Tag Archives: startups

Meghan Martinez, Founder of KEASY, a keyless, digital lock that provides safe and efficient access to rental homes.

KEASY sweeps winning prize at SEED SPOT Demo Day

Move over, Silicon Valley – Arizona is becoming quite the hotbed for startups. Just ask the 800+ people who attended SEED SPOT’s fourth Demo Day event in Phoenix, designed to highlight local, up-and-coming entrepreneurs and their successful and inspiring new ventures.

SEED SPOT, an incubator for socially-minded entrepreneurs, entertained a sell-out crowd at its Demo Day event, held Tuesday, Dec. 9, at 6 p.m. at the Herberger Theater in downtown Phoenix.

During this energetic and uplifting event, ten SEED SPOT entrepreneurs shared their socially-responsible, purpose-driven business plans. Each entrepreneur was given three minutes to give background about his/her startup, along with successes and next steps.

After every entrepreneur presented, everyone in the audience was able to vote via text message for their favorite new venture. The venture who received the most votes, along with a $5,000 cash prize from Cox Communications and a paid trip to a conference of choice was Meghan Martinez, Founder of KEASY, a keyless, digital lock that provides safe and efficient access to rental homes. After spending the majority of her career in real estate and property management, Meghan was always worried about floating keys and break-ins at her properties so an idea was born. KEASY can be managed from mobile and computer devices; it’s different from other keyless locks on the market  because it’s a patent pending technology.

In addition to KEASY, another award given that includes six months of free office space at SEED SPOT was given to Steve Zeidman, Founder of Vestafy, a software created to streamline and better help effectiveness for the animal welfare community. It’s also a mobile-friendly device that will allow animal control agencies and humane societies concentrate on helping to find pets homes.

Additional ventures honored include Paws 2 Read, a non-profit that certifies animal owners to take their pets into libraries and classrooms, helping children build confidence as they learn to read; along with Trade My Show which is an online service that allows leg amputees and people with disabilities to trade their shoes with one another around the world.

To prepare for Demo Day, the ten entrepreneurs went through a rigorous entrepreneurship program, with four months of curriculum from SEED SPOT and support from Arizona business leaders. Those selected to participate in Demo Day have worked hard to validate that they have customers and a solid business model.

SEED SPOT, a Phoenix-based nonprofit, incubates social entrepreneurs who are committed to sustainably solving important societal problems. The incubator has provided more than 25,000 hours of mentorship, positively impacting the lives of more than 107,000 people. Eighty-eight percent of SEED SPOT alumni are still in business, and 93 percent of them are still in Arizona. Applications for SEED SPOT’s 201 Program (a part-time, 12-week course) and 301 Program (a full-time, 14-week course) are being accepted now through Jan. 30, 2015 with the program beginning on Feb. 17, 2015. Visit www.seedspot.org for more details.

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ASU revises royalty policy, more proceeds to researchers

Arizona State University researchers with inventions licensed to existing companies or to form new startups will be entitled to a larger share of the proceeds under a new university policy developed by the Intellectual Property and Institutional Review Committee and approved by President Michael Crow.

Under the previous policy, net licensing proceeds (after administrative and legal fees) were split equally between the inventor(s), their lab(s) and the university. Effective as of Nov. 1, the “lab share” will be reduced so that a greater percentage of royalties flow directly to inventors.

“For the modern American research university, technology transfer is a critically important pathway for disseminating the knowledge needed to solve major societal challenges and boost our state and regional economies,” said Crow. “For the past decade we have reshaped our efforts in this area to engage more of the faculty in this process, speed the journey from lab to market and reward inventors for their time and effort.”

Technology transfer at U.S. research institutions is governed by the 1980 Bayh-Dole Act, which set consistent ground rules for inventions arising from federal funding. Prior to Bayh-Dole, the rights to most university technologies reverted to the funding agencies, with the result being that the government had successfully licensed fewer than five percent of the technologies represented by the 28,000 patents it had accumulated.

