Microsoft is joining several other notable corporate names throwing their support behind full marriage rights for gay couples in Washington state, a move that could give a final push to gay-marriage efforts at that state Capitol this year.

The companies—including RealNetworks, Concur, and Paul Allen’s Vulcan—announced their support for a possible state gay-marriage law on Thursday. The Seattle Times has a copy of the letter the firms sent to state officials.

Microsoft further explains its position in a blog post by its head lawyer, Brad Smith, who says that granting full rights to same-sex couples would reflect the company’s values and be “good for our business and good for the state’s economy.”

“As other states recognize marriage equality, Washington’s employers are at a disadvantage if we cannot offer a similar, inclusive environment to our talented employees, our top recruits and their families. Employers in the technology sector face an unprecedented national and global competition for top talent,” Smith wrote.

Smith noted that gay marriage is legal in six other states, including Massachusetts and New York. California’s gay-marriage laws are still tied up in court, after one federal judge overturned a previous gay-marriage ban.

In a short statement on its Facebook page, Vulcan said supporting gay marriage “is part of our company’s core values, which include appreciation and support for employees with diverse backgrounds. We believe that everyone has the right to be valued on their merits and contributions, not on their sexual orientation.”

Microsoft’s support for gay marriage in Washington is hugely significant.

Legislators in Olympia are now just one vote shy of being able to pass a bill legalizing civil marriages for same-sex couples, and one of the state senators representing parts of Microsoft’s hometown of Redmond, Republican Andy Hill, has been among the undecided.

As a humongous publicly traded corporation with tens of thousands of employees, Microsoft also has to sound a bit of a cautious note, saying that it respects the views of employees who might disagree with the company’s embrace of gay marriage rights.

“We’re not asking anyone to change their views to conform to the company’s position,” Smith wrote.

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It’s not just Wikipedia that’s throwing its weight today behind the movement to stop the controversial anti-piracy bills moving through the U.S. Congress.

While the English version of the world’s most-visited encyclopedia site has gone dark for the day to call attention to the perceived dangers of the Stop Online Piracy Act and the Protect Intellectual Property Act, a number of other organizations are stepping into the spotlight, making their case that the laws—which, in their original form, would have given federal prosecutors and courts the power to block access to Internet domains deemed to be supporting “infringing” activities—would deter free speech and undermine the Internet’s technical infrastructure.

Given indications that markup of the bill is being delayed, as well as the Obama Administration’s recently declared opposition to SOPA (the House version of the bill) and PIPA (the Senate version), it’s doubtful that the anti-piracy bills will make it into law this year. But protesters and Internet entrepreneurs are saying today’s actions are necessary to forestall future Congressional action and call attention to the extent of popular opposition to the bills.

Here’s a quick survey of protest actions going on today around the San Francisco Bay Area and Xconomy’s other home cities.

—Hackers & Founders plans a live protest against PIPA and SOPA at San Francisco’s Civic Center Plaza at noon Pacific Time today. The group of programmer-entrepreneurs says it’s joining forces with other groups such as 106 Miles, SV NewTech, SF NewTech, Designers and Geeks, Hacks & Hackers, the Electronic Frontier Foundation, the Internet Archive, and TechNet to stage similar events in New York, Seattle, Silicon Valley, and Washington, D.C. Speakers expected at today’s protest in San Francisco include angel investor Ron Conway, Internet Archive founder Brewster Kahle, TechNet vice president Gideon Lett, and Hackers & Founders founder Jonathan Nelson.

—The Occupy Oakland website used by coordinators of grassroots protests in the East Bay has gone dark for the day—but features a nifty mouse-tracking spotlight that allows you to read a statement explaining the action.

—The 20,000-member New York Tech Meetup group has blacked out its site and is organizing an “Emergency NY Tech Meetup” today at 12:30 Eastern time at 780 Third Avenue in Manhattan, outside the offices of Senator Charles Schumer and Senator Kirsten Gillibrand. Speakers will include Meetup.com CEO and NY Tech Meetup founder Scott Heiferman, NYU media studies scholar Clay Shirky, Grateful Dead lyricist John Perry Barlow, Reddit co-founder Alexis Ohanian, and Tumblr vice president Andrew McLaughlin. New York Tech Meetup chairman Andrew Rasiej said in a statement that the tech community in New York is “appalled” by Schumer and Gillibrand’s support for PIPA.

–A Seattle Against SOPA rally originally planned for 11:30 a.m. Pacific time today has been postponed due to the city’s poor weather, but organizers say they will reschedule the event.

—Google is censoring itself by placing a symbolic black square over its logo. The search and advertising giant has also posted a petition urging members of Congress to vote against PIPA and SOPA.

—Craigslist has interposed a black landing page protesting SOPA and PIPA before users can reach its online listings (which are still accessible).

—Flickr, the photo sharing site owned by Yahoo, offered users the ability to black out up to 10 photos each as a symbolic way to”deprive the web of the rich content that makes it thrive.”

… Next Page »

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As we turn the page on the year 2011, there is no shortage of topics about which the entire world seems to be debating. One that interests me the most is the renewed debate on the role of government in the energy sector, specifically in the United States. Budget shortages, deficit increases, front-page analysis of public-backed private enterprises, and a particularly bitter political climate have combined to push this topic to the forefront more so in 2011 than in recent years. It’s as though we are back in the smoky classrooms of the University of Chicago in the ‘50s and ‘60s where economists engaged in frequent Keynes Vs. Friedman (Milton not Thomas, mind you!) debates.

Energy is always a popular topic in the U.S., given its strategic importance to national security. All this recent debating has been interesting to follow but a bit confusing. Economists, reporters, business folk, and politicians do not seem to agree on what constitutes a government subsidy, let alone which sub-sector is the recipient of how much. While I do not want to take any sides, I thought it would be worthwhile to examine what constitutes a government subsidy, and what subsidies and how much were provided by the U.S. government historically.

