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SBIR/STTR Grant Programs Still Need to Be Reauthorized by Congress January 17, 2011

Posted by Jim Price in Business, Entrepreneurship.
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I’ve commented in this space before about how crucial SBIR and STTR grants can be in providing early-stage funding for startups in a wide range of fields.  Congress has yet to reauthorize funding for this great program. 

In the final hours of last year’s 111th Congress, the U.S. Senate passed a compromise SBIR/STTR Reauthorization bill, but the same bill ran out of time in the House.  Now, with a revised power structure in both houses in the 112th Congress, it’s not clear what will happen.  Follow this critical issue in the excellent SBIR Insider Newsletter by Rick Shindell here: http://www.zyn.com/sbir/insider/sb-insider1-16-11.htm.

Why Google Succeeds at Intrapreneurship Where Most Big Businesses Fail January 15, 2011

Posted by Jim Price in Business, Entrepreneurship.
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Google just announced that John Hanke, its longtime Google Maps leader, was moving to San Francisco to head up a brand new Google incubator.  This little group of intrapreneurs — maybe fewer than 20 geeks — will be working on mobile, social-networking and location-based apps.  Here’s a good post from The New York Times with more details http://www.nytimes.com/external/readwriteweb/2011/01/14/14readwriteweb-leader-of-google-maps-to-launch-multiple-ne-29788.html?ref=technology.

Yes, I think it’s cool that Google will be hatching neat new “startups” in its new incubator. 

But the thing that caught my attention in this announcement was the theme of talent retention: that John came to Google through their 2004 acquisition of his Keyhole Inc.  Now, it’s not unusual for an acquired company’s top talent to stick around for one to three years.  Here’s what often happens:  the senior executives at the newly-acquired entity will have some sort of earn-out.  That is, a portion of the total acquisition price for the company is held back for 18-36 months until certain milestones are achieved.  These “golden handcuffs” are very effective at keeping the leaders from flying the coop in the short-run.  For the best technical talent, issuing stock options can incent them to stick around.

But you look up four, five, or six years down the road and top talent from Google’s acquired companies are still at Google, rocking, inventing and running things!  What’s up with that?  Aren’t these ADHD entrepreneurs attracted by shiny new objects? 

Why is it that some companies can grow big and successful, while somehow still maintaining their entrepreneurial culture and managing to hang on to creative people — the ones who normally would prefer smaller, more startup-oriented environments?

It’s been amazing in recent years to watch Google grow organically and keep its talented people.  But, as I mentioned in my last post, perhaps more impressive has been their remarkable track record of hanging onto the hot talent in the companies they’ve acquired.  You can’t imagine how hard that is to do, and how rare it is. 

Google understands the entrepreneurial mindset.  Keep the groups small.  Give people autonomy.  Be generous with credit when things go right. 

And, maybe most importantly, they make it clear that it’s cool to take risks.  And that when you take risks, you’re going to fail.  And that therefore, it’s not only OK to fail, it’s actually cool to fail. 

We entrepreneurs do that all the time.  We try creative new things — new product innovations, new pricing, new marketing innovations, wierd business models, whatever — all the time knowing they have a limited likelihood of succeeding.  We’re constantly running small, rapid, limited experiments with a “do-it/try-it/fix-it/do-it/try-it/fix-it/repeat” mentality. 

We entrepreneurs understand that it’s OK to try something when you only have 9% of the data to make a decision.  (Rather than adopting the big-company mentality, where such a dearth of decision-support information would trigger the response: “Form a committee… Continue to study…  Do nothing… Be safe…”)

The Googles of the world get that, and have established a culture that reassures its people that it’s not only OK to fail, but that, Hey, that’s how we all learn and improve. 

Using a skiing analogy, the first thing we learn in ski school is how to fall down.  Why?  Because if you’re going to push yourself beyond the bunny slopes and actually have fun, you’re going to fall, and that’s a good thing.  That’s how we learn and improve.  When you push off down a new slope for the first time, think of all the things you don’t know:  the undulating shape of the slope, how the clouds will dynamically change the light conditions and you go down, the condition of the snow and ice, the position of stationary objects such as trees and poles, the changing positions of moving obstacles such as other skiiers, etc. 

If you were completely risk-averse, you’d never push off down the slope, because there would simply be too many unknowns.  You stand frozen (in more ways than one) at the top of the run and form a committee and continue to study.  You’d never start skiing.  How dumb.

