When the University of Washington hired Michael Young to be its new president last year, one qualification that stood out was an impressive record of spinning out companies from his previous employer, the University of Utah.

Today, the UW is taking a step toward fulfilling some of that promise by opening its New Ventures Facility, an incubator offering lab and office space for startups based on the school’s research. The incubator will be run by the university’s Center for Commercialization, which recently topped off a $25 million fund for spinning out public university research.

Tech startup incubators have been erupting across the American business landscape in the past few years, as faster, cheaper, more powerful software and hardware makes it very inexpensive to start a new company and investors look for ways to place broader bets on a crop of entrepreneurs. Seattle has a branch of the prominent TechStars program, which is also partnering with Microsoft to organize a separate accelerator program for startups working on the Kinect motion and sound sensor.

The UW plans to talk in detail about the New Ventures incubator at a launch event later today, and I’ll update with more color from the scene. It promises to be a bright spot for the university amid an era of steep cutbacks in money from the state, which is still struggling with lax tax collections following the Great Recession. Tuition has already increased to compensate for less state money, and the UW is likely to soon start charging different prices for in-demand majors for the first time.

UW’s commercialization efforts already have seen several spinouts in life sciences and information technology, including notable names like Fate Therapeutics and Farecast, now part of Bing’s travel search. The Center for Commercialization also has a strong collection of entrepreneurs-in-residence, with folks like Ken Myer and Luni Libes on the roster.

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In a grand test of whether the Silicon Valley startup accelerator model can help university scientists get promising new technologies to market faster, 21 teams hand-picked for the National Science Foundation’s new Innovation Corps (I-Corps) program converged on the Stanford University campus last week. The goal: to review the progress they’d made during an eight-week crash course in entrepreneurship, and share the details of their newly battle-tested business models with a panel of NSF leaders and venture capital partners.

I sat in for the first half of the review session, which took place Wednesday at Stanford’s School of Engineering, and listened to presentations on everything from hydrophobic materials for preventing ice buildup on airplane wings to a method for growing transparent sheets of graphene that could be used in next-generation computer displays. It’s too early to say how many of these innovations will turn up in the marketplace—but it was remarkable to see how thoroughly the traditional walls between academia and business had melted away in the minds of the program participants.

It all made for an event unlike any demo day I’ve seen before. The I-Corps teams—who hailed from Seattle, Tucson, Pittsburgh, Boston, and everywhere in between—were the antithesis of the hip, young, polished entrepreneurs you see coming out of venture incubators like Y Combinator or TechStars. Instead, these were geeks on a mission: bench scientists who are convinced that businesses can be built around the technologies they’ve invented, and who’ve decided to take the leap themselves rather than wait for a corporate licensee to wander along, as in the old model of university technology transfer.

For most of these scientists, the I-Corps program was their first real exposure to the startup mindset, and they had plenty of self-deprecating stories to share about the lessons they’d learned while talking with potential customers. One University of Connecticut team developing a nanocomposite material for explosives detection had pivoted not once but twice—from a landmine-detector product to an airport security product, then back to landmines. “The most important thing we learned from I-Corps is how important getting out of the building is,” principal investigator Yu Lei said.

It was no accident that that phrase—”getting out of the building”—came up in every presentation I saw. It’s practically been trademarked by Steve Blank, the serial entrepreneur famous around Silicon Valley for his “customer development” methodology, which says that the highest priority for any startup is to gather feedback from potential customers and continually refine its product or its target market or both until it finds a fit. NSF officials tapped Blank to lead the I-Corps program after watching him teach customer development to students in his “Lean LaunchPad” course at Stanford.

The teams chosen for the I-Corps program—each of which consisted of at least one principal investigator with a history of NSF grant-getting, one younger “entrepreneurial lead” (typically a graduate student or postdoc), and one business mentor—first came to Stanford in October for a few days of startup bootcamp. They were then sent home with instructions to get out, talk to customers, and, if necessary, throw out their original business models and start over. Last week’s session was both an opportunity to share what they’d learned and an audition for Phase II of the program, in which a few of the teams will be selected for NSF grants to help them continue their commercialization efforts.

