same path.

Brazil's most popular automaker, Fiat, sought a design for its 2009 concept vehicle, the Fiat Mio. Rather than turning inward to its core team of designers and engineers to come up with the new look, the company turned outward­—and let the world decide how the car would look, feel, and drive. By crowdsourcing the design of the car through its website, fueled by a viral marketing campaign, the Fiat Mio became the world's first fully-crowdsourced vehicle, debuting at the Sao Paulo International Automobile Show to rave reviews. All in all, the car's design took into account some 10,000 suggestions from people in more than 160 countries.

"A good designer tries to realize the wishes of everyone, and with this concept car we were truly working on everybody's behalf," said Peter Fassbender, manager of Fiat's design center, Centro Estilo, in a release. "The group of designers working in the Fiat Mio house were totally open. There was transparency about every decision, which were all communicated online and commented on. This is completely different to the usual design process, which is entirely hidden and secretive."

Alexandra Levit thinks we need a reality check. Too many of us, she says, believe that we can quit our jobs, be controversial, and find overnight success pursuing our passions after fleeing our day jobs. Despite the slew of popular bloggers urging us to do just that, Levit, an author and speaker on career issues, insists it’s not the right path for most people. Instead, in her new book, Blind Spots, she urges us to work hard, fit in, and keep those day jobs.

“Today, it’s fashionable to say that you’re going to become an entrepreneur, that you’ll shun the corporate world to go out and start a business according to your own values and your own rules. But here’s the thing. Running a business is harder than it looks, and the idea that entrepreneurship is the best solution for everyone is a myth,” she writes.

According to a recent article in Slate, “Why Small Businesses Aren’t Innovative,” as world governments have reacted to the recession, significant focus has been placed on job creation and how to best support the so-called small business owner. Indeed, the small business owner has long been considered a central force behind the world’s free economies. At Endeavor, we too have long championed SMEs, but with a caveat. Our focus has been on scalable or “high impact” SMEs — businesses that have significant growth potential and can therefore play a disproportionate role in emerging market development.

In a rare move for a university, U-M will for the first time directly invest in its own startup businesses, President Mary Sue Coleman announced today.

Through the Michigan Investment in New Technology Startups (MINTS) initiative, the university could inject up to $25 million during the next decade into select venture-funded U-M startups — new companies built around inventions born in faculty members' labs.

"We believe in the work of our researchers," Coleman said, "and we believe in delivering strong returns on our endowment."

This past year Congress needed eight stopgap “continuing resolution” (CR) spending bills before the Senate and House of Representatives could craft a federal budget for the fiscal year that ended September 30. Already in the current 2012 fiscal year, one CR is in place through November 18 pending adoption of a budget.

Embarrassing as all that sounds, Congressional leaders have had to craft three years of temporary spending fixes for one small component of that budget that has helped startups in the life sciences and other technology fields transform their innovations into successful businesses. The Small Business Innovation Research (SBIR) program subsists on the same roughly $2 billion annual budget as it had when its authorization ended with the 2008 fiscal year.

The other day I received a phone call from a CEO of a pharmaceutical company. During our conversation this person mentioned they were in the process of unloading a non-core asset. I asked for some more details and learned how companies often develop certain valuable technologies. These technologies may be core to a clinical trial and successfully move a drug toward proof of concept. However, it may not be a fit for the company post commercialization. What do you do, retain or divest? Doing either presents additional questions. If you retain, do you build a business unit around it, or just keep it on the shelf? If you divest, are you out to make a profit, breakeven, or donate it and use it as a write off? What I found interesting wasn’t the fact that the CEO has determined to divest the asset, but how they described the process of unloading it akin to someone getting rid of a family pet, “We want to find it a good home where it can grow.” Apparently the technology is very good. So why not keep it? Maybe this is a means of diversifying your company. At conferences, I have heard a mixed message from investment gurus. Some advocate focus while others are proponents of diversification. It is hard to argue against diversification when you look at successful and yet very diverse companies (e.g. GE, 3M, Siemens, Hitachi, Bayer). Conversely, the WD-40 Company (NASDAQ: WDFC) has been quite successful with its rather focused approach. The answer to what to do seems to depend on your corporate strategy, vision, mission, culture and values.

Steven P. Jobs, the visionary co-founder of Apple who helped usher in the era of personal computers and then did nothing less than lead a cultural transformation in the way music, movies and mobile communications were experienced in the digital age, died Wednesday in Palo Alto, Calif.. He was 56.

The death was announced by Apple, the company Mr. Jobs and his high school friend Stephen Wozniak started in 1976 in a suburban California garage.