The best skiiers — the best entrepreneurs and intrapreneurs — are comfortable pushing off down the slope despite many unknowns.  We need to feel comfortable making decisions in environments with a profound lack of decision-support information.  And at some point, there are so many unknowns in a decision-making situaiton that we go from uncertainty — i.e., there are certain things we don’t know — to uncertainty squared, or ambiguity — i.e., we don’t even know what we don’t know.

Entrepreneurs are comfortable making decisions in the face of ambiguity, and with the idea of failure and learning from failure.  The best intrapreneurial environments build that into their culture.

That’s how you foster intrapreneurship.  That’s how you grow talent and hang onto talent.

Are Smartphones and Tablets Taking Over? January 10, 2011

Posted by Jim Price in Business, Entrepreneurship.
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Interesting post in the Wall Street Journal from Mike Malone and Tom Hayes, posted from the ongoing Consumer Electronics Show in Las Vegas:  “Bye-Bye, PCs and Laptops,” http://online.wsj.com/article/SB10001424052970204527804576043803826627110.html

Do you believe that mobile devices and tablets will be handling most of our personal computing needs within a couple of years?  One of their arguments is that so-called creatives are stampeding away from traditional PC development environments and are now developing for mobile devices.  A pretty cogent point:  When was the last time you met a smart/driven young creative yearning to work on Windows apps?

Shepherd Intelligent Systems is One Smart Startup January 9, 2011

Posted by Jim Price in Business, Entrepreneurship.
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There I was, holding five back-to-back meetings last Friday at Sweetwaters® Coffee & Tea (www.sweetwaterscafe.com – I tip heavily to relieve the guilt of not paying rent), when Andy McColm, a VC with Early Stage Partners (www.esplp.com), strolled by our table to wish Adrian Fortino and me a happy new year.  As the three of us chatted, I found myself blurting out to Andy, “I love this guy [Adrian]… he’s got his startup raising the best kind of startup capital:  recurring revenue from paying customers!”

Of course, my tongue was firmly planted in my cheek, because revenue does not, technically speaking, count as paid-in capital at all.  It doesn’t show up on the balance sheet of the company.  Unlike paid-in equity capital, customer revenue doesn’t dilute shareholder’s equity ownership.  Unlike borrowed capital (debt), customer revenue doesn’t have to be paid back with interest.   

Adrian Fortino was taking time to fill me in on progress with his startup, Shepherd Intelligent Systems (www.shepherdintelligentsystems.com), where he serves as CEO of the dynamic company he cofounded with CTO Jahan Khanna.  Shepherd’s Magic Bus™ platform is an extremely clever and unique application of Google Android phones’ GPS technology integrated with realtime server software technology that provides vehicle location information and highly accurate predictive arrival time to both passengers and managers of public transportation and municipal systems.  

Based in Ann Arbor, the company has successfully implemented the Magic Bus platform on several transit bus systems including the University of Michigan Transit fleet, the Indiana University/Purdue University/Indianapolis transit fleet, and the Kent State University Transit fleet.  Sheherd is now focused on a national roll-out in route-based public transportation (think buses, light rail, subways, etc.) and non-route-based transportation (taxis, limos and the like).

So why was I so excited about how Adrian and his team are building Shepherd Intelligent Systems from scratch? 

  • They’re doing it intelligently (excuse the pun) by following market signals and responding directly to the needs of paying customers. 
  • They’re allowing the market to pull their solution in, rather than spending other people’s money developing something they think the market needs, and then pushing it on a market that may or may not want it.
  • Their SaaS (software-as-a-service) business model brings multiple benefits to the party: customers pay up-front for each years’ annual subscription, helping Shepherd with working capital;  the incremental cost-of-goods-sold (server support, etc.) to support each incremental customer is remarkably small; 
  • They’re going after an addressable market ($1 billion+/year) that’s plenty big enough for a startup, but not so big as to attract the Googles of the world as competitors.

But finally (and back to my original point) Adrian, Jahan and company are crafting Shepherd Intelligent Systems on a pay-as-you-go basis.  It may not be pretty, but it’ll pay huge dividends in the long run, because they’ll come out with a market-driven business, and one that’s owned and controlled to a greater extent by the founders and employees.