As I began to think about what sectors to focus on, it made sense to examine those that have been of significant strategic importance to U.S. economic growth in the past. The rise of the U.S. to be the largest economy in the world was driven to a large extent by what some refer to as the second industrial revolution constituting the rise of the railroad, steel making, telecommunications, petroleum, and the automobile industries. This article attempts to capture the subsidies provided by the U.S. government to some of these industries at different stages of their growth cycle.

What is an energy subsidy?

I am no economist, but it seems to me that we can all agree on what constitutes a government subsidy without too much debate. Table 1 (below) attempts to summarize the different forms that energy subsidies can take. Most of these subsidy types are immediately recognizable. The “type” that has generated much debate so far is the “Failure to include Externality Costs.” No matter where you stand on the climate change debate, it is not that hard to see that pollution has at the very least caused smog and acid rain—ask the residents of the Los Angeles from the ‘80s and, more recently, those from Beijing. There has not been a worldwide accepted externality cost measure yet, but as we move forward the chances of that happening are higher.

Regardless, it is safe to say preferential tax treatments and price controls are as much a government subsidy as a cash grant or a low-interest loan. The U.S. government wallet is a bit lighter in both cases.

Historical U.S. government subsidies

The growth of the U.S. economy after the Civil War to become the world’s largest economy was driven by increasing commercialization of technologies including the railroad, iron and steel making, petroleum, and the internal combustion engine. Besides private capital and resources, an important catalyst behind the development and growth of these industries were U.S. government subsidies at different stages. Table 2 summarizes the amounts, types, time period, and stage at which government subsidies were provided to these industries.

Railroad and transportation

U.S. railroad companies laid more than 35,000 miles of track between 1867 and 1873—more than three times that laid in the previous 30 years. Congress gave the railroad companies more than $64 million ($8 billion in 2011 US$ at 3.5 percent inflation) in loans and tax breaks and more than … Next Page »

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In the long-running debate over online sales tax laws, one of the most laughable ideas has been that calculating sales tax rates all over the country is somehow a difficult job for big e-commerce companies like Amazon.com.

You know, the same company that adds enough servers every single weekday to run a circa-2000 version of itself. The same company that knows every item I’ve ever perused, and can tell me what fellow shoppers bundle and buy. The same company that gives away streaming movies and takes a loss on full-color touchscreen tablets just to get people in the buying mood.

But that’s been the basic argument against various cash-starved states’ attempts to pass “Amazon laws” deputizing online retailers as new tax collectors. A longstanding U.S. Supreme Court decision, enacted before the Web was a force in retail, held that figuring out sales tax rates for thousands of jurisdictions nationwide would put a burden on interstate commerce. And that is something only Congress is allowed to do.

That could be happening sometime soon. As we’ve discussed, Amazon is putting its weight pretty heavily behind a new online sales tax system being debated in Congress. The latest evidence of the Seattle company’s dedication was on display today, as VP Paul Misener testified at a U.S. House committee hearing on the issue.

In his prepared remarks, Misener acknowledges the obvious fact that software has solved the problems with national sales tax collection: “With today’s computing and communications technology, widespread collection no longer would be an unconstitutional burden on interstate commerce, and Congress feasibly can authorize the states to require all but the very smallest volume sellers to collect.”

He also shouts out Avalara, the Bainbridge Island, WA-based company that has been a leader in supplying online sales tax software to retailers, particularly small and medium-sized sellers. As CEO Scott McFarlane recently told me, all the talk of sales tax collection being some kind of unfathomable dark art is frustrating for the entrepreneurs trying to solve the problem.

“What chafes me is when people say that there’s not a solution out there, it’s too hard. The reality is, it isn’t. It’s a statutory requirement. We have the technology,” McFarlane said.

It’s encouraging to see so much progress being made on an issue that’s lingered, probably needlessly, for so long. Amazon’s sometime foe at the National Retail Federation, which represents a lot of the big brick-and-mortar retailers, also is behind the recent push to enact a national online sales tax system.

The fight for now seems to be over which businesses to exempt from such a system. The bill Amazon’s supporting gives a pass to sellers making less than $500,000 a year in revenue, and Misener’s testimony calls out $150,000 as an even better figure. eBay, in its own testimony today, wants a much bigger small business exemption—eBay’s Tod Cohen threw out several suggested thresholds, from $5 million up to $30 million.

There is the matter of a little election about a year from now, which could see big changes in who’s in charge over in the other Washington. It’s not clear whether this issue will be resolved before the political climate gets hot and heavy—if you were running for re-election, would you want some opponent running ads about how you voted for an Internet sales tax?

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[Editor's note: Cross-posted from The Economist, 11/2/11]

New York Mayor-entrepreneur Michael Bloomberg, not known for shyness, recently proclaimed New York City as America’s new entrepreneurship capital, roaring past Boston in venture capital and soon to leave Silicon Valley in the dust as the “go to” destination for entrepreneurs. Indeed, the world media are awash with proposals to kick start entrepreneurship as a strategy for economic revival, with support for venture finance at the heart of many programs. Yet the title of Harvard’s Josh Lerner’s recent book, “Boulevard of Broken Dreams,” is no coincidence, because proclamations are one thing, actual success is quite another.

Fortunately, there is a lot of experience around the world about what works and what doesn’t. Here are some practical principles that the Babson Entrepreneurship Ecosystem Project have been identifying and developing for public leaders who have, correctly in my opinion, identified entrepreneurship as an essential plank in economic policy.

1. Be clear that the objective is to foster an entrepreneurial finance ecosystem, not to directly provide capital to entrepreneurs. Over time, a healthy entrepreneurship ecosystem makes available capital to ventures that deserve it, while denying it to ventures that do not. This does not mean that governments need to revert to selecting the deserving. This idea has regained currency recently, but we learn time and again (Solyndra anyone?) that it does not work. It does mean that the availability of capital, and other resources, needs to be part of a natural process in which the ecosystem elements—in this case, deal flow and capital—continually evolve and adjust to each other, a concept that is consistent with Smith’s “invisible hand.” But the concept goes further by suggesting that enlightened and skillful leadership can play a critical role in encouraging the evolution of a self-sustaining ecosystem, but leaders have to understand how and when to get in, and how and when to get out.

