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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.

Toward the end of his era as a full-time Microsoft executive, Bill Gates would often spend a week or so visiting and speaking at college campuses across the country, talking about his vision for the future of technology and trying to keep the Redmond company at the forefront of college students' minds.

In his absence, that role has been assumed by Craig Mundie, the company's chief research and strategy officer. But like an aging rock star who can't resist the allure of the road, Gates announced last night that he'll be back at it next week -- visiting UC Berkeley, Stanford, the University of Chicago, Harvard University, and MIT.

You can almost hear the students now: Bill Gates? He's still touring?

This time around, Gates will be conducting the college tour not for Microsoft but for the Bill & Melinda Gates Foundation, and speaking not just about technology but about the broader issues facing the globe.

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Tyler Jordan PluhacekTyler Jordan Pluhacek--but he goes by the name of TJ--is a 16-year-old high-school student from Lake Oswego, just south of Portland, Oregon. His favorite subjects are Math and Spanish, and he's an accomplished guitarist and harmonica player with a passion for Blues and Ragtime from the '20s and '30s. He lives at home with his Mom and younger sister. Oh, and he's designed a $.99 app for the iPad.

You might expect a teen developer to come up with a frivolous app--a game, perhaps, or something more throwaway. Not TJ. NoteLook is a pretty serious tool aimed at both students and business people, and it helps you organize your note-taking. But then, TJ is not your average teen. He's extraordinarily focused--when asked what he wanted to do after school, this was his response. "I've spent more time than most people looking at my options. When I go to college, I want to obtain degrees in both computer science and business management, and my plan is to become an entrepreneur and start up my own software development business."

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It’s said that on Twitter it’s not the number of followers you have that counts, it’s how many times you’ve been retweeted. And there’s some truth to that. While follower counts can be tricked, inflated or simply represent the number of people actively ignoring you, retweets show people actually engaging with what you’re putting out there. Having your content retweeted by your network means adding exposure, additional authority, and, more importantly, that people like what your brand is doing or saying. And that’s a pretty big metric to keep an eye on while participating in social media.

Last month I wrote about 5 ways to track Twitter sentiment. After that post, SmallBizTrends reader Mark Harbeke emailed me looking for tools to help him track retweets. I was able to offer him couple early recommendations, but it made me want to dig deeper to see what was available for SMB owners looking to track retweets.

Here are some of the most valuable tools I stumbled across to help SMB owners measure influence.

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It’s not enough that Warren Buffett has become one of the richest men in the world. He’s also a world-class storyteller – and nowhere does this gift go on public display more than in his annual letter to shareholders.

His latest  letter on the Berkshire Hathaway Web site offers terrific lessons for startup ventures in shaping their communications.

Lesson No. 1: Converse Like a Real Human Being

There’s something about a position of power that often causes perfectly normal executives to embrace “corporate speak.” Their communications become stiff and jargon-filled drivel.

In contrast, look at how Buffett explains his philosophy of empowerment:

We tend to let our many subsidiaries operate on their own, without our supervising and monitoring them to any degree. That means we are sometimes late in spotting management problems and that both operating and capital decisions are occasionally made with which Charlie and I would have disagreed had we been consulted.

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Writing about this Morgan Stanley chart on his blog, mega-VC Fred Wilson writes:

"Even though I've been saying for years that social networking will one day usurp email, it's a bit shocking to see that it has.

There are some caveats. My kids use Facebook as their primary inbox (they also use gmail). So some of what they do on Facebook is actually email.

But even so, it looks like email's reign as the king of communication is ending and social networking is now supreme."

chart of the day, social networking vs email usage, 2006-2009
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As national organizations that support the start-up and growth of innovative small businesses, we want to express the importance of ensuring that the Restoring American Financial Stability Act of 2010 does not damage angel investing and particularly the entrepreneurial businesses they support. We join the Angel Capital Association in asking that two small sections in the bill be removed or modified:

  • Section 412 and 413, Adjusting the Accredited Investor Standard for Inflation. As currently written, this section could result in the elimination of as many as two-thirds of all accredited investors who invest directly in start-up and early-stage small businesses.
  • Section 926, Authority of State Regulators Over Regulation D Offerings. This section could make it more difficult to raise angel capital from investors in different states, make it unclear what entities regulate angel investments, and introduce potential lengthy waiting periods for businesses to receive their capital, possibly resulting in the death of those businesses.
  • We appreciate the importance of regulation to protect investors from fraud, but we urge the Senate to consider several factors in improving these sections of the legislation:
  • Entrepreneurial companies are important to job creation and innovation in the United States. We note particularly the study by the US Census Bureau that companies five years old or less created all of the net new jobs over a 25 year period.
  • Angel investors are an important source of capital for many of these innovative start-ups. For instance, one of the signatories to this letter, the Association of University Technology Managers (AUTM), has tracked the source of initial funding for university spin-out companies for the past five years. They have consistently found that accredited individual investors are the source of initial funding for a third of all university start-up companies. All of the signing organizations are therefore deeply concerned about any changes that would diminish the size of the pool of accredited investors.
  • Establishing standards that would significantly cut back on the pool of angel capital is especially difficult during the recession, when small businesses are having trouble finding capital, especially in the $100,000 to $2 million range that is sometimes referred to as the “Valley of Death.”
  • Startup and seed investments are precisely the types of financing that need uniformity and simplicity the most. It is important to ensure that entrepreneurs raising capital have the same regulations regardless of their state and that they are not subjected to excessive legal costs, delays, complexity, and uncertainty that would follow from Section 926 as currently written.
  • Consider “beefing up” accredited investor protections for private offerings by clarifying who is disqualified from involvement in these financings and developing more accessible information on individuals and entities with prior records of fraud and deceit in any type of investment activity, so that federal and state securities regulators can more easily review Regulation D filings to ensure that new investment offerings do not include those people and entities.

