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October 17, 2008

Fighting the flight: When community can help company

While still with Hewlett-Packard earlier this decade, Carly Fiorina offered some long-overdue advice to politicians on how to stimulate economic development.

Fiorina, speaking before the National Governor’s Association, basically told the assembled pooh-bahs to forget tax breaks, sweetheart deals, and other traditional inducements for businesses to come or stay.  If you want to lure HP to your community, she said, convince us that it’s a place where our workforce will want to live.

I’m hesitant to put too much stock in the opinion of someone who has played prominent roles in two sinking ships – HP (back then) and the McCain presidential campaign (still submerging) – but when it comes to luring young professionals (YPs), Fiorina is on to something.

Rebecca Ryan of Madison’s Next Generation Consulting relayed that anecdote during a recent Webcast, where she explained in detail the findings of a Global YP survey conducted by her firm. The survey not only confirmed the importance of YPs, but also their characteristics and preferences. It is the latter two that communities should pay attention to if they have any hope of building a knowledge economy.

Mobile, moneyed YPs

Next Generation notes that 50 percent of YPs in the communities surveyed are comprised of “transplants,” 18 percent are made up of “boomerangers” (returnees), and 32 percent are lifers (the old high school mafia).

This extreme mobility is no surprise, but there are other aspects to YPs that may shock the powers that be, including their financial condition. Their median income is $56,500, and about 71 percent are homeowners with an average home value of $184,000.

While they have a tight-fisted reputation, YPs actually are philanthropic and involved. Fifty-five percent of them had donated over $250 within the past six months, 94 percent are registered voters, and 77 percent voted in the last election (among the reasons the smart money is on Obama this time around).

Another characteristic – they tend to be fiscally conservative and socially liberal – points to potential for a third party that is philosophically structured along those lines.

They are very well educated – 84 percent have a four-year degree or higher – and they are entrepreneurial. The survey respondents include business owners that created 44,000 jobs with annual revenues of $713 million.

All the more reason to hang on to them, right? One would think so, but too many communities have a worrisome flight risk. Of those surveyed, 39 percent plan to stay in their communities for 16 or more years, but 15 percent plan to stay only one to four years, and four percent plan to leave within the next year.

Next Generation has come up with a formula to calculate the cost of YP flight. It incorporates the $56,500 medium income, a conservative accelerator of 1.2, and the number of YPs (693) that indicated they would be leaving in one to four years. The total impact of this YP flight was $47 million, or an average of $3.9 million per community surveyed.

Again, that’s on the low end, Ryan said. “That [1.2] is a small accelerator, very conservative,” she noted.

What do YPs want?

Perhaps the most important information from the survey is what YP’s value in a community. Among the things that matter most were cost of lifestyle, 98 percent; earnings, 96 percent; vitality, 93 percent; around town (how easy to get around), 91 percent; opportunities for learning, 91 percent; social capital, 87 percent; and after hours (entertainment after 5 p.m.), 87 percent.

It’s not easy to satisfy all these categories, Ryan said. Even the so-called “coolest” cities don’t always make it easy to spend money after hours, but others have scored with “stroll” or entertainment districts.

As for quality of life, Ryan expects gasoline to someday climb to $7 a gallon (the current drop in price notwithstanding), so services like thoughtful bus routes and connected bike paths are coveted by YPs. (Cold climates are no excuse: Madison’s bike paths are plowed before the streets are, Ryan said.)

That would explain a lot to those of us who nearly killed ourselves tooling around Madison in automobiles last winter, but you get the picture.

As Carly Fiorina noted, it’s worth providing YPs with what they seek, and most (if not all) of what they value is not out of the reach of Wisconsin communities. What price would you put on stemming the brain drain?


October 04, 2008

Stem cell concern: Public patience amid all the hype

When I listen to some politicians that support stem cell research, especially embryonic stem cell research, I understand why stem cell research pioneers like Dr. James Thomson try to be realistic when talking about its potential benefits, and the timetable on which these benefits will reach us.

It is the political season, and in the coming weeks we’ll hear a lot about the potential cures and treatments that stem cell research could produce. Be prepared, however, for snake oil salesmen (and women) that trot out families whose members suffer from conditions like juvenile diabetes and make it sound as though stem cell research will produce cures that are just around the corner.

It’s the latest version of “vote for me, and I’ll set you free.” They may be able to hoodwink some members of the public into believing this, but in the long run their baloney may be doing this promising research a great disservice in terms of public expectations and possible disillusionment.

