88X ROI

We've been watching some talks from the recent TED conference.  For those who may be unfamiliar with this program, it is an annual colloquium of the brightest and most imaginative thinkers, thought leaders, and overachievers from the worlds of Technology, Entertainment, and Design, discussing "Ideas worth spreading".

Juan Enriquez, Managing Director with Excel Medical Ventures and the CEO and Chairman of Biotechonomy, gave a fascinating presentation examining the economic meltdown, specifying strategies for recovery, and concluding with a look at some emerging innovations in life science technology presaging the emergence of "homo evolutis"; a humankind that takes an active role in its own evolution.

In the course of his talk, about seven minutes in, he made a remarkable observation about the impact of venture investment in the economy.  He said that investment in startups represented about .02% of GDP, whereas venture-backed companies produced 17% of GDP.  He mentioned it in passing as he transitioned from a laundry list of necessary cuts to public expenditure to areas where spending must be increased, but it certainly caught our attention.

Then we saw a similar observation in the Economist special report on entrepreneurship we discussed last week, and we tracked down the source.  As it happens, it comes from VentureImpact, a research paper commissioned by the National Venture Capital Association, and prepared by Global Insight with data provided by Content First.  The actual proportion of GDP invested in early stage companies in 2006 was .2%, and the output was 17.6%, which translates to a staggering 88x return on investment.

The study also documents

 that these companies

 produced more than

 10 million jobs, and over 2 trillion dollars in revenue that year, and the trend over the previous 6 years was consistently increasing.  Venture-backed firms also significantly outperformed the economy as a whole, producing more than three times the compound annual growth of jobs (3.6% vs. 1.4%) and nearly twice the growth in revenues (11.8% vs. 6.5%).

We've been on the lookout for solid evidence of our central thesis -- that the most effective strategy for economic development is innovation and entrepreneurship -- and this research certainly provides meaningful support for it.  The study was published in 2007, and analyzed more than 23,000 venture-backed companies.  An update to the study is in process, and is expected this June.  We look forward to it with eager anticipation.

Tom Hayes Stimulus Package

Our old friend Tom Hayes is at it again.  In an op-ed piece in yesterday's Wall Street Journal, he and Michael S. Malone critique the new administration's stimulus strategy, and offer suggestions for an innovation-based approach that certainly sounds more promising than propping up failed industries.

Readers of this page know that we have long argued that the best and most valuable jobs are created by entrepreneurs and the private investors who fund them.  And we've certainly celebrated the occasions when the public sector has recognized and supported entrepreneurial efforts, even while noting our disappointment in how little of that is evident.

Hayes and Malone rehearse the same catechism of entrepreneurship, innovation, private investment, and economic vitality, and go one to make some specific recommendations for policy makers to give serious attention.  Some highlights:

- First, kill Sarbanes-Oxley or make it voluntary. Right now.

- Allow entrepreneurs to more easily tap tax-free retirement accounts -- or better yet, let them create tax-free accounts specifically to fund themselves.

- Eliminate payroll taxes, which unnecessarily burden young companies. 

- Make the tax system more forgiving for Angel investors -- or allow the creation of tax-free investment vehicles similar to what we now see with nonprofit foundations or 529 college savings funds.

- Lower capital gains taxes on investments in early stage companies and higher taxes on later stage deals. 

- Help big business think small. 

- Convene a presidential summit on entrepreneurship and small business. The last president to do so was Ronald Reagan in 1982.

Hayes and Malone elaborate on these points, and we highly recommend their article as "required reading".  

In the "Q"

As long-time subscribers to McKinsey Quarterly's email newsletter, we enjoy the in-depth analyses featured on their website.  We'll continue to alert readers to useful and relevant content we encounter through this channel (links back to the Quarterly site require free registration for access to the entire article.)  We cited a report from the "Q" earlier this month, and now we are delighted that today's inbox brings credible third-party validation of one of our central theses: invention is science, innovation is economics.  

Excerpted from his recent book, Amar Bhidé makes a compelling case that despite falling behind rapidly emerging BRIC economies in secondary and higher education in STEM competencies and pure research generally, the United States enjoys a competitive advantage in applying discoveries from the laboratory to real-world uses.