Bayh-Dole sought to spur innovation and increase the number of research discoveries that were translated into treatments, products or services that benefit the general public. Under its provisions, universities own these inventions and are required to share royalties with the inventors, though they have broad flexibility in how they structure the payouts.

“The changes to ASU’s royalty-sharing policy are designed to incentivize innovation and were adopted after an intensive process involving faculty input and deliberation,” said Sethuraman “Panch” Panchanathan, ASU’s senior vice president for Knowledge Enterprise Development. “The new model recognizes and incentivizes the transformational research being done by ASU faculty across every department and campus.”

For the first $10,000 in net income for a licensed technology: The creator(s) receive half of net royalties, with the lab receiving one-sixth and the university one-third.

After the first $10,000 in net income: The creator share varies by the number of listed inventors on a sliding scale from 40 percent for a solo inventor up to 50 percent for five or more. The university share remains one-third and the lab share adjusts accordingly. The lab share is capped at $2 million on an annual basis.

The full policy on royalty sharing is available here.

Arizona Technology Enterprises (AzTE) is a separate limited liability company formed in 2003 that acts as ASU’s exclusive intellectual property management and technology transfer organization. Funded by ASU, AzTE comprises industry and university professionals with extensive experience in technology evaluation, product development, marketing, capital formation, IP protection and licensing and commercialization.

ASU, through the activities of AzTE, is annually one of the top-performing U.S. universities in terms of intellectual property inputs (inventions disclosed by ASU researchers) and outputs (licensing deals and start-ups) relative to the size of the university’s research enterprise.

The Association of University Technology Managers (AUTM) prepares an annual report collecting the technology commercialization results for almost 200 universities and research hospitals. In the past five years, among research institutions that achieved at least $300 million in annual research expenditures, ASU was one of just four schools to achieve top 10 rankings for licensing agreements, startups and invention disclosures per $10 million in research.

In FY14, ASU faculty working with AzTE set new record highs in invention disclosures (261), U.S. issued patents (56), startups (12), and licenses and options (90).
To date, more than 70 companies have been launched based on ASU discoveries. In just the last three years, these companies and their sub-licensees have attracted $163 million in funding from venture capital firms and other investors.

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Getting an angel to open the checkbook

Governor Jan Brewer touts her policies and business regulatory climate as the reason Arizona is growing new businesses. That may be a factor, but it’s not the major reason Arizona topped the Kaufman Foundation Index of Entrepreneurial Activity in 2012. If it were the case, Arizona would have been on top again in 2013—instead of plummeting to 20th nationally.

“Just because there are a lot of startups,” observes Barry Broome, CEO of the Greater Phoenix Economic Council, “doesn’t provide a measure of the economic growth in the Valley.” A startup can be someone opening a consultancy, a contractor or the next Apple. Self-employment is a form of startup. The challenge is nurturing a startup so it grows with high value jobs.

Local governments and the Arizona Commerce Authority see major value with growing Arizona startups into enterprises. Chris Mackay, economic development director in Chandler says, “There’s staying power when a business is local. It’s connected to the local community and if the economy falters, the owners are more willing to keep going locally as opposed to closing up shop.” That local staying power is one reason Mackay says Chandler makes big investments in growing future enterprises.

Planting the seeds

Arizona’s new economy needs startups to scale up into enterprises. Those growing small businesses become hiring employers offering high value jobs paying home-buying income. Government policy supporting businesses that can scale up is based on simple economics.

Businesses with more than 20 employees, says the Small Business Administration, generate two of three Arizona paychecks. Those same businesses cut checks for more than 70 percent of Arizona’s private payrolls. The value in 2012 was over $100 billion.

All new businesses are “startups,” but not all startup businesses will be entrepreneurial enterprises. “There is no relation between starting a business and starting a company,” says Dr. Daniel Isenberg, Professor of Entrepreneurship Practice and founding executive director of the Babson College Entrepreneurship Ecosystem Project in Boston. “Ninety percent of companies formed don’t grow high value jobs.”

Isenberg says that the difference between a start-up and enterprise is a matter of scale. He is an international advocate for scaling a business to grow as opposed to opening a business. An entrepreneur, he points out, is a business founder with a large company that just happens to be small right now.