How well did the teams adapt to customer-development thinking? “I think they hit it out of the park,” Blank told me at the review session.

The evidence was in the before-and-after “business model canvases” that each team shared during their presentations. An invention of strategy consultant Alexander Osterwalder, a business model canvas is a template that helps fledgling startup teams envision who their most natural customers are, how they’ll deliver value to those customers, and how they’ll manage costs, revenues, and partnerships. With help from mentors, and with feedback from the more than 2,000 prospective customers they interviewed during the eight-week program, the I-Corps teams redrew their canvases … Next Page »

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Medical device makers, drug developers, charity foundations, and health IT startups rounded out the New England life sciences news pot this week.

—Cambridge, MA-based MedicalRecords.com is raising $500,000 to put toward the development of its website, which connects sellers of electronic medical records software with doctors looking to adopt the technology.

—Rib-X Pharmaceuticals, a New Haven, CT-based antibiotics developer with two drugs in clinical trials, filed documents with the SEC indicating its intent to go public. The company, founded in 2000, has developed a drug-discovery platform based around an atomic, three-dimensional picture of the interactions between the antibiotics and the bacteria they target.

—The Michael J. Fox Foundation for Parkinson’s Research awarded grant money to Chelsea, MA-based Civitas Therapeutics, a startup working to improve the standard treatment for Parkinson’s disease. Patients usually take the drug, levodopa (L-dopa), in pill form, but Civitas is developing a version that they could inhale to get quicker, more precise doses of the medication. The company, spun out by the Waltham, MA, biotech Alkermes (NASDAQ: ALKS) will test the inhalable drug in a pair of clinical trials over the next year.

—Mundipharma will provide $50 million to Cambridge-based Infinity Pharmaceuticals in 2013 to support the development of Infinity (NASDAQ: INFI) drug candidates, like IPI-145, a molecule that’s being designed to treat blood cancers and inflammatory conditions. Infinity and Mundipharma first inked a collaboration deal in 2008, in which Mundipharma and its Stamford, CT-based affiliate Purdue Pharma, the maker of the drug oxycodone (Oxycontin), said they would pay $75 million to Infinity to access the company’s research and development capabilities.

—Cambridge-based Idera Pharmaceuticals regained the rights to a cancer drug it was previously co-developing with Merck KGaA, until the German drugmaker cancelled the collaboration this past July. Merck will continue an ongoing clinical trial of the drug, IMO-2055, in combination with Eli Lilly’s cetuximab (Erbitux) in 104 patients with a form of head and neck cancer, and Idera will reimburse the company for about 1.8 million Euros in expenses associated with the trial across 12 months. Idera (NASDAQ: IDRA) will own the data from that trial and other clinical studies Merck helped conduct and finance.

—A bioreactor made by Holliston, MA-based Harvard Bioscience was recently used in the world’s first two synthetic trachea implantations. Harvard’s InBreath Bioreactor helped create the tracheas by using the patients’ own stem cells. The company (NASDAQ: HBIO) has been around for 110 years as a maker of scientific instruments such as pumps and glassware for drug research, but it’s expanding its presence in the regenerative medicine field.

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Merck (NYSE: MRK) outlined progress on several of the drugs in its pipeline today during its annual R&D and business briefing for Wall Street analysts and investors, which was held at the drug giant’s Whitehouse Station, NJ headquarters.

CEO Kenneth Frazier began the day by acknowledging that Wall Street has been impatient with the company’s progress in advancing novel drugs to market. Despite the fact that the company has won FDA approval for five new products this year—including boceprevir (Victrelis) to treat hepatits C—the company’s stock has been declining over the last six months, dropping from $36 in May to $33.80 yesterday. “We recognize we can’t ask you—our investors—to wait for us to achieve our long-term aspirations,” Frazier told the audience at R&D Day.  ”I want you to know we intend to perform in the short term.”