I thought about this recently during the World Stem Cell Summit in Madison, where Thomson once again acknowledged how much work there still is to do, and following a recent chat with Alta Charo, a University of Wisconsin-Madison professor of law and bioethics. As people who are fully immersed in advancing stem cell research, they understand that the science is unpredictable and could benefit people in ways we don’t expect.

They also understand that the most immediate applications will not be cures for the most debilitating human diseases or regenerative applications like transplants, but in gradual improvements in the fundamental areas of public health.

Stem cell apps

“The most likely applications are not the kind people have in mind, not transplanting a pancreas in a diabetic, or the spinal cord of a paralyzed veteran,” Charo said. “Some of the applications will be things like creating test tube models of diseases so we can screen possible new drugs more quickly, more cheaply, and more safely than we currently do.”

Another important application, Charo said, is going to be the development of a safe human blood supply. At the moment, we rely on donations from individuals, but in the future we might be able to grow real human blood from embryonic stem cells or other kinds of cell lines, she noted. This could produce a blood supply that is manageable, abundant, and free of contaminants or viruses.

Another important application will be the in the study of genetic disease. Someday, we could be able to take cells from people who have genetic disorders and generate stem cell lines, whether through cloning or induced pluripotent stem cell work, and then grow those cell lines in laboratories so that researchers can see how a genetic mutation affects the normal growth of tissue. In this way, stem cells could help researchers understand how genetic mutations cause illness.

“That may give us some insights into new ways that we can try and ameliorate or even cure these diseases,” Charo said.

"A lot of those research applications don't have the wow factor that a human transplant does, but the public needs to appreciate that the most important developments may take place in less obviously dramatic areas of research, which are nonetheless hugely important in improving public health.”

Regarding human transplant work, Charo said the public soon might hear more about experiments in human stem cell lines that have been placed into animals. This will be done in order to test whether those stem cell lines can reliably be directed “to make the kind of tissue you want it to make, and make sure that that tissue then integrates itself into the body where you want it to integrate, and begin to function as that tissue needs to function,” she explained.

The idea of putting human tissue into an animal can be very alarming, Charo cautioned. “It's even generated some Congressional interest, and it is something that can sound science fiction-like,” she said. “It can sound dangerous. It can sound creepy even, but in fact it's a perfectly normal part of research.”

The harm of hype

These applications provide more than enough justification to support human embryonic stem cell research and ramp up federal funding beyond existing lines. (I’ve predicted that rescinding the Bush restrictions might be Barack Obama’s first official act as president, but I’m getting ahead of myself). Investing in stem cell research is both a short and long-term commitment, but it’s an investment that should be tempered with some truth about expectations.

During the World Stem Cell Summit, I engaged in some small talk with a couple of attendees about the cautious tone of Thomson, who serves as the director of regenerative biology at the Morgridge Institute for Research. One man seated in front of me, somewhat annoyed by Thomson’s attempts to fight the hype, actually questioned his commitment to regenerative medicine.

Imagine that. The man who first isolated and cultured embryonic stem cells, and who was instrumental in developing induced pluripotent stem cells, was having his commitment questioned.

Perhaps the hype already has gone too far.

August 15, 2008

Entrepreneurs need not wonder what angel investors want

Kelly Fitzsimmons admitted something that she probably wouldn’t have said to her company’s investors. Fitzsimmons, co-founder and CEO of the Wisconsin-based Comic Wonder, a Website dedicated to the fine art of joke telling, sheepishly confessed that she’s a rotten joke teller.

Fortunately, she’s a state-of-the-art entrepreneur, and that’s why the likes of the Phenomenelle Angels, Wisconsin Women Angels, and Wisconsin Investment Partners have committed so much to a company that produces nothing but grins.

Fitzsimmons, who spoke at the recent Wisconsin Innovation Network luncheon in Brookfield, is resigned to play “straight-woman” to her more comical husband, Jeff, but the lessons that can be taken from the early progress of their start-up business are no laughing matter.

Those lessons start with how to make a compelling pitch to would-be investors, which is just what they did at the 2007 Wisconsin Early-Stage Symposium in Madison. Not long after their rather succinct presentation, the Fitzsimmons were well on their way to securing $750,000 in capital, about a quarter of a million dollars more than they were looking for.

Although their elevator pitch to financiers took only a few minutes, Fitzsimmons probably can write an entire book about what investors want.

“We got seven minutes to convince investors that we were credible,” she said. “You need a compelling reason for them to invest.”

The compelling reason was simple, but it resonated: people love to laugh. The company offers content – namely, jokes – to client partners like radio stations, which use the content to drive traffic to their websites through joke-telling contests and other promotions.