Arizona State University, as the new American university, is at the cutting edge of helping turn ideas into enterprise. Recently, the college joined the elite ranks of schools offering a stand-alone degree in entrepreneurship. It’s on that list with Harvard Business School, Babson, and University of Texas. Its goal is getting new businesses that can grow into the market.

Locally grown

ASU says more than 70 percent of its W.P. Carey School of Business MBA graduates remain in Arizona. Keeping these graduates in state provides the human resources necessary to building new enterprises fueling the future economy.

“Starting a company — as opposed to just starting a business — is hard work,” says Isenberg. “An entrepreneur looks at the business and sees it growing. It’s a time of sleep deprivation, hard work, and endless pitches.” Few startups achieve quality growth—less than ten percent, he believes. “The golden triangle of a growing enterprise,” he continues, “is cash, customers and people.”

“An entrepreneurial endeavor isn’t limited to startups,” Isenberg emphasizes. “University research, family businesses, mature companies, all can be turned into a growing enterprise. Most startups tend to stay small.” The key to the economic contribution of startups in Arizona is scalability. He is adamant about it, “Ambition is not a dirty word. A business founder without ambition does not significantly contribute to overall economic growth.”

“There are a number of entrepreneurial success stories arising from a new direction for an existing, mature business,” Isenberg reports. Sometimes it takes a new owner with a vision; sometimes the existing management team finds a new direction. It can be a license from a university, a new product, or an innovative use of an existing product. Entrepreneurship can occur anywhere in a business’ lifecycle.”

Bringing ideas to market

Arizona colleges are on that licensing bandwagon. Entrepreneurs complain that it takes years to license patents or transfer technology from most universities. In ASU’s Office of Knowledge and Enterprise Development, the Arizona Furnace Technology Transfer Accelerator — first project of its type in the world — slashes technology transfer time from years to months. The AZ Furnace is a joint venture of ASU, University of Arizona, Northern Arizona University and Dignity Health. Funding partners include the Arizona Commerce Authority, BioAccel, and additional support from Thunderbird School of Global Management.

“There are hundreds of patents sitting on shelves at universities that could be in the market earning money for creators, colleges and businesses,” enthuses Gordon McConnell, assistant vice president, Entrepreneurship & Innovation Group in OKED. “We started a program to get patents into the market quickly.” The startups selected for incubation in AZ Furnace are either entrepreneurs in search of an idea to market or idea-creators ready to market through a business entity. The fledgling enterprises are capital-ready in 12 months or less.

Enterprise starts with a leader and a vision. The scale of the vision is what makes the difference, says Isenberg. The vast majority of business owners are thinking of a model that gets them to the point that they’re putting money in the bank. He says, “Entrepreneurs are thinking of a model that finds smart people, willing customers and puts the cash to back into the enterprise.”

“Angels invest in businesses they understand or CEOs they respect,” says Broome. “There’s a need for more of that in the Valley. We’re just not seeing the next Apple or Google evolving here.”

Gaining visibility

“The biggest challenge about getting angel and venture money is visibility,” says Brandon Clark, region coordinator for Startup Arizona.  “If you’re a promising digital startup locally, it’s a little harder to get noticed nationally being from a region not known for its digital startups.  That’s starting to slowly shift.” National publications, FastCompany and Entrepreneur Magazine, have eyed Arizona as an emerging technology region.

The development opportunity for the small business is capital. Combine the “Broome Factor”—known businesses; known leaders—with the large number of startups, and there are too many funding requests heading towards too few checkbooks.

What makes early investors open pocketbooks to startup businesses is scalability. Businesses with potential to grow create the greatest return on investment for the angels. “It’s also makes a difference to the local economy,” says Isenberg. “Local policymakers need to change their focus from ‘startup’ to a ‘high value growth business’.”