2. Stimulate financing, but stay off of ventures’ balance sheets. Presence of government and government-owned entities as direct debt or equity holders of ventures should be a red flag. The only reason government should be on a venture’s balance sheet is in the rare case when it is absolutely necessary to entice private, profit-oriented entities to get involved as the natural selector of investment targets, and in those cases, government should have a clear plan to get out. Governments can, as have Israel, Finland and some other countries, provide smart, off-balance sheet funding in the form of repayable grants, matching grants and so forth. But presence on ventures’ balance sheets ultimately leads to a conflict of interest between governments’ social priorities and obligations, and the need to provide a positive return to invested capital. Overall, there is evidence that a moderate amount of this kind of financing can be beneficial, but as it gets to be too great, the benefits rapidly turn into liabilities.

3. Make sunset clauses for financial support programs the rule, not the exception. Permanent, or evergreen programs of government-supported venture capital, loan guarantees, startup grants, angel tax credits and so on, risk becoming white elephants and/or political assets, not economic ones, and in the process risk squandering public funds. Sunset clauses, or “sell-by dates,” help focus policy-implementation programs on (a) achieving results, and (b) creating self-sustainability by building capacity and mutually reinforcing systems (for example, by showing private sector players that they can actually make profits.)

4. “Pulse” incentives to foster discovery. An implication of sunset clauses, in general, is that if providers and consumers of risky capital can “discover” that it is profitable to engage, then they will accelerate self-interested behavior when the “visible hand” is removed. Seeing if providers and consumers of entrepreneurial capital “discover” the correct pricing mechanisms to allow them to engage in a profit-seeking transaction is one test as to whether the problem is really a market failure or not, and is not just … Next Page »

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A Boston-area security tech company and the University of Michigan are involved in one of the most ambitious—and potentially controversial—transportation projects of our time. It could have major impact on federal legislation, and almost everyone you know.

Picture this: You’re driving in your car, approaching an intersection. Maybe you’re speeding a little, going 40 mph in a 35 zone, say. Unbeknownst to you, another driver is racing down the cross street and is about to run a red light (probably texting or something). This could spell disaster. But instead, your car picks up a wireless signal from the other vehicle. A beeping sound or flashing light on your dashboard alerts you to slow down, so you hit the brakes. Disaster averted.

Now let’s take it a step further. Maybe the alert is hooked into your car’s control system, so if you don’t put on the brakes, your car does it automatically. And maybe that’s fine with you. But you might be a little worried about giving up that kind of control in life-and-death situations. After all, computers get hacked and software crashes. Not to mention, you might not want your car broadcasting its speed and location out there for all to see (especially not the cops, since you were speeding).

This scenario isn’t the future. It’s happening already—at least the driver-alert part. In six cities around the U.S., trials of about 100 drivers each are underway to see how people react to in-car alerts (such as collision warnings, do not pass, and vehicle stopped ahead). But the next step is bigger. In Ann Arbor, MI, some 3,000 cars will be equipped with onboard wireless devices for communicating with each other and signaling to drivers when there’s an imminent hazard. This 12-month pilot study, which was announced recently and starts next August, is being led by the University of Michigan’s Transportation Research Institute (UMTRI) through a $14.9 million contract from the U.S. Department of Transportation. The state of Michigan has been heavily involved as well.

The goal of the federal initiative is, ultimately, to save lives. In the U.S., auto accidents are the leading cause of death for people aged 15 to 34; more than 30,000 people are killed on the nation’s roadways each year. The hope is that with new early-warning systems in place, a sizable fraction of would-be victims could be saved—some say 80 percent of non-alcohol-related cases—especially when high speed is involved.

The idea of wirelessly connected cars isn’t new, of course. The field of vehicle telematics has been around for years, with applications in fleet management, tracking, and safety. But advances in GPS location technologies, wireless communications, sensors, hardware, and algorithms are enabling smarter, better-connected vehicles to be tested on a bigger scale. And recent breakthroughs such as autonomous road-racing vehicles and Google’s self-driving car are starting to propel the technology into the mainstream.

Nevertheless, the Michigan study raises some serious real-world concerns. “This is a massive system with tremendous security and privacy implications,” says Ed Adams, the chief executive of Security Innovation in Wilmington, MA. And that’s exactly where his software security firm comes in.

Security Innovation developed the mobile software being used in the U-M study to … Next Page »

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In a few weeks, Detroit-based  Hantz Farms will present the Detroit City Council with its plan to build the largest urban farm the nation has ever seen. The plan has been years and millions of dollars in the making, and there’s no doubt that it has the potential to reinvent the city’s economy, creating jobs while blighted areas are transformed to lush farmland. Even though the project, at this point, exists only on paper, it has already drawn press interest from outlets as varied and widespread as the BBC, the Atlantic magazine, and ABC News.

As any astute observer of the media has already noted, the reinvention of Detroit is a topic du jour that never seems to run out of steam. Whether it’s Dan Gilbert’s Detroit Venture Partners seeding IT ventures and mobile app labs, or the Big Three delving into advanced battery-powered automotives, investors seem determined to transform Detroit into a hub for cleantech. Hantz Farms envisions a reinvention of an entirely different sort, one that takes Detroit back to its pre-Industrial Age roots, when it was a scrappy community along the river known for soil so potent one of its districts was referred to by the French as “Black Bottom.”

But Hantz Farms’ proposed agrarian reinvention project isn’t without stumbling blocks. It requires the city to demolish vacant structures on a fairly aggressive timeline and then adhere to its own blight ordinances thereafter, which has historically been a struggle for Detroit.

Then there’s the Michigan Right to Farm Act, which was created to protect farmers from nuisance suits but also, in effect, prohibits farming in heavily populated areas. The proposed Hantz Farm project spans hundreds of acres across neighborhoods on the east side of Detroit—that would require local legislative intervention. Then there are the people in the affected areas themselves: Do they want to live in the middle of a farm? Have they even been consulted?