Technological innovations, especially high-level ones, usually have limited economic or commercial importance unless complemented by lower-level innovations. Breakthroughs in solid-state physics, for example, have value for the semiconductor industry only if accompanied by new microprocessor designs, which themselves may be largely useless without plant-level tweaks that make it possible to produce these components in large quantities. A new microprocessor’s value may be impossible to realize without new motherboards and computers, as well.

New know-how and products also require interconnected, nontechnological innovations on a number of levels. A new diskless (thin-client) computer, for instance, generates revenue for its producer and value for its users only if it is marketed effectively and deployed properly. Marketing and organizational innovations are usually needed; for example, such a computer may force its manufacturer to develop a new sales pitch and materials and its users to reorganize their IT departments.

Bhidé makes these observations in the context of anxieties in the policy and media communities about America losing it's "edge", and his concerns about resorting to protectionism or diverting scarce resources to pure research activities, or "what the economists Sylvia Ostry and Richard Nelson call techno-nationalism and techno-fetishism".

Techno-nationalists and techno-fetishists oversimplify innovation by equating it with discoveries announced in scientific journals and with patents for cutting-edge technologies developed in university or commercial research labs. Since they rarely distinguish between the different levels and kinds of know-how, they ignore the contributions of the other players—contributions that don’t generate publications or patents.

They oversimplify globalization as well—for example, by assuming that high-level ideas and know-how rarely if ever cross national borders and that only the final products made with it are traded. Actually, ideas and technologies move from country to country quite easily, but much final output, especially in the service sector, does not. The findings of science are available—for the price of learned books and journals—to any country that can use them. Advanced technology, by contrast, does have commercial value because it can be patented, but patent owners generally don’t charge higher fees to foreigners. In the early 1950s, what was then a tiny Japanese company called Sony was among the first licensors of Bell Labs’ transistor patent, for $50,000.

In the current economic climate, it is critical that resources and regulations be more closely aligned with the successful commercialization of new science, rather than deep, long-range investments in adding to the store of human knowledge.  As we have seen, the economies that benefit most from commercial application of new technology are not necessarily the ones in which it was patented.  License revenue and royalties create few new jobs.

Since innovation is not a zero-sum game among nations, and high-level science and engineering are no more important than the ability to use them in mid- and ground-level innovations, the United States should reverse policies that favor the one over the other, and it should cease to worry that the forward march of the rest of the human race will reduce it to ruin.

Immigration policies that favor high-level research by preferring highly trained engineers and scientists to people who hold only bachelor’s degrees are misguided too. By working in, say, the IT departments of retailers and banks, immigrants who don’t have advanced degrees probably make as great a contribution to the US economy as those who do. Likewise, the US patent system is excessively attuned to the needs of R&D labs and not enough to those of innovators developing mid- and ground-level products, which often don’t generate patentable intellectual property under current rules and are often threatened by easily obtained high-level patents.

Even factoring in outsourced manufacturing and back-office services, the most (and best) net new jobs are created by innovators who find a crying need and fill it with creative solutions fashioned from new discoveries and existing technologies alike.  As we've pointed out elsewhere, an innovative company isn't necessarily introducing widgets, but is also applying novel thinking and imagination to improving established business processes for greater effectiveness or efficiency.  Cloud computing, for example, offers familiar software capabilities, but in a new form factor and delivery model.  That's not the sort of thing you invent in a lab.

New Rules for Policymakers

Rule #1: Don’t Get Bogged Down in the Minutiae - Take Action Now!
By Golden Capital Network CEO Jon Gregory

In President Obama’s inauguration speech, he made a statement that will resonate with many local policymakers and civic leaders in cities and counties across the country seeking to make proactive change in their own communities: “The time for standing pat has passed.”

When it comes to economic development, which is a highly compelling current issue, it is clear the time for standing pat has also passed. Numerous studies and reports issued by credible organizations in the U.S. and abroad point to business innovation as the leading contributor to jobs and wealth creation, community prosperity, and economic competitiveness. Based on these reports, policymakers and civic leaders across the country, in metropolitan areas and small towns alike, are anxious to implement innovation-driven economic development initiatives to accelerate local economic recovery and growth.

The innovation-driven model represents a new approach for many communities and economic development practitioners that have historically focused on industrial attraction campaigns as the stimulus for economic development. While the industrial attraction approach -- and others like tourism development, downtown revitalization and micro-enterprise development -- are important components of an overall strategy, they should not represent the “end all” solution in today’s dynamic global economy where new industries rapidly emerge and grow (and other industries conversely decline). Because of this modern-day reality community efforts to support and add value to promising entrepreneurial companies similarly need to be high on the action agenda for economic development.