Cities like helping scalable startups — and provide resources that build success. There’s a loyalty factor when the business grows; it typically remains in the hometown that helped it succeed. This is important to Chandler, Mesa, Peoria, Phoenix, Scottsdale, and Surprise. These five cities have specifically invested in incubators and accelerators to nurture and graduate businesses achieving market traction. Chandler, Phoenix and Tucson have involvement with collaborative workspaces — Gangplank and Co+Hoots — as well.

While an employee or two in a collaborative workspace works well for a while, the time comes when a move up is needed. Clairvoyant, an enterprise and analytics startup now in Chandler Innovations started with Gangplank. “We grew from four employees in March to 12 in April,” smiles Amber Anderson, a firm partner and its business developer. “We needed a place to meet with clients and work with a growing team.” Still self-funded, the growing entity plans to hit 20 employees by January.

Mackay explains, “We help a company like this grow and hope that as it expands it continues to locate in Chandler.” To that end, the city is working with landlords in its Price Corridor to offer “teenage” space that lets a business move from the heavily subsidized rents and back office support of the incubator into its own place—without too much sticker shock.

Support from cities

The difference by which startup is accepted into a city’s incubator is the ability to scale up from the garage to commercial space; from one employee to more than 20. Chandler and Mesa are looking for businesses with this capacity. Innovations gives lab and office space to businesses that have formed entities — LLCs, corporations, partnerships — and a business plan. Mesa’s new Technology Accelerator is planned with a similar focus, but is looking for businesses at an earlier stage. Surprise’s Arizona TechCelerator wants to shepherd a business to the angel investor stage.

In Surprise, scalability is one of the criteria to be accepted into Arizona’s oldest incubator. The TechCelerator is looking for businesses offering something outside the box or creating a new niche. “The company has to be started before we’ll consider them,” says Julie Neal, the economic development coordinator for the city’s enterprise. “They need a mentor, a plan and have to know where they are going.”

“Scaling up is difficult,” says Isenberg, “but doing it right defines the difference between the successful entrepreneur with a growth business and a startup that just stays small. Marketplaces are competitive. The startup has to acquire customers. That means overcoming inertia or changing buyer behavior. While established companies are cruising on their business platforms, the startup has to hire people, start a company, raise money, and all the while, it’s competing in the marketplace. That’s tough work.”

After incubation, the business must gain market traction. At this phase, the fledgling enterprise has product going out and customers paying for it. The kinks are being smoothed, and it’s time to move up to the next stage and grow. Isenberg says that the high growth criterion is simply 20 percent annual increases in sales or staff for five years.

Getting capital

To make this leap requires high levels of capital — the checks venture capitalists cut. The biggest challenge in Phoenix is that there are few sources for local venture capital. The venturists hang out in places like Silicon Valley, Boston, San Diego and Seattle. “There are even a couple of funds with deep ties to the Valley,” worries Clark, “but they have very little involvement in local startups.”

Clate Mask, CEO of Infusionsoft, had to travel out of town for his venture capital. “At one time, I was told that a fund wouldn’t cut a check for a firm in Phoenix because we didn’t have the workforce for success,” he says. “That’s no longer true; venture funds are seeing that there is a real climate for success in the Valley.”

Another resource for a growing business is the Arizona Commerce Authority’s “Growing Your Arizona Business” services. The quasi-public agency provides mentorship, regulatory assistance, access to incentive programs and site selection. It also works as a liaison connecting the growing business with other business resources. The agency mentors businesses in accessing federal procurement and grant opportunities as well as serving as an entrée to international trade.

Overall, the major resource in Arizona for start-up businesses is the universities. Anemic legislative funding for the schools causes their efforts to help to face the same struggles growing businesses face. Their efforts to improve Arizona’s long-term economy are stymied by a declining source of capital.

“ASU is underfunded,” complains Barry Broome. “The school has done an amazing job despite being financially crippled by budget cuts. It’s suffering from a lack of resources to take its programs to scale.” “Scalability” is applicable to the business-development programs at the universities and other public agencies just as it is for growing enterprises.

“Getting money for those programs is the top job for the next governor,” predicts Broome.
Opportunity in Arizona will come from the core of businesses growing today. They will create the jobs for the new economy and drive economic success for the next generation.