In addition to worldwide media, it’s safe to say that companies across the globe who would like to erect similar farming projects in other cash-poor, land-rich cities along the rust belt are watching to see what Detroit does with Hantz Farms. Will it be a revolutionary first step in a new form … Next Page »

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I recently had the pleasure of taking a two week academic trip to China with Babson’s MBA program, where several dozen of my classmates and I were led through Beijing, Dalian, and Shanghai by the inimitable Robert Eng. During the course of the journey, our group visited with government officials, leaders from state-owned enterprises, and a number of businesses operated by domestic and foreign owners. While there are many interesting and non-trivial idiosyncrasies of doing business in China, such as the need for government contacts, I thought it would be more informative to share some of the broader business trends that became clear during the course of our visit.

First, China is beginning to capture more of the value chain. As the world’s third largest manufacturer, China has developed a solid reputation as a nation that builds products for Western companies to attach their brands. Apple is one of the most famous examples of this. Perhaps more surprisingly, Nike and Reebok both have their shoes manufactured in the same facility. Li Ning, China’s leading sports apparel maker and the number four sports apparel company in the world, also has its shoes made there. If you’ve heard of Li Ning, you’re ahead of the curve. If not, you probably will soon. Li Ning has begun opening stores in the United States and other countries overseas. In the U.S., it decided to launch its pilot store in Portland, OR, which seems like an odd choice until you realize that it’s right in Nike’s backyard. It’s a bold statement from a bold company and serves an appropriate example for the changing mentality of Chinese business; no longer content with the margins available to them making things for others to sell, the Chinese are now looking for ways to move up the value chain and capture the margins commanded by being a globally recognized brand.

Second, China is starting to look inward for markets. While the rest of the world is still staggering from financial crisis to financial crisis, China’s chugging along at a brisk 9 percent annual growth rate. Shanghai has joined the list of top tier metropolises, on par with London and Moscow, complete with a Starbucks and a McDonald’s around every corner. Shopping malls are awash in luxury brands. With that kind of affluence at home comes increased spending power, and Chinese companies are beginning to recognize the potential of the domestic market. (By Chinese companies, I also mean the Chinese government. State-owned enterprises still command roughly half of the country’s industrial assets, and the government has tentacles in just about every successful business in the country, private ownership or no.) As evidence of this, the 12th Five Year Plan explicitly discusses the yawning trade imbalance that China has created with the U.S. and other nations, and proposes to address this dependence on foreign consumption by directing more goods to the domestic market. It’s uncertain what the government will do about Chinese households’ astronomical savings rate.

Third, national stability is not a guarantee. Incidents of social unrest have been growing more frequent in the past couple years. Chaffed by a widening wealth disparity and the trampling approach to development, Chinese citizens are expressing their dissatisfaction in a way that makes government officials and many members of the business community nervous. Restrictions on freedom of speech and the flow of capital have done a great deal to boost the Communist Party agenda of security and growth, but they’ve also created an economic and social pressure cooker. The 12th Five Year Plan seeks to address these concerns by explaining how the government plans to handle rising inflation and housing costs (regulatory controls), the income gap (higher taxes for the rich), and the blistering pace of development (cleaner environmental standards and lower growth targets). Perhaps more revealing, social stability was a concern voiced by several businessmen we visited during the trip. One Chinese business leader who spoke to our delegation put it especially elegantly: “China will continue to grow as long as the Communist Party is in power. The Communist Party will stay in power as long as China continues to grow.”

The state of Chinese development offers an interesting puzzle: free market incentives bounded by strict financial and political controls. The tremendous opportunities of doing business there are matched by equally tremendous challenges. From this point in history, it almost seems possible that Communist China will continue growing in perpetuity, achieving global dominance in our lifetimes. Or the entire system could collapse spectacularly, and we will ask each other why we didn’t see it coming. 

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The Supreme Court today released its opinion regarding California’s attempt to ban the sale of so-called violent video games to those under 18. My company, Vindicia, filed an amicus brief in the case, Brown v. Entertainment Merchant’s Association, to make sure the Court was aware of the ramifications of the California law in the digital gaming world.

The decision is being widely reported as 7-2, which is true enough on the merits of this law. But looking closer, the decision is really 5-4 when it comes to the question of whether the First Amendment categorically protects the sale of video games to minors.

As I noted in a blog post after attending oral arguments in the case, Justice Alito and Chief Justice Roberts both seemed willing to allow states an ability to restrict the sale of violent video games. The Chief Justice seemed to miss the point that Postal 2, the game in question in the case, appears designed specifically to make white middle-aged conservative fathers like him angry. Justice Alito’s concurrence, with which the Chief agreed (bringing the two additional votes in the 7-2 vote), argues that some other law that better defines “violent” could pass constitutional muster.

Justice Thomas wrote a dissent in which he continues to take the position that kids really don’t have any free speech rights as an originalist matter. The flip side being that game creators have no right to sell to them if they’re under 18 (and as an original matter, probably under 21). Justice Scalia rightly points out in the majority opinion that Justice Thomas’s theory may support a system where parents could put their kids on a state-wide “do not sell video games to” list, but Scalia asserted that game makers’ free speech rights are violated when all kids are banned from buying their games.

Justice Breyer continues simply to believe that everything is a balancing test, regardless of the fundamental enumerated right in question, and that therefore judges should be allowed to use political arguments about what is best for society to balance laws against their harms. I’m reminded of Justice Scalia in another recent opinion replying to an almost identical Breyer argument with, “the very enumeration of the right takes out of the hands of government—even the Third Branch of Government—the power to decide on a case-by-case basis whether the right is really worth insisting upon.”

Today’s decision is good news in that the Supreme Court has found that states attempting to severely restrict the sales of video games have been going about it using unconstitutional methods. What’s still frightening is that we appear to be only one vote away from a state finding a way to restrict sales of video games to minors. Luckily, most of the methods that legislatures who really just don’t like video games would want to use would fail other constitutional tests. However, the “do not sell” list concept combined with the existing rating system does leave open a path for legislation that may not burden video game makers much. (That concept, however, faces the difficulty of the changes the digital revolution is bringing to the game industry’s business models, as we outlined in our Amicus brief.)