You’ve by now read all the compelling reports about innovation. And are enthusiastic and ready to move forward with your strategy to improve the local economy, today!!! Whoa bubba. Wait a minute. Sit down, relax and take a deep breath. I know I don’t have to tell you this, but bureaucracies can be resistant to change and slow to act. Fortunately, I’m here to tell you that you don’t have to play by the old rules. Local policymakers and civic leaders have within the realm of possibility a means to start fostering an innovation-focused economic agenda that doesn’t require a lot of financial resources or council approvals.

Three statements you may hear at the beginning of your efforts to make change should serve as red flags. The first statement is: “Let’s schedule a meeting with all of the nonprofit partner organizations in the community who deal with economic development.” The goal of such a meeting – to the start the process of creating collaboration – is, of course, good. But are the “usual suspects” the right partners to have involved in the collaboration? What resources do they bring to the table? What is their current agenda and is it in alignment with the objective of this effort, or will it really serve as an impediment or roadblock? And, perhaps most importantly, how long will it take them to obtain the necessary approvals from their board to participate? After all, your goal is to move quickly!

The second red flag is: “This sounds like a good idea, let’s hire a consultant and do a feasibility study.” As I’ve already stated, numerous reports, studies and articles have concluded innovation is an integral part of the process for any community or region seeking to enhance its economic condition and competitiveness. If you go down the traditional feasibility study route, the process is likely to take a minimum of 6 months, at best, to cycle through. Can you afford to wait that long?

Venture capitalist and angel investor Roger Akers of Akers Capital suggests a different approach: “To begin this process, I would first call on successful entrepreneurs and CEOs, and all of the regional lawyers, investment professionals, senior University leadership, venture capital companies, angel group leaders, appropriate non-profits and economic development leaders to attend a two-day workshop to be educated in the current and needed capabilities of the region relative to new business formation and development and why it is so important.” A single focus group with 8-12 private sector leaders in the innovation sector can get you the information you need to move forward in 2 weeks (at most). There are many projects requiring extensive feasibility studies. This isn’t one of them. You don’t have the luxury of time on your side.

The third red flag is: “Let’s include your project during the next cycle of potential funding applications the city (or county) could consider submitting for a grant later this year or next year.” Leverage state, federal and foundation grant resources to fund high-impact projects in your community. But putting important community projects put on hold while waiting for the big-ticket funding source is wrong.

An excellent example of a proactive civic leader is Charlie Brown, executive director of NoRTEC, a consortium of workforce investment organizations in rural Northern California. Charlie has been very successful accessing state and federal resources over the past couple of decades. He didn’t wait for significant grant funding to get started; he has been building a coalition of leaders around the notion of innovation as a regional economic differentiator, and supporting incremental, smaller activities along the way. When his organization was able to access State and Federal dollars through the federal WIRED initiative a couple of years ago, he was in a much stronger position to maximize the impact of that effort.

Getting started on an innovation-based economic development initiative doesn’t require a lot of money. Don’t underestimate the ability of local sponsorships, contributions and volunteer services to get great things done! Move forward with the grant proposals that your staff or community organization partners want to prepare. But view that as your lever, rather than as deciding factor of whether to proceed or not.

Below are ten activities you can act on tomorrow that can start fostering innovation-based economic development in your community:

1. Recruit a blue-ribbon committee of innovation leaders to immediately give your effort credibility, generate fresh ideas and identify a private sector champion
2. Secure sponsorships from private sector leaders
3. Engage local media in your efforts to generate visibility
4. Re-direct staff time and energy from lower value activities to your new high priority strategy
5. Use your influence to recruit community-based organizations to go to work in support of your initiative
6. Educate your elected colleagues and other civic leaders about the idea of innovation as an economic driver
7. Launch a series of informal network events that occur onsite at your successful innovation-based businesses or other venues in the community
8. Begin a speaker circuit, making presentations about innovation economic development at service club and civic group meetings and local schools
9. Initiate a brown bag lunch outreach campaign: visit with the CEOs of as many innovation-based businesses in your community as possible and find out how you can help these companies
10. Create a Mentor’s Roundtable from your most successful CEOs

Peter Gardner, a partner in the Venture Capital fund Wavepoint Ventures, offers a few suggestions: (1) identify a low-cost office space in the City to provide incubation and shared services for local early-stage companies; (2) organize a local angel investment group that can provide capital and mentoring to local entrepreneurs; (3) initiate a monthly breakfast meeting with local entrepreneurs, business leaders, select City employees and professional service providers to discuss challenges to growth, and potential solutions, and then incorporate this market feedback directly into City policymaking.

