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innovation DAILY

Here we highlight selected innovation related articles from around the world on a daily basis.  These articles related to innovation and funding for innovative companies, and best practices for innovation based economic development.

When Bad Things Happen to Good InnovatorsDr. Janice Presser, CEO, The Gabriel Institute

Sound familiar?

  • Your startup seemed to have essential Angel funding ‘in the bag,’ but for some reason the money never arrives.
  • A strategic alliance took months to establish, and can nearly double your revenue projection, but suddenly your new partner gets bought by a competitor and the deal is off.
  • The new marketing materials are ready just in time for product launch at a major show, but a storm in the Midwest delays the shipment, leaving you empty-handed.

Bad things do happen to good entrepreneurs—all too frequently.  Some manage to recover and others don’t. Is there a way to distinguish the teams that will step up from the teams that give up?

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As the market improves, many start-up owners are likely be thinking about raising funding. With my latest startup, I’m now a venture-backed startup founder (I’ve raised $33 million in three rounds of capital for my marketing software company). So, I’ve got some direct experience with the process. Several of the companies I’m an angel investor in or otherwise involved with have also been in the fund-raising process. So, along the way, I’ve learned a few things, and I’d like to share them with you.

There’s already lots of great content on the web about raising capital and understanding deal terms. But, I figured it wouldn’t hurt to share some of the “lessons learned” from my own experiences.

1. Get the first round right: The terms of your Series A deal are very important. Not just because of the impact on that first round, but because many of those same terms are likely to carry through to future rounds. It’s tempting to concede on some important terms but try to resist that temptation. When negotiating the term-sheet for your Series B or Series C round, the “base” terms (the starting point of negotiations) is whatever terms were in your Series A. So, if you agree to some non-favorable terms on the “A” round, you’re likely going to continue to pay the price for that in future rounds as well.

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Fast Company Logo A reader asks:

“How do you set a valuation for a start-up company?”

I’ll answer the question with a few other questions (and answers) of my own:

How much money do you need?

First, figure out how much money you need to run the business for “two rounds” and then add 3 additional months of expenses. “Two Rounds” refers to periods of time in the business to sufficiently provide a test of your product/service/store. The test is to determine if you have a viable product/service that people will pay money for and see value enough to either refer someone else or buy from you again.

For the sake of this example let’s assume you need $50,000 to run the business for two rounds plus the extra 3 months.

If you need to raise the $50,000 you now need to determine a valuation. The question next is: How much of the company will you sell for $50,000?

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altThere is a flurry of activity on the University of Missouri campus related to technology transfer. The technology transfer group is all but taking over the third-floor offices in the Bond Life Sciences Center. In engineering, newly constructed offices will house a technology transfer staff about equal in number to the number of engineering faculty who are actively trying to commercialize technology through the university. In addition, President Gary Forsee is giving an additional $5 million to the business incubator center.

The MU faculty would gladly welcome a technology transfer office that would regularly succeed in commercializing the employee-inventors’ technologies. For many of us, few things are more motivating than to see our laboratory breakthroughs make it to commercialization where they can help society.

Sadly, the MU technology transfer groups do not rise to this challenge. The need for a $5 million influx of funds to the business incubator is evidence of this — that center was supposed to be self-sufficient. An absence of companies using the facility, however, necessitates that someone step up to pay the mortgage.

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Campus Connection: UW-Madison among leaders in licensing revenueThe Chronicle of Higher Education is reporting that academic inventions spurred the "creation of a record 543 new university spinoff companies in the 2008 fiscal year, while generating more than $2.3 billion in licensing revenue for 154 institutions and their inventors."

According to this Chronicle survey, the University of Wisconsin-Madison was one of just 10 institutions that reported licensing revenue of more than $50 million. The survey shows UW-Madison ranked No. 9, with $54.1 million in licensing income.

Only four institutions brought in more than $100 million in licensing revenues: Northwestern University ($824.4 million); University of California system ($146.3 million); Columbia University ($134.3 million); and New York University ($104.3 million). In addition to Northwestern and Wisconsin, the University of Minnesota ($84.7 million) was the only other Big Ten Conference institution in the top 10.

The Wisconsin Alumni Research Foundation, or WARF, is the entity which helps patent discoveries of UW-Madison researchers and licenses those technologies to companies across the globe.

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The Collapse of Innovation in America?Remember the myriad of jokes back in the early eighties when products were showing up by the groves with the imprint “Made in China”. If anybody even noticed at all, it seemed to be acceptable when low-paying manufacturing jobs were leaving overseas by the hundreds of thousands. First it was the toys and widgets. Then it was the shoes and clothing that were being lost to cheap foreign competition. Next up was the steel industry, shipbuilders and auto manufacturing. Furniture and household goods were also hard hit. Outsourcing has also found its way into higher-paid jobs; software development, aerospace, animation, electronics and all forms of technology are now under threat. To understand more of this read the article; The Death of American Manufacturing.

We are now seeing the erosion of our manufacturing and production capabilities at a faster pace than ever before. Towns and cities all across America have been impacted by the rise in outsourcing. In fact outsourcing our production and manufacturing are the leading factors in the rise of unemployment. Unemployment continues to post record numbers as more and more companies are finding themselves in a position where they can only compete if they cut costs down to the bare bones. Companies must conserve like never before. Even those companies who would have never dreamed of outsourcing their jobs to overseas markets just a few years ago are finding themselves in a position where the economics demand it. There is this deep sense of fear that has gripped Corporate America as small business continues to bleed red and jobs are increasingly scarce.