For adults, this opinion reaffirms something many of us knew. The fact that some people don’t like the content of video games is no basis for curtailing or choking them off at what many consider to be the beginning of a revolution in creativity, realism, and storytelling.

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[Editor's note: Cross-posted from The Economist, 6/16/11]

As the G8 last month pledged $10 billion to aid the Arab Spring to support the building of economic and political institutions, the May 24th NASDAQ debut of Russia’s $10 billion Yandex was but one of many green shoots of an equally significant Entrepreneurial Spring blossoming out from Chile to China, and Israel to India. Led by two brilliant entrepreneurs who knew how to take native search engine technology and implant it in the emerging Russian marketplace, for over a decade, Yandex, a Moscow-based Internet venture, had been growing inside of its language-walled garden. Finally, after a planned 2008 IPO was foiled by the economic crisis, this ambitious venture burst onto a global stage with the largest NASDAQ Internet offering in recent history.

Like its Middle East counterpart, the Entrepreneurial Spring is a grass roots movement, and, although fertilized by innovations originating in the United States, it is fundamentally global and only loosely connected to America. China’s RenRen, Estonia’s Skype, Japan’s Rakuten, and Bangladesh’s GrameenPhone represent ripe fruits of the last decade’s entrepreneurial investments in environments outside the U.S.

Also similar to its Middle East counterpart, the global Entrepreneurial Spring can lead to the democratization of opportunity and increased control by citizens over their own economic fates. However, just as the Arab Spring is a first fraught step on a long, even treacherous, path, so is the Entrepreneurial Spring neither a panacea nor a fait accompli. Left unaided, exposed to the vicissitudes of climate and availability of resources, the fragile shoots can easily be stunted or trampled. To take root, they will require enlightened leadership and the patient cultivation of a rich environment of institutions and norms in order to become part of a self-sustaining ecosystem.

To sustain and spread these new ventures, like political democracy, leaders everywhere—not only publicly elected leaders, but a broad base of leaders of public and private, formal and informal, institutions—need to democratize the entrepreneurial choice without over-controlling it. That will require deliberately fostering an entrepreneurship ecosystem that (a) is conducive to increasingly broad numbers of citizens making the choice to take their economic futures into their own hands, and, (b) after that choice is made, facilitates the broad, merit-based access to the resources—capital, human, cultural, institutional, educational, and legislative—required in order to be successful. The helping hand and the invisible hand must clasp each other.

Fortunately, there are also green shoots of such enlightened leadership. Startup America, StartUp Britain, Startup Africa, and Start-Up Chile are but a few outward manifestations of the new national priority that leaders are assigning to entrepreneurship. Kauffman Foundation-initiated Global Entrepreneurship Week, launched less than three years ago, already conducts 100,000 discrete activities in more than 100 countries. In four years, Startup Weekend has spread to more than 100 cities in 30 countries with 30,000 participants. These two private initiatives, impressive by themselves, show that leadership of the Entrepreneurial Spring can and must go beyond government.

The bubbling up of the Entrepreneurial Spring shouldn’t be confused with the capital market bubble of social media valuations. Up-and-coming next generation stars from Lebanon (SABIS; management of K-12 schools in 15 countries), to Slovenia (Studio Moderna; multi-channel retailing in 20 countries), to Brazil (Tecsis; wind-turbine blades for the US and Europe) to Iceland (Actavis; generic pharmaceuticals in 40 world markets) show that entrepreneurship spreads far beyond the latest Internet technology. These rapidly growing, high potential ventures––and thousands like them––may still be under the public radar, but they are already having huge impact in their respective fields; no less importantly, they are making their economies more competitive, their citizens more prosperous, and they are creating jobs for many and inspiring further entrepreneurship in others.

For those countries not yet blooming with new ventures, get ready. As the successes become more visible and prove that value-creating entrepreneurship can and does happen anywhere and everywhere, the cultivation of a conducive ecosystem will not be a “nice-to-have” opportunity but a “must-have” necessity. Citizens everywhere will expect and demand the equal access to the possibility of prosperity that entrepreneurship can provide.

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Recently I attended the Boston Smart Grid Forum, where some of the leading “smart grid” minds met to discuss the challenges and opportunities that currently exist. Ontario has been one of the investment leaders in smart grid technology, much of which is being developed through the University of Waterloo. There are a number of similarities between Ontario and the Boston-area energy ecosystem, as new technology developments come from close relationships between the universities and entrepreneurs to develop great technology in emerging markets. Here are some thoughts about the pilot programs currently running in Ontario and the opportunities that exist for similar programs in New England.

Through pilot programs and tests in communities in the Northeast U.S. and Canada, individual efficiency and renewable energy technologies continue to evolve, becoming more efficient and effective every day. Photovoltaic cells are getting more efficient, improving the value of solar panels. Wind turbines are transferring more energy from the blades to the electrical grid.

While significant investment has been focused in these areas, insufficient attention is being paid to the ways in which they can be operated to maximize the benefits across a broader “energy system.” For example, a lot of effort is being exerted in order to improve the efficiency of photovoltaic cells beyond the current levels. There is a big opportunity to increase the value of this existing technology if it were coupled with an energy storage technology so that energy could be stored now and discharged later, during peak demand times, reducing the strain on the overall system. In response to this need, the Province of Ontario, in conjunction with Energent, Hydro One, Ontario Power Authority, Milton Hydro, and the University of Waterloo, are developing the Energy Hub Management System (EHMS).

Energent has been working with utilities in Canada and the U.S. developing smart grid technology for consumers since 2007. In creating the backbone of EHMS, Energent has defined a “hub” as a single, static location, such as a home, manufacturing facility, farm, etc. The management system consists of three key elements. First, there are two-way controls on all energy-consuming and producing devices within the energy hub. These controls will have the capacity to record energy consumption/production, and to direct the operation of the individual device, such as a motor, compressor, or dishwasher.

The second element will be a central core module that consolidates the information from the devices, the external environment (weather, energy prices, etc.), and user-defined models to effectively manage energy.