Convincing skeptical investors that you’re going to change the world through audio jokes is not an easy sell, but the Fitzsimmons had gained some "cred" long before they told the story of their new venture in bits and pieces. Those bits and pieces included the following:

•    Comic Wonder is the only audio joke-telling site on the Internet, giving it first-to-market advantage.
•    Its key demographic is the highly coveted 18-to-34-year-old age group.
•    The business helps solve a problem for the medium of radio, an industry under siege from several directions (streaming video, iPods, and cell phones), and one that is having difficulty monetizing its online operations.
•    The company is shooting for a fast play of three to five years in the “mega-niche” of online comedy, now a $500 million market that’s expected to grow to $1 billion by 2010.

It didn’t hurt that Kelly Fitzsimmons had been there and done that. Tom Still, president of the Wisconsin Technology Council, introduced her as a “serial entrepreneur,” the kind that has launched, grown, and sold several companies. Her two successful exits, including the sale of a computer security company, are a testimony to her entrepreneurial track record.

Thanks to this success rate, the Fitzsimmons had the advantage of applying $450,000 of their own money upfront, which told investors they had a stake in the business.

They also avoided a very common mistake among entrepreneurs seeking capital – instead of a shoot-for-the-moon estimate, they attached a realistic valuation ($1.5 million) to their business. The temptation is to establish a high valuation, but that’s detrimental in several ways, not the least of which is that it can badly damage your exit, Fitzsimmons explained.

Comic Wonder also happens to have a clear exit strategy of acquisition in a space, online comedy, where acquisition activity is accelerating. In 2006, M&A deals in this space reached as high as $20 million to $25 million. In fact, by the time the Fitzsimmons made their investor pitch at the Early Stage Symposium, they already knew of an interested buyer.

“Within a month, we got our first tap on the shoulder from someone who said, ‘Hey, we’re interested,’” Kelly said.

The start-up company also could point to having highly respected fans in the technology world. To impress investors, Fitzsimmons used a quote from friend, author, and venture capitalist Guy Kawasaki, one of founders of Apple Computer’s Macintosh Division. Kawasaki, whose 10, 20, 30 rule – 10 slides, 20 minutes, and 30-point fonts - is considered a guide for such presentations, provided the following endorsement:

“Comic Wonder is like finding a $20 bill in your jeans. How can your day not be brightened?”

That’s not to say there were no worries. Comic Wonder has tackled several challenges along the way. Being able to scale up the website to handle the “killer joke” was one such example.

Comic Wonder, which wants to sell online advertising space, also had to acknowledge a hard truth about this potential source of revenue. According to Kelly Fitzsimmons, the large advertising agencies want websites to be at one million hits per month before they will take the site seriously, and 93 percent of the dollars in online ad revenue go to the top 50 sites.

At the moment, Comic Wonder can point to an impressive 600,000 page views a month, but there is more work to do.

Nonetheless, its best days are clearly ahead as new opportunities emerge. Not only has Comic Wonder established a model to create a turnkey, cross-platform service to help radio stations drive more people to their websites, the company is part of a web telephony industry that is just starting to gain traction.

Not every entrepreneur can be this alluring, but the key thing to remember is that from the investor’s point of view, it’s not so much about technology. It’s about the problem it solves, the size of the market opportunity, and the ability of management to deliver.

August 01, 2008

What Obama should say about Iraq and the surge

Upon his return from a triumphant foreign trip, presumptive Democratic Presidential nominee Barack Obama found himself in a rhetorical box over the improving situation in Iraq, which only a delusional person would not attribute to the troop surge launched in 2007.

For a variety of reasons, many having to do with unmet needs here at home, I agree with Obama that we should gradually reduce our troop footprint in Iraq early in the next presidential term. Ironically, it's the stunning success of the surge, and the growing effectiveness of the Iraqi military, that suddenly makes this a more likely scenario.

Yet Obama can't bring himself to admit the obvious: that the surge has exceeded everyone's expectations in reducing violence, which in turn has given the Iraqi government the space it needs to make progress on various benchmarks. I realize that Obama said the surge wouldn't work, but he should be thankful it did. Why? Because now we can implement his phased withdrawal without Iraq plunging into chaos, something no prospective President should wish upon himself.

Obama will have to eat his words, but he can also remind voters of President Bush's words. While running for re-election four years ago, the President summed up his policy succinctly: "When the Iraqis stand up, we can stand down."

Well, in becoming more effective in handling their own security needs, the Iraqis are standing up. They have become so confident in their ability to stand up that Iraqi Prime Minister Nouri al-Maliki has more or less endorsed Obama's timetable for withdrawal.

Four years ago, there was nothing in President Bush's rhetoric about permanent bases or a 100-year troop commitment (John McCain's words). Simply put, when the Iraqis were ready, we could leave and/or redeploy. The way things are going, Afghanistan looks like the most likely place.