Bill Reichert, Managing Director of Garage Technology Ventures says: “I would initiate the ‘Ourtown Innovation Challenge’ calling on all businesses, organizations, and citizens to contribute their ideas and recommendations regarding ways to stimulate innovation and entrepreneurship, ranging from ways to streamline government to ways to attract more resources to the community.”

He continued, “I would start the planning for an Innovation and Entrepreneurship event to be held in one year to celebrate the individuals and the organizations that have done the most to help innovation and entrepreneurship in the area, and to provide a showcase for entrepreneurs seeking to launch their own innovative companies or non-profit organizations.” Reichert concluded with a statement about the impact these efforts can have. “In combination, these initial efforts will create a string of PR opportunities for the ongoing initiative. By enhancing the visibility of the initiative locally (and getting visibility statewide), I would hope to bring a combination of public and private resources into the community to participate in some way – at a minimum, sponsoring the annual event.”

There’s no time like the present to get things moving. Worst case, you will have dramatically elevated awareness of innovation as the true economic driver in your community that sets the stage for many good things to emerge. Best case you will have a fully functioning, sustainable innovation program in place that fosters business formation and growth from your entrepreneurs that doesn’t require a lot of public money. In either case, don’t let yourself get bogged down in the minutiae!

Beyond Doom and Gloom: New Economic Development Rules for Local Policymakers

By Golden Capital Network CEO Jon Gregory

Introducing GLOBIES

With Tuesday’s impending inauguration ceremonies there has been a lot of media, economic and political speculation about President-elect Barack Obama’s stimulus package. While debate continues in the beltway about how to rejuvenate the American economy from a macroeconomic perspective, little attention has been given to the equally difficult challenge local elected officials face in cities and counties across America. They are tasked with creating jobs, tax revenues and prosperity in their communities in a period compared to the Great Depression. It is at the local grass roots level where the effects of lay-off notices are exceedingly personal and the impacts on public services most noticeable.

The recent announcement of the closure of the remaining 567 Circuit City stores in the U.S. at a cost of 34,000 jobs, along with major reduction in employment levels at well-known companies like Hertz Global Holdings Inc., WellPoint, ConocoPhillips, Advanced Micro Devices, Saks and Motorola Inc. make the road to economic recovery for local policymakers pretty rough.

Recent studies by economists and academics, along with noted authors and distinguished reporters, suggest that innovation remains the one true economic advantage America possesses over other nations. Excellent publications such as Regional Innovation, National Prosperity by the Council on Competitiveness, and The Innovation Driven Economic Development Model by Collaborative Economics serve as excellent resources on this topic. Yet, despite the increased attention on innovation, discussion among thought leaders about innovation as an economic development strategy has mostly been relegated to the 50,000-foot-level rather than given merit as a practical solution that can be implemented at the grass-roots level.

Even more important is the distinction between long-established national and global businesses with divisions or stores located in hundreds of communities across the country but whose headquarters are located elsewhere, versus innovation-based businesses serving national and global markets with their home base of operations located in the community itself.

I’ve coined a new term for the economic development vernacular to better distinguish these types of businesses from others: GLOBIE (Growth-focused Locally-Owned Businesses run by Innovative Entrepreneurs). Even while major global corporations such as those I mentioned earlier in this article falter or stumble, at Golden Capital Network we are able to regularly observe the under-recognized progress made by hundreds of GLOBIEs. Just last week, for example, alumni presenting company GLOBIEs like Red Condor, Utopy, Alter-G, Inc., and Sentilla reported important business-related achievements, such as new customers, new management team hires, new rounds of capital raised and new technology milestones reached.

The most recent 10-year period of my economic development career has been spent in the trenches on a day-by-day basis with the founders and CEOs of GLOBIEs. It is this subset of the innovation sector that drives ongoing economic growth. Importantly, GLOBIEs exist everywhere in this country. They represent the bright spots in an otherwise struggling economy.

GLOBIEs deserve special recognition and support by local policymakers because they not only serve as the market-leading difference-makers in a community, but also usually have a true affinity for that community and a desire to stay and grow there.