Finally, the third element is a Web-based portal, which is the user-friendly interface between the energy hub’s managers and the core module technology. This information will also be available on mobile devices for the three major smartphone platforms. Using a local home network to connect the home to the grid, the EHMS provides an effective, integrated interface for both the energy consuming/producing devices within a single, static location. It will also receive, analyze, and act on system-wide information, not seen in most in-home technologies.

The transformational change that comes from this program is the … Next Page »

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In the 15th century, British noblemen decided that they needed brighter colors for their coats of arms to help their armies more easily distinguish them on muddy battlefields. They naturally approached suppliers in their own nation. But when British tradesmen refused to accept this innovative approach to their traditional ways, the noblemen turned to Germany, where tradesmen were more than willing. This in turn helped spawn the German chemical industry, then the German petrochemical industry, then the German pharmaceutical industry. The British were left on the competitive sidelines.

Five centuries later, Otis Elevator, which had dominated its business until the 1970s, found itself in a war with GE, Westinghouse, Hitachi, and Fujitsu. The challenge was how to respond. After all, weren’t elevators just motors and bent metal? Then a member of Otis’s internal IT department made a breakthrough: Otis developed software that could automatically configure elevators and gave it to architects so that they could conform to local building codes, thus gaining market share for Otis. By putting computer chips in elevators, Otis could also send repair crews before systems broke down. Since the real money in elevators is maintenance, those who win the installation battle end up with a cash flow that will continue for as long as the building is standing.

Though separated by a half millennium, these examples show how innovation has always driven new technology, which drives new companies, which create economic growth and jobs. But innovation does not just happen. It requires far more than just inventors: it needs the entire organization. The messianic belief held by many organizations that they can lead in innovation by increasing research and development spending is simply not true. Apple, for example, trails its industry in R&D spending, yet it leads in innovation. And large companies that brag about their research departments by day often end up having to make large acquisitions because their own R&D departments continue to fail them.

America cannot maintain its dominance in some sectors and regain it in others without innovation, the importance of which has been hailed by everyone from the President to the local manager. But innovation does not occur automatically. To produce workers, managers, investors, and others who recognize and reward innovation requires making innovation a state of mind. Innovation should be taught, beginning in kindergarten. Properly run business schools combine … Next Page »

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A proverbial giant has left the cleantech stage here in Boston—though he probably wouldn’t admit any part of that statement.

Hemant Taneja, a managing director at General Catalyst Partners in Cambridge, MA, has moved to the San Francisco Bay Area this week. Taneja is one of the top venture capitalists in the energy sector. Beyond investing, he has been a champion of the local cleantech industry as a founder of the New England Clean Energy Council. He also helped write the Massachusetts Green Jobs Act of 2008 and serves on the board of the Massachusetts Clean Energy Center.

Reached by phone yesterday, Taneja said he has moved his family to the West Coast but is keeping a home in the Boston area as well. He joins fellow managing director Neil Sequeira (another recent Boston transplant) and a small team of associates at General Catalyst’s Palo Alto, CA, office, which opened in the past half-year. (You can read more about these VC moves here and here; in addition, Silicon Valley VC Jonathan Teo, formerly at Benchmark Capital, recently joined General Catalyst in New York.)

So, is Taneja’s departure a blow to the New England cleantech industry? “I hope not,” he says. “A, I’m not that big a deal. And B, we’re continuing to remain active on the East Coast. We’ll tag team.” Taneja says he’ll split his time between Boston and the Bay Area, as roughly half his investments are on each coast.

Some more background: Taneja is a recovering mobile software veteran who converted to cleantech about five years ago. Before joining General Catalyst in 2002, he was the founder and CEO of Boston mobile startup Isovia (acquired by JP Mobile). He co-founded JumpTap and also previously sat on the board of m-Qube. In the past few years, he has focused mostly on building energy companies, serving on the boards of ARC Energy, Mascoma, Modular Wind, Stion, and SunBorne Energy, among other firms.

I asked about his original move from software to cleantech, and about a more recent trend I’ve been hearing about—that software investors who dabbled in energy are now flocking back to software. “We saw a lot of entrepreneurs and academics moving into the [energy] sector, and our job is to follow the smartest people,” Taneja says. “A ton of people jumped into the sector, and some investors got burned because they were looking at technologies that were way too risky for venture capital. Some of those … Next Page »

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Cambridge, MA-based Heartland Robotics, the manufacturing robotics company founded by Rod Brooks, is moving into a larger office space in Boston’s Fort Point district next week, according to a report in Mass High Tech. The news comes on the heels of a Boston Globe report that says Vertex Pharmaceuticals (NASDAQ: VRTX), also based in Cambridge, has signed a letter of intent to move its headquarters to Boston’s waterfront area (Fan Pier) in late 2013. The move is contingent upon Vertex receiving federal approval of its hepatitis C drug, telaprevir, according to the Globe (more details on that process here). Boston mayor Tom Menino has designated the waterfront area as an “Innovation District” and is providing tax incentives for Vertex. This isn’t the first time Vertex has talked about moving to Boston. In 2008, the company signed a similar letter of intent to move to Fan Pier before extending its leases in Cambridge the following year.

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The MIT Museum in Cambridge, MA, is running a special exhibition, starting this weekend, to celebrate the 150th anniversary of MIT’s charter. The “MIT 150” exhibit showcases a collection of stories and artifacts that represent the institute’s contributions to science, technology, business, education, and society—things like Marvin Minsky’s robot arm, Claude Shannon’s maze-solving machine, J.C.R. Licklider’s Internet-presaging paper, Norbert Wiener’s letter describing a meeting with Albert Einstein, and much more.

The exhibit’s objects and themes were crowdsourced from the MIT community and organized by Deborah Douglas, curator of science and technology at the museum. It’s all part of a 150-day-long campus-wide celebration of MIT’s distinguished history. (Some sticklers for detail point out that MIT didn’t actually open its doors to students until 1865, so we might have to do all this celebrating over again in 2015.)