Steve Jobs, Apple co-founder and former CEO, has died at the age of 56.

Apple has posted this statement on its website:

Apple has lost a visionary and creative genius, and the world has lost an amazing human being. Those of us who have been fortunate enough to know and work with Steve have lost a dear friend and an inspiring mentor. Steve leaves behind a company that only he could have built, and his spirit will forever be the foundation of Apple. If you would like to share your thoughts, memories, and condolences, please email This email address is being protected from spambots. You need JavaScript enabled to view it.

There’s no mystical secret when it comes to being a successful business owner. There is certainly no definite set of rules to follow, either. However, you can learn a lot from entrepreneurs who have tried, failed, and finally succeeded before you.

We are all bound to make mistakes along the way, and there’s so much that we can gain from our mistakes. Some mistakes, though, are so deadly that they can cripple our business, so  obviously, we need to avoid them at all costs.

Below are some common mistakes that new entrepreneurs often make. See if any of them ring a bell, and do your best to correct your course as necessary to increase your chances of winning in the entrepreneurial game!

With the lack of a federal advanced energy policy, several states are seizing the opportunity to fill the void.  I was in Columbus last week to attend Ohio Governor John Kasich’s Energy and Economic Summit, which kicked off the development of a comprehensive energy strategy for the state. Personally, I found the opening remarks from Governor Kasich and from Joseph Stanislaw, author and the former president of Cambridge Energy Research Associates, very motivating.

One thing in the Governor’s comments that really resonated with me was that Ohio could work on a comprehensive energy strategy, which could be a model for other industrial states.  What if states continue to take a leadership role, share best practices and then link together their energy strategies – could they make a significant economic impact on the advanced energy industry as well as help solve our country’s energy puzzle?

Are you ready to take your company to the next level? Is it time to go get some of that easy flowing venture capital cash?

Most of the time the answer is a simple “nope.”  A company must be the right type of company at the right stage of their development at the right time in the market to be VC fundable.

5 BUSINESS TRAITS THAT MAKE IT DIFFICULT TO GET FUNDED 1. Leverage-bility – The business has very little margin leverage due to high variable costs and/or high cost of goods (COGs), resulting in low gross margins that don’t ramp up with volume. VCs love leverage-able financials.  COGs that represent single digit percentage of the average selling price are very attractive.  Single digit gross margins aren’t.

I’m often asked the question about why there aren’t more women who are entrepreneurs. On my blog I’ve been hesitant to take the topic head on. Somehow it seems kind of strange for a man to answer this question that obviously comes from a man’s point of view.

But last week I noticed a blog post by a woman, Tara Tiger Brown, that asked the question, “Why Aren’t More Women Commenting on VC Blog Posts?” [it's short, you should read it] . In it she observes that only 3% of the comments on this blog are from women. I would love to see Tara follow up with blog posts on: why she believes this is the case & what we can do about it.

It’s time for more entrepreneurs to reset their focus, and shift their thinking to completely different ways of doing things. Everyone talks about innovation, but the majority of business plans I see still reflect linear thinking – one more social network with improved usability, one more wind-farm energy generator with a few more blades, or one more dating site with a new dimension of compatibility. Serious changes and great successes don’t come from linear thinking.

In searching for ways to get this message out, I came across a no excuse, no apology, new book by Brian Reich, called “Shift and Reset,” which makes some excellent points on ways to increase the range of change in a person’s thinking, or an organization’s results. Here are some key principles that he espouses and I support:

Contrary to belief, older people in South Africa and Brazil become happier as they age. New research suggests that, with the right policies in place, a developing country can significantly improve the wellbeing of its older citizens.

The average levels of wellbeing experienced by older people in South Africa and Brazil improved between 2002 and 2008, due to a combination of economic growth and enlightened social policies, according to a study from the New Dynamics of Ageing Programme, a unique collaboration between five UK Research Councils.

Patent application review is an integral part of the examination procedures undertaken by patent offices before a patent grant is given. Prior art search is a complex and time consuming part of this process. Crowdsourcing this critical stage is a valuable opportunity to render the traditional patent application review process more efficient by separating the stage of prior art search from the patent grant procedure.

This article briefly describes the crowdsourcing phenomenon and then details how it can aid patent review. The open source review pilot projects of the USPTO and JPO are presented in order to assess the potential of opening prior art search to a wider community of experts and practitioners. Public-private partnerships between patent offices and companies managing online review communities are proposed as an opportunity to leverage the benefits of open review while providing sufficient incentives and quality assurances to yield useful contributions.