With 25 years directly or indirectly involved in local economic development under my belt, I am concerned that our local elected officials -- and other civic leaders charged with economic development responsibilities -- are not fully equipped with the right knowledge or the most effective tools and strategies to stimulate their economies by focusing on GLOBIEs. Instead, many of the strategies being championed to elected officials in communities across the country today are the same ones touted when I started my career in economic development in 1985. The problem is that the economy of today is nothing like it was in 1985.

It is important to emphasize that GLOBIEs are the businesses that are most vital to the economic recovery and growth of a local economy, and that grass-roots efforts can actually have a positive impact on their success! With companies whose headquarters are located elsewhere, the ability for a local entity to impact their decision-making process is minimal, at best. In fact, the economic development strategies being advocated in many communities and states across the U.S. today offer little value to GLOBIEs. This is disheartening in that it is possible for local policymakers and other leaders of local economic development organizations to have a profound impact on the success of these businesses by helping to address their needs. The organization of a community’s human capital assets is a good example. I am referring not only to the employees who become the workforce for GLOBIE businesses, but all of the human-related input essential to starting, growing and exiting a GLOBIE company; known as the innovation eco-system.

Local policymakers can play a pivotal role in this process. Yet in most community’s economic development efforts exert no energy into proactively cultivating this innovation eco-system. It is this disconnect that has inspired me to write “Beyond Doom and Gloom: New Rules for Local Policymakers” as a guidebook for policymakers and other economic development leaders to implement a cost-effective, sustainable and compelling economic development initiative at the local level that is focused on GLOBIEs.

Over the course of the next two weeks, I’ll periodically release these New Rules seeking perspectives from throughout the extended GCN network. If you have inputs, feel free to respond here. Next we’ll start the journey with New Rule #1 for local policymakers: “Take Action Now! Don’t Get Bogged Down in the Minutiae.”

Jon Gregory
President/CEO
Golden Capital Network
California Business Ascent

Get On the Bus

Remember the days when you'd call to talk to a business and a real person answered the phone? Remember when you used a credit card and they'd swipe that heavy contraption back and forth making a carbon copy of your card or when your old LP's were traded in for new-fangled tapes? Well, if you can remember it, it's almost certain you've gotten the look from a "Digital Native" when you've talked about it, as if to say, "Oh, my god! How old are you?" In a book summary from John Palfrey and Urs Gasser's Born Digital: Understanding the First Generation of Digital Natives, David Hornik takes you through a comical example of what Palfrey is eluding to.

If you have not yet experienced "Digital Natives" in their natural habitat, come on over to my house on any weekend. When I wander down stairs on a Saturday or Sunday morning, the scene is always pretty much the same. The TV is on and yammering away. But my kids are far more engaged in their respective laptops than they are in the TV making noise in the foreground. My 6 year old is likely buying a new go kart for his Webkinz monkey. My 8 year old is busy shooting balloons on Addicting Games. My 11 year old is blogging about some great new Japanese rock band video he found on YouTube. My 13 year old is reading the latest news about his favorite performers on Broadway.com. And, amazingly, while "watching" TV and voraciously consuming the Web, my children are more than capable of fighting with each at the same time -- digital multitasking at its finest.

Digital Natives today may be a small group of non-voting, non-credit card holding kids. But soon Digital Natives will be the predominant consumers of media, goods, services. And as such, they will expect their experiences to be inherently digital. Analog experiences will be viewed as quaint -- perhaps they'll trigger nostalgia for the good old days of board games and books -- but, in the end, the expectations will be one hundred percent digital. Companies will need to think differently about how they market to Digital Natives. Governments will need to think differently about how they engage Digital Citizens. Doctors will need to think differently about how they treat Digital Patients. It won't be an evolution -- it will need to be a revolution.

I already see this revolution when I'm pitched on businesses whose customers are kids. Businesses focused on children or Millennials (the next big group of consumers being chased by the advertising world) have no interest in the historically analog world. Their products are naturally digital. They acquire customers digitally. They interact digitally. Indeed, any analog byproduct of the digital experience (you know, like meet real humans in person) is just that, a byproduct. Kids want their media consumption, their shopping, their communications to be digital. Webkinz is a great example of this phenomenon -- who would have thought that stuffed animals could prove to be the gateway drug to a digital experience? Yet that is precisely what they have become.