Merck’s R&D chief Peter Kim started by highlighting several drug candidates in Merck’s late-stage pipeline. Kim reviewed recent data on a range of drugs to treat such conditions as osteoporosis, atherosclerosis, and chronic insomnia. Kim vowed to submit eight new drugs to the FDA for approval in 2012 and 2013.

During R&D day, Merck outlined recent progress on six novel drug candidates, including two the company detailed for the first time. First is MK-3102, an oral drug to treat … Next Page »

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Over the weekend, I learned that one of my heroes, Lee Davenport, had just passed away. Lee died of cancer at the age of 95 in his longtime home of Greenwich, CT. That’s where I first met him in 1994, when I was researching a book about the MIT Radiation Laboratory, the World War II lab where some of the nation’s best and brightest physicists secretly developed microwave radar—the most important technological weapon the U.S. and Britain brought to bear in the war.

Lee was an X-ray spectroscopist and all around electronics wizard. He interrupted his doctoral work in physics at the University of Pittsburgh to join the Rad Lab, where he helped lead development of the SCR-584 fire-control radar that tracked planes and buzz bombs and automatically relayed their position to anti-aircraft guns, saving a lot of Allied lives, soldiers and citizens. After the war, he helped build the Harvard cyclotron, and then went into industrial research, rising to become the head of research at General Telephone & Electronics (GTE) Laboratories.

All told, I did six formal interviews with Lee, three for the World War II book (The Invention That Changed the World), and three more for Engines of Tomorrow, a book about the management of corporate research. Afterwards, I saw him a time or two at conferences and when helping with two documentaries about the war, but we fell out of touch in recent years.

The New York Times ran a very nice obituary of Lee on Saturday. There are also some nice details in this article posted by Union College in New York, one of his alma maters. I urge you to read these for more of his story. But I wanted to share a few details that weren’t in those articles that showcase this remarkable and always-humble man—and I especially want to share his principles of innovation, which I think American corporations (or any corporation) would be well-advised to consider.

To start, here are some souvenirs of Lee Davenport’s life:

—Lee was once in a commuter plane crash, I think in upstate New York. He made it off the plane, but realized others were still inside. Dazed and hurt, he risked his own safety to go back and help several passengers or crew members escape. His wife showed me a newspaper clip recounting his actions, but I haven’t been able to track it down for this article.

Lee Davenport. Photo courtesy of Union College

—The GTE lab Lee oversaw was based in Bayside, NY. He spent 15 years as director in the 1960s and 1970s before retiring in 1980. GTE at the time owned Sylvania, and under Davenport, the lab created and patented the bright red phosphor later used universally in color TVs. I believe the patent was later sold or licensed to Sony and became part of its Trinitron technology.

—In 1963, as a publicity stunt while at GTE, Davenport appeared on the live television show I’ve Got A Secret, his secret being a way the lab had developed to transmit TV signals via lasers. The panelists failed to guess the secret, and he brought out the laser. Smoke was blown across the stage so the audience could see its light. Then Davenport interrupted the video portion of the live broadcast by blocking the light with his hand.

—Lee stayed incredibly active. One of the things he did in retirement was restore vintage cars in his garage. He then drove them all around in road rallies well into his 80s.

Lee, as I noted above, also knew some things about innovation. He came up with some basic principles about the subject for a series of lectures at the University of Virginia’s Darden Graduate School of Business Administration. Based on his lecture notes, and with his permission, I distilled them for Engines of Tomorrow and my own talks. I’d like to share them again with you here.

Lee Davenport’s Seven Principles of Innovation

1) Success is based on schedules and results—not effort, job difficulty, or loyalty. “You must expect your R&D people to produce results and reward them accordingly.”

2) Since most projects last several years, managers must break them into shorter segments, with measurable goals at each phase.

3) Never allow general goals. Avoid such words as: approve, advance, increase, investigate, study, explore. All are false goals—immeasurable.

4) Look for idea people. Only a few individuals have truly unique, even hare-brained ideas. Encourage them.

5) Find product champions—internal entrepreneurs who understand technology, explain it clearly, and can push ideas through corporate barriers. These traits typically elude top researchers.