Here are a few items and links that caught my eye as being particularly relevant to MIT’s entrepreneurial legacy:

—The first business plan for Digital Equipment Corporation, and other items from American Research and Development Corporation, the equity investment firm co-founded by former MIT president Karl Compton (which originally invested $70,000 in DEC in 1957).

—Artifacts commemorating the 25,000-plus active companies around the world founded by MIT alumni and faculty.

—Nicholas Negroponte’s One Laptop Per Child “XO” Laptop, from 2002.

—MIT’s first patent policy, from 1932.

—Richard Stallman’s GNU manifesto (1985), in response to companies making proprietary software.

—Project Athena (1983-1991), a joint project by MIT, IBM, and DEC to integrate computers into the university curriculum. (OK, I’m sentimental about my first e-mail account.)

There is a celebration at the museum for the MIT community today from 3:00-5:00 pm, and a public program on January 14. The MIT 150 exhibition officially opens to the public tomorrow.

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For some people, innovation is not enough. Gururaj “Desh” Deshpande is one of those people. Let’s just say the Boston-area tech entrepreneur and billionaire philanthropist has earned the right to make such a claim.

“For innovation to have impact, it needs relevance,” he says. “Innovation plus relevance equals impact.”

Deshpande is talking about global impact, but his latest project is in his own backyard. Last month, his foundation committed $5 million over the next five years to support a new innovation center housed at the University of Massachusetts Lowell. The Merrimack Valley Sandbox, as it’s called, will work together with local colleges and nonprofits to boost entrepreneurship among students and professionals, and to develop local leadership through mentoring and seed funding programs.

The new initiative has similarities to the Deshpande Center at MIT and a social entrepreneurship center Deshpande set up in northern Karnataka, India—with some big differences. But to understand what Deshpande is really trying to accomplish with the Merrimack project, you need to know more about his story.

Gururaj Deshpande grew up in India and studied electrical engineering at the Indian Institute of Technology in Madras (Chennai). He went on to do his PhD in data communications at Queen’s University in Ontario, Canada. Starting in the late 1980s, he founded a series of successful technology companies—Coral Networks, Cascade Communications (which sold to Ascend Communications for $3.7 billion in 1997), Sycamore Networks (NASDAQ: SCMR), and Tejas Networks. He currently serves as chairman of Sycamore, Tejas, and A123Systems, among other top-level duties.

The success of Cascade and Sycamore made Deshpande a wealthy man, and he and his wife Jaishree set up the Deshpande Foundation in 1995. Its unifying theme has been to foster innovation ecosystems and social entrepreneurship. Its first major initiative was setting up the Deshpande Center for Technological Innovation at MIT in 2002. That organization has been active in providing grants to MIT labs, connecting faculty with the business community, and more generally tying ivory- tower research to market realities.

“In society, thinkers all come together, and they come up with new ideas,” Deshpande says. “But as they keep coming up with new ideas, they have to play the game of impressing each other”—whether that means other professors or government funding agencies. “In the process they lose the ability to have impact,” he says, because of a lack of relevance to real-world problems (and products). “The center at MIT is about bringing that relevance.”

After a few years, Deshpande looked at setting up something similar in his native land. “But somehow doing nanotechnology in India didn’t sound that exciting,” he says. Instead, he thought, … Next Page »

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Ken Rogers, executive director of Automation Alley, the Troy, MI-based technology business association, has been appointed to a trade advisory panel by U.S. Secretary of Commerce Gary Locke. Automation Alley, in a news release, says Rogers will serve on the Industry Trade Advisory Committee on Information and Communications Technologies, Services, and Electronic Commerce. He will advise Locke on trade agreements, serving as a representative from Automation Alley and for the U.S. information and communications technologies industry sector, until his term ends in 2014. Rogers, in a prepared statement, says he “can offer my thoughts and suggestions on encouraging and increasing exporting, both in Michigan and in the United States.”

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The second annual MIT Sloan Energy Finance Forum, which focused on the lifecycle of energy finance, was held last Friday at the Sloan School of Management at MIT. I am not someone interested in working in finance, but I decided to walk across campus to get a sense of the state of the sector in case I ever am in the position to develop a business from a technology I may develop during my time as a student here at MIT or afterwards.

As a fourth year PhD student in mechanical engineering, I have been around the block before; I have gotten to know a couple generations of Sloan MBA students, many of whom are very eager to find a technologist—someone with a potentially marketable technology—and lead this unsuspecting engineer or scientist down the path of soliciting investment and business development. I have not yet come across what I would consider to be a marketable technology during my graduate work, but I figured that this forum would afford me a good opportunity to understand this pipeline and what I may possibly encounter.

What struck me most at this event was the pessimism among the mid- and late-career professionals within the energy industry, especially those who deal with early-stage investments in promising technologies. This was quite surprising to me after my past few years at MIT interacting with very optimistic Sloan students. It was through the lens of this disconnect that I tried to make sense of the conversations during the forum.

The opening keynote was delivered by Department of Energy CFO Steve Isakowitz, who echoed Secretary of Energy Steven Chu’s recent musing as to whether the United States is missing out on its “Sputnik moment” in energy. If there isn’t a national effort focusing on the development and deployment of new energy technologies, this new industrial revolution would be missed. However, Isakowitz’s message became more optimistic as he spoke on the Obama administration’s policies directed at energy technology investment. With sustained government policy, he argued, private investment would continue to enter the market and allow for continued technology development and the deployment of those technologies which are economically viable.

By the midpoint of the first panel, entitled “Dirty Little Secrets About Energy Venture Capital”, the conversation shifted to the consideration of whether the venture capital industry’s traditional model was sufficient for the sustained development of energy technologies. Ramana Nanda, assistant professor at Harvard Business School, argued that venture capital firms were not prepared for the structural challenges of investing in energy: the regulation, the product as a commodity, and, most importantly, the low and long-term returns in this capital intensive industry. Venture capital firms entered the energy space with the false assumption that they were entering white space similar to their previous successes in information technology, but were unprepared for the fact that they were entering an industry of massive scale, regulated markets, and a fully developed (though aging) infrastructure.