In light of all that, it was great to read the timely new book by John Palfrey and Urs Gasser called "Born Digital: Understanding the First Generation of Digital Natives." John and Urs look into the opportunities and challenges posed by this digital revolution. Those of us with kids are living in and among the Digital Natives and certainly can use all the help we can get to navigate this brave new world both for ourselves and for our kids.

When I was about 6 or 7, my family got our first VCR. Every time the electricity would go out my Dad would have me reset the clock because he could never figure it out himself. When I moved out on my own my Dad gave me that VCR. He said that the blinking light drove him crazy (without me around the clock was never set and just flashed 0:00). Now he has an MP3 player that he loaded with songs, and figured out how to play it through his car stereo. I rode in the car with him the other day and I noticed the dashboard clock was blinking the "0:00." When I asked him about it he said, "I can't figure it out," as he clicked from Carly Simon to The Beatles on his Mp3 Player. Some things don't change, but he is learning the new technology to suit his needs, which I'm sure a lot of you are having to do. As for telling time? Right now, my Dad's content wearing a watch.

Orking Cows

There is a hot and happening trend in knowledge work these days. It seems to have emerged a couple years ago, largely spontaneously, as disaffected technology freelancers got fed up with the isolation of working in their home offices and the turbulent chaos of working in cafes.

My first inkling of this came when reading a special report in the Economist magazine last April, which discussed the "new nomads" who work wherever they can find signal, whether on their laptop, PDA, smart phones, or blackberries. You see them at Starbucks, the library, and other areas where WiFi is promiscuously available.

On a recent road trip, my GCN colleagues and I sketched out a business plan to create a mental health club for nomadic innovators, a "venture community center" where entrepreneurs could work on their businesses among others of the similar inclinations, with access to GCN's network of domain experts, coaches, investors, etc. When I began to look into it, I discovered we'd reinvented the wheel, albeit a fairly shiny new wheel with a lot of permutations.

The term of art in the movement (it's so embryonic as to hardly constitute an industry -- yet) is "coworking". It manifests in a number of models, but the common features are a community workplace occupied by people working on their own projects, but actively collaborating, brainstorming, and socializing.

One of the godmothers of this movement is Tara Hunt, co-founder of CitizenSpace in San Francisco. I had an opportunity to visit her operation last week, and it was fascinating. For one thing, it was within sight of the location of the first startup I worked for back in the 1980s, Friend Technologies (introducing a service called "voice mail"; you may have heard of it). But the other thing that I found intriguing was that it was largely unoccupied, even though they are sold out. Startling at first, upon reflection I realized it made sense; when you're a one-man-band, you're not spending a lot of time at a desk. You're out there, meeting with folks, adding value at client premises, and prospecting for new business. CitizenSpace is an agreeably funky loft space with a dozen desks and an airy conference room. There was indeed a meeting taking place in the conference room, but aside from Tara, there was only one other solitary worker at a desk.

CitizenSpace is organized around a co-op model. It's not intended to produce a profit, but rather be a crucible for creative collaboration. The members are all "desk residents"; that is, they have a desk that is theirs alone, and pay a monthly rent for the use of it. While some coworking spaces are similarly aligned, others are more explicitly business models that can produce surplus cashflow, while preserving the core principles of the coworking movement. These include;

• Openness – Willingness to share ideas freely, without license. Open-source brainstorming.
  
• Collaboration – Creative interaction that promotes innovation and new science.
• Community – Sharing risks and rewards, obligations and opportunities.
• Sustainability – Combining resources so that less is used by more.
• Accessibility – Minimizing barriers.

I also visited Sandbox Suites in San Francisco, a commercial coworking scene, and that was also sparsely occupied at midday and midweek. Two conference rooms were busy (and their posted schedules looked pretty full, as well), but the rest of the space was pretty empty. They have resident desks like CitizenSpace, but also ad hoc access to tables, chairs, desks and a wifi network (called "hot desking") for a monthly membership fee, depending on part-time or full-time use.

It is a very attractive, casual, vaguely hip space, not at all like an "office". There is a conversation pit of black leather sofas and easy chairs. A row of cubicles separated by translucent plastic panels were lined up against one wall, but otherwise it was all very "open plan" cafe style furnishings.