Thanks for your consideration of these issues and your support of innovative small businesses. We want to ensure that the entrepreneurial startups that create important innovations and high quality jobs not only continue to have this important type of capital so they can grow, but that they are not subjected to regulations that make new and existing companies die for lack of capital or waiting to clear 120 day hurdles and large legal costs to get regulatory approval for the legitimate capital they raised.

Sincerely,

Dan Berglund State Science & Technology Institute

Marianne Hudson Angel Capital Association

Jim Jaffe National Association of Seed and Venture Funds

David Monkman National Business Incubation Association

Matthew Nemerson Technology Councils of North America

Rohit Shukla Larta Institute

Ashley Stevens, D. Phil (Oxon), CLP Association of University Technology Managers

Kerwin Tesdell Community Development Venture Capital Alliance

Eileen Walker Association of University Research Parks

Jennifer Simon, the director of Ohio University's Innovation Center, is pictured in this undated handout photo. REUTERS/handout/Ben French PhotographyCHICAGO (Reuters.com) - Longstanding stereotypes of Appalachia conjure images of a backwater region blighted by poverty. Now the state of Ohio is working to change that perception by promoting the region as an emerging hotbed for startups in industries such as high tech and alternative energy.

Entrepreneurs like Craig Newbold, a software developer who grew up locally in the town of East Liverpool along the Ohio River between Youngstown and Pittsburgh, are betting on the area's future. Newbold returned home after retiring from an information technology career in Seattle to found software development firm Newbold Technologies in 2003, with the aim of creating local opportunities.

"To me, areas like this have a lot of diamonds in the rough," said Newbold, whose father made his living running a local filling station in the area once known as the ‘pottery capital of the world.' "People that want to live here have the aptitude and the ability, but need to be developed."

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nvca_logo_jan10.jpgThough rising numbers from the final quarter for 2009 had many hopeful that 2010 would see a rebound of venture capital funds, new data from the Nation Venture Capital Association (NVCA) is bound to disappoint as Q1 2010 saw the lowest first quarter numbers (PDF) in 17 years. According to the NVCA, just $3.6 billion has been raised so far this year by VCs compared to $5.2 billion in 2009 and $7.1 billion 2008.

Back in January, we postulated that the uptake in fundraising by VCs during the final quarter of 2009 could lead to increased VC spending in 2010. The first quarter did see record breaking merger and acquisition numbers, but as NVCA president Mark Heesen points out, the IPO market continued to struggle - a fact he says may have contributed to the new low numbers for VC funds.

"Over the last two years, alternative asset allocations have declined and the exit market has suffered, putting venture firms in the unenviable position of communicating their value in an extremely challenging environment," says Heesen. "Many firms have been waiting until the exit market improves before embarking upon their fundraising efforts."

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Edmonton Journal business columnist Gary LamphierDuncan Stewart doesn't pretend to know where the world of technology is going, but he's never shy about expressing an opinion, usually with considerable vigour.

After two decades as a high-tech analyst, money manager, venture capitalist and media commentator, Deloitte Canada's resident high-tech guru also has the street cred to back up his views.

So when Stewart addresses the annual TEC VenturePrize awards luncheon Thursday, my guess is the audience won't be bored. Stewart has a habit of calling it as he sees it, whether good, bad or ugly.

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VENTURE capital and private equity investments in China jumped last month backed by positive investments in information technology industries, an industry report said today.

VC and PE firms invested US$418 million in 46 businesses through March, compared with US$292 million in 18 cases a month earlier, Zero2IPO Research Center said.

Investments in information technology sector totaled US$192 million, accounting for 46.2 percent of the total, in 20 cases, the report said.

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Tengion Inc.’s initial public offering on Friday harks back to the days when small venture-backed companies routinely employed boutique investment banks to escort themselves to the public markets.

The biotechnology company raised $30 million in the IPO, the smallest venture-backed offering since Feb. 19, 2008, when another unprofitable biotech, Bioheart Inc., earned just $5.8 million in proceeds in a slimmed down offering. Tengion is also the first such company since Bioheart to use boutique banks solely as bookrunners - which do the majority of work and collect the largest fees.

A year ago, the National Venture Capital Association urged the venture capital community to hire boutiques to take companies public, much like the industry did during the 1990s, arguing that VCs have relied too heavily on so-called bulge-bracket banks that aren’t interested in smaller companies.

Boutique investment banks can handle smaller transactions that have less appeal to larger banks. They’re also more likely to have staff with specialized experience needed to market offerings from small technology and health care companies to long-term investors, some observers say.

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The importance of firm formation to net job creation raises the question: Over time, are newly formed businesses employing more or fewer people? Given the number of net new jobs created from firm formation, a decline in startups’ average employment could pose problems for our economy’s ability to generate the jobs we need to reduce current levels of unemployment.

To figure out what has been happening to the initial employment of new businesses, I took a look at data from the Longitudinal Business Database of the U.S. Census (see figure below). The vertical axis measures the average number of employees per new business in its founding year. The blue bars show the average number of employees in new firms by year. The black line shows the five year moving average of that figure.

Rate of job creation by new businesses
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