6) Keep a little something on the side. A bootleg research budget is sometimes the only way to pursue ideas that break the mold.

7) Hire young blood. A research staff’s average age must not increase even one year per annum. In a high-tech lab, a nice average is under 35.

As I once wrote of Lee, “as a physicist and industrial research director, he has enjoyed a ringside seat on the electronics age—from tubes to chip, analog to digital. In war and peace, he’s seen ideas come and go—and come again. That gives him an all-too-rare commodity: perspective.”

Here’s to you, Lee.

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Building owners and managers are often reluctant to adopt new energy efficiency technology because they doubt it will be worth the cost in the long run.

Nolan Browne, managing director of the Cambridge, MA-based (for now) Fraunhofer Center for Sustainable Energy Systems, is on the same page.

“I fundamentally agree with them,” he says. “If we don’t prove it, why would they want to buy it? We need to prove that it will work or last 20 to 30 years and that the occupant in that building is going to be happy and productive. If not, then it’s a problem.”

His organization is in the process of retrofitting an old building in the South Boston waterfront section known as the Innovation District. The facility will serve as the center’s offices and a “living lab” for demonstrating and validating energy efficient building technologies.

“Our goal is to become recognized as premier global leader in sustainable energy field,” says Browne. And it hopes to promote economic development through the technology it commercializes, he says.

The Center for Sustainable Energy Systems (CSE) is connected to the Munich-based Fraunhofer Society, an organization formed in 1949 and funded in part by the Marshall Plan to help spur economic recovery in post World War II through research projects that could benefit industry across the country.

Globally, Fraunhofer centers now perform research in a variety of arenas and have about 18,000 scientists and engineers, and a 1.66 billion euro annual research budget. They’re credited with having a role in the invention of things like MP3s and fat-free sausage, to name a few, says Browne. CSE was first formed in 2008 to collaborate with MIT on research in building technology and solar. It is part of a smattering of U.S.-based research centers known as Fraunhofer USA, an independent American 501c3 nonprofit focused on growing the U.S. economy through technology research and commercialization. The USA centers have different structures and non-profit charters than the German group, Browne says.

CSE—which launched with funding from National Grid and Massachusetts Technology Collaborative’s the Renewable Energy Trust (now part of the Massachusetts Clean Energy Center)—works in a few different ways with industry partners. The CSE can be commissioned by companies who are in need new technology or modifications to their existing products, but don’t have the needed internal R&D capabilities. And CSE scientists can come up with an idea and develop the project in house and bring it to potential industry partners. Some of CSE’s projects are publicly funded, focusing on cleantech areas the government has deemed promising. It has attracted research funding from private donors and foundations.

For its South Boston project—dubbed the Building Technology Showcase—CSE will be installing materials and systems from a host of energy efficiency players (Browne wouldn’t name names) and collecting real-time data on how the products are working. The project is costing more than $20 million, and has the support from groups such as the U.S. Department of Commerce’s economic development agency, the city of Boston, MassCEC, the Massachusetts Department of Energy and Environmental Affairs, the Massachusetts Department of Housing and Economic Development, and Commonwealth Ventures, Browne says.

And it’s not just typical efficiency tools you might think of—like solar panels or energy use monitoring software that the CSE will be

… Next Page »

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Cars have come a long way since the Model T. Technology now allows your car to play music off your iPhone, to tell you how to parallel park, and to alert you when you’re about to bump into a shopping cart as you’re backing out. If Ford and New York City-based Bug Labs have anything to say about it, your car will soon be able to do much more: compare your fuel economy to that of your friends, measure your biometrics as your drive, or even alert you to the presence of allergens in the air.

“Think of the car of the future as a mobile computer on wheels, and these are the attachments,” says Peter Semmelhack, founder and CEO of Bug Labs. “The idea is a crowd-sourced, bottom-up approach.”

The two companies announced this week that they will team up in a joint development project to research and distribute open-source developer tools to advance in-car connectivity innovation. Known as “OpenXC,” the research platform will transform the car into a docking station for interchangeable plug-and-play hardware and software modules. Functions change with the addition or deletion of modules, giving owners the freedom to continually customize their vehicles.