Obama also can point out that if Bush had launched such a troop surge after the fall of Baghdad in 2003, we probably would have withdrawn by now. In fact, he can remind people that if Bush had been more patient with the United Nations weapons inspection program, we would have found out before the invasion that Iraq had stopped producing weapons of mass destruction - the Administration's primary justification for the war.

By refusing to admit the obvious about the troop surge, Obama has missed an opportunity to explain why his policy is not reckless, as McCain alleges. The Iraqis had to take the hand-off at some point in time, and thanks to the troop surge that time is fast approaching. Suck it up and say so.




July 21, 2008

The research rise of Wisconsin's "other" campuses

In a few short years, technology transfer won't be the sole province of the University of Wisconsin-Madison or UW-Milwaukee.

In fact, it's already spreading to Wisconsin's smaller universities, if the early-stage success of UW-Platteville spin-off Graphene Solutions is any indication. Last month, the nanotechnology business won the 2008 Governor's Business Plan Contest, and several research programs that could someday lead to similar tech transfer were on display last week at the Wisconsin Science and Technology Symposium at UW-Stout.

The symposium was revealing and encouraging, especially for those who believe the state's so-called "comprehensive campuses" can contribute to the strategy of building an economy around biotechnology and clean energy. One of those believers is Gov. Jim Doyle, who addressed the symposium on July 17.

Doyle noted the contributions of the WiSys Technology Foundation, which is trying to accommodate technology transfer from the comprehensive campuses in much the same way its parent organization, the Wisconsin Alumni Research Foundation, does at UW-Madison. Doyle called WiSys' efforts to apply WARF's tech transfer methods around the state as "incredibly important" to unlocking research and commercial development from that research.

Tech triumvirate

Another interested observer was Tom Wyrobek, president of Hysitron, a maker of nano-mechanical test instruments based in Eden Prairie, Minn. In the past, Hysitron has collaborated with the likes of the University of Minnesota, the University of California Berkeley, and the Massachusetts Institute of Technology, but now it is looking for collaborations with smaller, sometimes hungrier institutions.

Thanks to research that is growing in sophistication, some smaller schools have become the darlings of federal funding agencies. "When they get a pot of money, something will happen, as opposed to larger schools where you don't know," Wyrobek said.

The WARF tech transfer model isn't the only one in play. Lance Kuhn, customer service manager for Hysitron, said the company has been using a model that involves what he called the new technology triumvirate: smaller tech companies that develop cutting-edge products, academic institutions that validate the technology's efficacy (with faculty and student involvement), and industry that puts it to good use.

"They [industry] are the ones that have the real need and are the ultimate benefactors," Kuhn noted.

At UW-Madison, tech transfer has been part of the "Wisconsin Idea" for decades, but now smaller universities are lining up for a piece of the $150 billion federal R&D pot. About $1.5 billion of that is for nanotech initiatives, and that's where several of Wisconsin's comprehensive campuses come in.

The UW-Stouts and UW-Eau Claires of the world, not to mention tech colleges like Chippewa Valley Technical College, not only complement research being done at UW-Madison and UW-Milwaukee, they can complement and collaborate with one another. In fact, that's just what they are doing with the NanoRite Center for Innovation, a nanotech research center on the campus of CVTC. Together, they may do even more to fill the high-tech space between the Twin Cities and Eau Claire.

Charles Sorensen, chancellor at UW-Stout, expects the partnership to have a profound impact on economic development in northwestern Wisconsin and on the region's ability to attract segments of the creative class. "We are planning out a very careful way to be a major player in applied research for the UW comprehensives and in this I-94 corridor from Minneapolis to Eau Claire, which is a growth corridor," Sorensen said.

He's not alone in that view. Virtually every UW campus is trying to leverage faculty-student research. On display at the  Science and Technology Symposium were programs in genomics (UW-Stout), tissue engineering and high-oil corn (UW-River Falls), solid-state lighting (UW-Oshkosh), and nanoscale electronics (UW-Stevens Point).

Capitalizing on research

While the short-term, problem-solving benefits of the research has industry taking a close look, venture capitalists are taking the long view. Charlie Goff, general partner of the Appleton-based New Capital Fund, agreed that ramped-up research is a legitimate thrust for the likes of UW-Stout, but the ability to transfer research from the lab to the marketplace ultimately will determine whether these technologies attract risk capital.

"You have to find something that is close enough to prime time so that risk capital isn't going to get tired," Goff said. "I'm not sure there is more than a handful, but we have to be aware of these things as they occur."