As a potential technologist, this was the most startling lesson from Friday—that the very people who are supposed to be the ones escorting innovators over the “valley of death” to a profitably deployed technology were the ones most unsure of their ability to perform the task in front of them.

Fortunately, I was able to leave this event optimistic about the potential for continued investment and innovation in energy. This was because of the sheer interest from students of my generation, the up-and-coming leaders in energy. The lecture hall was filled to standing-room only with a great mix of professionals and many students from across MIT and the many other great institutions in the Boston area.

Perhaps the most heartening thing, however, was the fact that I wasn’t the lone PhD student in the room. There were many others who made the trek across campus with the hope of gaining a deeper understanding of the current landscape of energy investment. These twenty- and thirty-something burgeoning energy professionals—MBA students, technologists and policy students alike—are the ones who will be forging their way across the valleys of death together, and I am excited that everyone in my generation is still chock full of optimism.

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Last week, Michigan voters elected political outsider Rick Snyder, whose resume more closely resembles that of a technology entrepreneur than a career politician, as the state’s next governor.

Before stepping into the political arena, Snyder served as president of computer giant Gateway, co-founded a venture capital firm called Avalon Investments, and was chairman of Ann Arbor SPARK, a business incubator.

As the self-proclaimed “tough nerd” prepares to take the reins of the state, leaders in the Ann Arbor startup community, which Snyder helped expand, say they’re excited to have someone in Lansing who understands their concerns. But some worry that despite his outsider perspective, he still might get bogged down in political bureaucracy.

Doug Neal, managing director for the University of Michigan’s Center for Entrepreneurship, which is housed in the College of Engineering, says although he doesn’t know what to expect from Snyder, he’s hopeful that the governor-elect will help foster an entrepreneurial spirit in the state.

“He seems very passionate about entrepreneurship and helping early-stage companies get going,” Neal says. “I think in general we’re optimistic that this will create a lot more focus and attention on the emerging opportunities.”

Neal says Snyder “really understands” that state funding opportunities for startup growth will have to be flexible, creative, and with limited restrictions. He added that he hopes Snyder will take the right steps to attract investors both in the state and around the country to help bring a variety of companies to the state, instead of just focusing on attracting one or two big ones.

Tom Kinnear, executive director of the Samuel Zell and Robert H. Lurie Institute for Entrepreneurial Studies housed in U-M’s Ross School of Business, says he hopes Snyder will rid the state of complicated regulations and tax codes in order to incentivize businesses to move to or start in Michigan. He cited a bill currently pending in the state House and Senate—which he expects Snyder will support—that would give angel investors incentives to make risky investments in new companies as one way to foster the startup environment in the state.

“He’s not the mayor of Ann Arbor, so he’s going to take a pretty broad view of supporting all the centers of entrepreneurship in the state,” says Kinnear, who calls himself a friend of Snyder’s. “There’s a lot going on, and I think he will be very supportive of nurturing that.”

Indeed, U-M leaders recognize that Snyder will have to balance the concerns of … Next Page »

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It’s “Clean Energy Week” here in Massachusetts—that entails a bunch of events in and around Boston on the theme of alternative energy and cleantech. I’m particularly looking forward to the biggest one, the Sixth Conference on Clean Energy, which is happening tomorrow and Thursday at the Hynes Convention Center. The conference, co-produced by the Massachusetts Technology Transfer Center (MTTC) and the Massachusetts Hydrogen Coalition, is expected to draw between 400 and 500 attendees, and more than 60 exhibiting companies and about 100 speakers.

Some highlights of the conference: There will be keynotes from Ian Bowles, Massachusetts’ secretary of energy and environmental affairs; Jim Gordon, the president of Cape Wind; and Stan Kowalski, chairman of FloDesign. Panel discussions over the two days will tackle important topics like renewable energy policy, venture capital and financing, and the future of cleantech sectors including energy storage, efficiency, smart grid, solar, wind, ocean energy, electric vehicles, and green computing.

The main goal of the conference is “really to showcase early-stage companies and help them get funding,” says Abi Barrow, the founding director of MTTC and an organizer of the event (see photo above).

Thirty-three companies looking for financing will give 10-minute pitches to an audience of investors and business leaders. The list of firms (the majority are from New England, with a few from Europe and Israel) includes Free Flow Power, OsComp Systems, Prism Solar Technologies, and World Energy Solutions.

The conference will also highlight bigger cleantech companies that are hiring in the region—always a hot topic. Among them is Boston-based EnerNOC (NASDAQ: ENOC), which I’m told is looking to hire more than 60 people in the coming year.

Barrow says her team has reviewed the companies that have pitched in the previous five years of the conference (about 100 of them), and found that they have since raised a total of $220 million in new venture and angel investment, $50 million in grant funding, and $10M in debt financing. (Some companies involved with the conference in the past few years include Qteros, FloDesign, and Novomer.)

As for top of mind issues in the industry, Barrow says, “The great unknown is what’s going to happen [in the elections] and how that’s going to impact the industry.” She mentions that the failure of Sen. John Kerry’s recent climate bill is “not good for the clean energy sector,” because “without a price on carbon, there’s no market pull.” On the plus side, she says, big tech companies like Google are all thinking about how to make their expanding facilities greener and more energy- and cost-efficient.

The closing panel at the conference, moderated by yours truly, will focus on the ins and outs of government financing for clean energy, and will feature Patrick Cloney of the Massachusetts Clean Energy Center, Ben Levitan of In-Q-Tel, Kelly Carnes of TechVision21, and Nick Masci of Dacon Corporation.

I plan to ask the panelists about a number of issues, including how their strategies can work in conjunction with federal funds and private venture sources to support new companies, ideas, and risk-taking (nuclear or geo-engineering, anyone?); what the promising and not-so-promising areas of cleantech investment are these days; and their financing advice for startups and entrepreneurs. Should be a fun discussion.

Let me know if you have questions for the panel, or suggestions for other themes to explore at the event—please leave a comment below or drop me a note. Hope to see you at the conference.

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