Last week, at the TechCrunch Disrupt conference in San Francisco, the two companies demonstrated a socially-networked in-car fuel economy monitor that connected to the Internet via BUGswarm, Bug Labs’ cloud-based service.

“The crowd was made up of VCs, geeks, and bloggers, and the response was terrific,” Semmelhack says. “We didn’t go in expecting to hit any metrics, but we’ve already been approached by investors.”

Turning developers loose on open-source tools is a win-win proposition, Semmelhack says. “Ford isn’t … Next Page »

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There’s no doubt that managing a biotech company is an enduring challenge, even during less tumultuous economic times. Now, entrepreneurs are contending with resources that are incredibly tight, an economy that is unsettled, a stock market on a roller-coaster ride, and research and development budgets that are being slashed. The stewardship role entrusted to the management teams of biotech companies has become especially tricky as they are required to make tough choices that balance the needs of investors and the pursuit of scientific discovery. They must also manage the chaotic world of innovation within the regulatory boundaries of FDA approval process, and give freedom to creative scientists without letting go of the fiscal discipline.

So how are biotech companies handling the pressure? At BDO USA, our analysis of the 10-K SEC filings of publicly traded companies listed on the NASDAQ Biotechnology Index (NBI) over the last four years provides a window into the impact of the economic turmoil on biotech’s operations, and strategies that management teams are using to remain financially viable. For the purpose of the analysis, biotech companies were classified as “large” (between $50 million and $300 million in revenue) and “small” (less than $50 million in revenue).

Here are the major findings:

Cash is King

An assertion perhaps no more critical than in the biotech industry, where cash and liquidity are really strategic assets. No matter how talented and innovative a company’s research team is, or how promising the technology they are developing, all comes to naught if there is no ability to continue to fund such efforts and the company runs out of cash. According to our analysis, NBI constituents—despite the turbulent markets and global recession—managed to maintain a very stable level of cash: the equivalent, on average, of over 2.5 years of R&D spending. However, maintaining liquidity has come at the expense of spending on R&D, a trend also seen at big pharmaceutica companies. The good news is that despite two consecutive years of R&D cutbacks in 2009 and 2010, biotech companies still managed to achieve double-digit growth in average revenue.

Selective Innovation

But if R&D spending is dropping, it’s logical to ask whether the biotech sector is suffering a decline in its desire to pursue new drugs, and what this will mean for product development. Are biotech companies becoming less innovative? From our perspective, the answer appears to be no, at least not in the near future. Biotech companies appear to be maintaining their average headcount, which is encouraging, but the spending per employee has gone down. What appears to be happening is that management teams are being more selective—sometimes strategically and at other times due to necessity—by funding certain programs ahead of others.

In addition, the frequency and significance of strategic partnerships and collaborative arrangements between biotech companies and pharmaceutical companies have been increasing over the past years. This has enabled biotechs to fund some R&D activities from payments under such collaboration deals at times when they don’t have products that are being sold commercially. As such, collaborative arrangements have become an essential financial lifeline for biotechs.

However, a word of warning. As big pharma cuts back on their R&D spending due to significant pressure to show a return on their R&D spending, management teams of biotech companies should expect to see a higher level of diligence and scrutiny from pharma companies before they fund collaboration deals. Under such a scenario, a careful and objective analysis will be critical in determining which projects and R&D efforts have the best chances of success in getting through all stages of the multi-year product development cycle. The dilemma for management teams will be whether it is better to delay certain R&D projects to conserve cash for projects that may have a better chance of commercial success.

The Role of Capital Markets

When it comes to accessing capital markets for product development, equity remains the top source of financing, according to the 10-K analysis. In 2010, 51 percent of smaller companies were able to raise an average of $64 million equity financing. This shows a promising rebound as companies are approaching pre-recessionary levels—61 percent of smaller companies raised financing in 2007 and the average value was also $64 million. Therefore, investors continue to have an appetite for investments in the biotech sector, but have become more selective.