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dollar symbol 300x199 Entrepreneur True CharacteristicsIt is said that in order to become a successful individual in whatever endeavor you wish to take, you must have the right attitude and characteristics. This is also true with an entrepreneur. Not everyone can become an entrepreneur. But before anything else, what is an entrepreneur?

According to one definition, an entrepreneur is someone who finances or initiates a certain business undertaking. If you too would want to become a businessperson, you have to possess the characteristics of an entrepreneur.

What are the characteristics of an entrepreneur? Are they really important? Well, of course the characteristics are important because if you don’t possess them, you will have lower chances in terms of business success. The characteristics are as follows –

1. Risk taker – this is a very important characteristic of an entrepreneur. If you’re not willing to take any risk, then you will not succeed as a businessperson. In the everyday course of the business, you will encounter a lot of problems and challenges which you need to decide the soonest.

Some risks are worth taking after careful evaluation especially if it’s for the good of the business. If you’re not a risk taker, then you’re not an effective entrepreneur and you’re bound to fail in your business undertaking.

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Understanding the Startup Financing Process Many budding entreprenerus, and especially those without a background in finance, and even those with a background in finance won't really understand how the startup financing process functions.

Or more adequately how you go from cracking open your piggy bank to issuing shares on the DAX, or any stock exchange for that matter.

But first thing's first, your 3F's are your Friends, Family and Fools, and they're the only ones willing to donate some money to your cause, friends and family, cause they care, and fools, cause well only a fool would give someone they don't know cash.

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altWe make marketing blunders when we don’t know who it is we’re marketing toward or when we try to treat all of our customers the same way. The truth is that our customers are not the same. They don’t take to marketing the same way, they don’t want the same things and they’re not equal in what they mean to our business. By segmenting customers into different “buckets” or personas it allows us to create a more targeted experience, while also helping SMB owners to better manage internal resources.

How Narrow Should You Segment? How Many Groups?

The simple answer is to create as many as make sense, whether that means creating two or twenty. Segmenting too broadly will take away your ability to customize service to the segment, while segmenting too narrowly may reduce profitability. You want to segment customers by the common characteristics shown to affect conversions. For example, if you’re a local hardware shop, you may only find that you have two customer types – Commercial and Non-Commercial. If you’re a florist, maybe you want to create an entire segment for marketing at Special Occasion customers or Men Buying For Wives. Once you get into the data, your segments should become fairly obvious.

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Vicki Farrar, co-founder and CEO of Catheter Connections poses for a portrait at her home/office Wednesday July 23, 2008. **************** Catheter Connections is a new company that is attempting to commercialize a technology donated to the University of Utah. The technology would virtually eliminate serious illnesses and deaths caused by bacteria that enter humans thru catheters. Photo by Chris Detrick/The Salt Lake Tribune frame #_1CD8232 (Chris Detrick)A few years ago, nurses Michael Howlett and James Mercer began patenting concepts for catheters that would block the transmission of pathogens into patients' bloodstream -- the cause of infections that cause up to 100,000 preventable deaths a year.

"We're providers, we take cake of patients and we saw a need for a device that would prevent catheter-related infections. We designed a prototype and got a provisional patent, then looked for someone to turn it into a reality," said Howlett, who works with Mercer at Salt Lake City's VA Hospital. "It's hard for a couple little guys to get to the titans of industry."

Instead they went to University of Utah biomedical engineers who developed their ideas into marketable products and fledged a company, Catheter Connections, one of 20 the U. spun off in 2008.

This young company, which doesn't even have an office yet, is a reason the U. now leads the nation in spinning off companies, finally catching No. 1 Massachusetts Institute of Technology, one of the nation's premier research centers.

The U. performs well not only in creating companies, but also in filing patents (119), patents awarded (33) and generating revenue from licensing technology ($26.2 million), according to 2008 rankings released Tuesday by the Association of University Technology Managers, or AUTM (pronounced "autumn").

U. officials say the U. has surpassed its Massachusetts rival in fiscal year 2009 with 23 spin-offs, versus MIT's 20.

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ZawyaJEDDAH - Saudi Arabia will become one of the leading countries in the world because of its investment in science and technology.

This is the view of Prof. Choon Fong Shih, President of King Abdullah University for Science and Technology (Kaust). He was speaking during the second session of the final day of the Jeddah Economic Forum Tuesday.

Shih said Kaust has brought in a number of experts from various fields such as science, engineering, and economics to exchange their experience and knowledge with Saudis.

He also spoke about sustainable prosperity through science and technology and specifically the role of Kaust in advancing science and technology through education and research. The mission of Kaust also involves catalyzing diversification of the Saudi economy through innovation and enterprise as well as connecting people and improving lives through science and technology.

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tankart.jpg"The best way to grow Maine’s economy is through creative enterprise," said David Cheever of Maine’s Cultural Affairs Council. "The creative economy taps into why people do what they do. The quality of life in Maine is so good, people want to live here. We need to trumpet the success story of how Maine is continuing to attract people in the creative sector. The governor sees where the best chance of growth is, in the economy, and that’s in people who want to live here and do things that ad value to all our lives."

Cheever made those remarks back during the economic growth period of President George W. Bush. He has been much quieter since the beginning of the recession of President Barack Obama.

Cheever wasn’t alone in heralding the golden path of Maine’s creative economy. “The economic engines that create opportunity are our people — our youth, our creative workers and our creative entrepreneurs — and we must provide them with the resources and support to be able to succeed," Governor John Baldacci said back when the only thing Democrats had to complain about was the Iraq war. We still have that war and have tossed in a crippling lack of jobs- creative or otherwise. "The creative economy is a major piece of my economic development plan.”

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