I also visited a launch party in Fresno for OfficeBay, a spinoff of another casual workspace operation called CargoBay, which started up 18 months ago, offering 50 10'x10' hardwall offices with a desk and IP telephone for $399 a month. The play here is that there are also rollup-door storage units, a shipping and receiving dock, and a photo studio (a lot of Ebay auctioneers operating there). The new place has larger offices for up to 6 workers, a cluster of individual cubicle resident desks, and a hot desk area off the main lobby. This is a more overtly commercial work space operation, and not very aligned with the coworking movement, but it is clear that the potential for collaboration and community is there, as well.

From reading the Google coworking group and wiki page, it's clear that coworking is in its infancy, and seems to have the most traction in major urban centers in established technology corridors. In midmarket communities, coworking is primarily following a "jelly" model, which is sort of a flash mob of people who coordinate via twitter or text message to descend on a library community room or cafe to spend the day working together.

I think the coworking model has great potential for incubating emerging growth companies. Existing incubator programs have been problematic, and have largely failed to stimulate interdisciplinary collaboration. I think this is due to the limited number of dedicated office spaces that can be supported in that model.

In a coworking space, significantly higher numbers of companies can be supported, since the resources are randomly deployed as available and as needed. It also provides a venue and audience for guest speakers, panel discussions, workshops, and networking events explicitly focused on entrepreneurship and business development themes. There can be a social dimension as well, such a karaoke or Guitar Hero night.

The connections that can be made in this sort of intentional community can be very immediately valuable, indeed. These are the types of professional relationships colleagues form in large corporate workplaces, and are what freelancers miss the most when they begin working exclusively from home. As in corporate office relationships, these connections can become long-term allegiances, forming a network of like minds. I think successful coworking venues will be the ones that put resources into stimulating and sustaining collegial connections. For the innovator wanting to start and grow a great company, coworking is like a petri dish for ideas.

coworking

Innovation and Entrepreneurship Seen as Key to Economic Prescription

I presented the Golden Capital Venture Communities model of cross-regional collaboration to catalyze innovation, entrepreneurship and private investing on a panel at a federal economic development forum this week in Alexandria, VA. (hosted by International Economic Development Council).

Never before in all my years of covering politics and economics as a journalist or working with companies, investors and communities to foster entrepreneurial networks, have I witnessed such optimism in the face of such potential calamity. It was a windy day inside the beltway, which I think lent a spirit of hope to the proceedings. It felt unusually fresh and invigorating, not hot and frustrating like Washington wind often does. In any case, it packed a punch.

Congressman Paul Kanjorski, the PA Democrat who chairs the house Financial Services Subcommittee on Capital Markets, Insurance and Government Sponsored Enterprises, keynoted the luncheon and sent the strongest message. "This seems to be a very upbeat meeting, which is good. All the indicators, data and forecasts we have indicate, however, that not only are we in a recession, but we might well be headed for much, much worse. It's the kind of data that might make you want to put your head in a cannon and pull the trigger."

The 300 or so attendees -- mainly economic developers, tech transfer pros, and innovation policy wonks from across the U.S. -- nearly choked on their cheesecakes. Kanjorski lightened up some by the end of his speech, and everyone went on with their business of networking and finding out about what's cutting edge in fostering innovation and entrepreneurship for economic development, but I couldn't get his harbinger of "slow spiralling meltdown" out of my head as I flew home to Chico the next day amidst new records announced for a barrel of crude, a gallon of gas, and mortgage default rate.

Bringing innovation to market was a key theme of Kanjorski's prescription for avoiding utter economic catastrophe, and a key theme for the event. I felt pretty good hearing that, since at Golden Capital, we've been of a mindset for nearly 10 years that economic development must focus squarely on innovation, entrepreneurship and investing if it wants to really make a difference in a community. I made the point in my presentation that technologic innovation from universities or national labs --as revolutionary as it may be -- doesn't mean very much unless it can get to market. It takes an entrepreneur to do that. The best researchers and academics are usually not the best entrepreneurs.

What this means for us at GCN is a continued focus on building regional collaborations that involve the research institutions, and that we must also continue to encourage our regional members to reach out to the "most likely to succeed" entrepreneurs and high into the ranks of the private sector within a community to connect entrepreneurs with the capital and advice they need to grow.

Venture Communities is designed to do exactly that and we'll keep beating that drum until see it -- or something comparable -- instituted throughout the nation, or we break under the weight of those who can't see the writing on the wall. Either way the wind blows, we'll keep fighting. Because if you aren't part of the solution...