Backers of biotech companies make huge investments and clearly want to maximize returns on their investment. Maintaining a fine balance between innovative curiosity and creating meaningful opportunities to generate shareholder returns promises to become more and more challenging. Companies will need to remain flexible to innovate not only in core scientific areas but also in their business models and operational structure in order to thrive in changing market dynamics, and fulfill the critical mission of making a difference in the lives of people globally.

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Here in Boston, we like to tout our universities, our faculty, our students. The academic community is one of the crowning strengths of the New England economy, not to mention a major driver of its global impact. But what have universities done for the local startup and business innovation community lately?

I’m not going to give a full answer here—it’s one of the broader themes I’m exploring around town—but I’ll give you a piece of the puzzle.

Harvard University’s Office of Technology Development has what it calls an “Accelerator Fund” that has been chugging along for four years now, and it has achieved some notable results. As of last month, the $10 million fund has given out $5.2 million in grants, which have supported more than 30 projects over five annual cycles. It’s still early to add up the returns on this investment, but already it has led to more than $10 million in partnership money for the university, and several startups that have received outside venture funding. (The Harvard office declined to give specifics on licensing revenues to date.)

What’s more, the model apparently has proven successful enough that the team is about to begin raising a much bigger fund, in the $20 million to $30 million range. And unlike in the past, when Harvard developed a laggardly reputation when it came to commercializing its research, universities around the country are starting to look at the school as a possible role model for technology transfer and startup development practices.

The Accelerator Fund, which Xconomy wrote about in early 2008, was created to help Harvard scientists commercialize their inventions by forming industry partnerships, licensing technology, and starting new companies, primarily in life sciences and biomedical fields. As technology development head and senior associate provost Isaac Kohlberg puts it, “The pipelines of Harvard were empty.” The school “suffered from a branding issue with stakeholders about the role of technology development,” he says.

Kohlberg and his team, which includes Curtis Keith, chief scientific officer of the Accelerator Fund, were brought in to overhaul Harvard’s tech transfer and development offices. Kohlberg joined … Next Page »

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I don’t know how most Americans feel these days, but I haven’t felt like this since just before Richard Nixon left office in 1974. Our political leaders (think “jumbo shrimp” or “military intelligence”) have just completed a grand game of chicken. They ended up in just the same position Neville Chamberlain was when he negotiated with Adolf Hitler.

I won’t dwell on the inanity of the negotiations or final resolution about spending, revenues and debt limits. Suffice it to say that cutting a little over $2 trillion from the projected 10—year deficit is akin to losing 7 pounds off a starting weight of 350. We will still have accumulated deficits over that time frame of $7 trillion, and we still confront total debt and vested liabilities of perhaps $90 trillion.

One side argues that we can’t raise revenues and the other argues that we can’t cut entitlements. I have no horse in the race, so to speak, so let me be clear: both sides are wrong, dumber than a pile of rocks, but much more dangerous. Entitlement costs, especially healthcare, will eat us alive: without real reform of affordable health delivery, not just reform of access to health insurance, the U.S. economy is doomed. More generally, at all levels, government has given away the future in order to buy votes in the present. It has been a truly bipartisan effort over decades. On the revenue side, we will need to increase taxes, broaden the tax base, and reform the tax code, or we are also doomed.

Because the negotiated settlement of the debt crisis was so lame, a ratings agency has downgraded the country. Instead of asking whether we are indeed in greater danger of long-term financial difficulties, everyone is blaming the bearer of bad news, pointing out that they weren’t exactly prescient in the recent financial crisis. Of course that is true but irrelevant. You don’t need a crystal ball to see that we have an unsustainable business model and no political process for change.

Reading the papers these days is remarkably uninformative. Increasingly, the media mixes editorial and news content. Each outlet picks a side and then puts all its weight behind a particular narrative. Silver-tongued/penned commentators rail against the lunacy of the other side without the slightest sense of humility or responsibility. Meanwhile, the American public divides into equally ill-informed and unthinking partisan camps.

Whenever I see this recurrent set of facts play out, I am reminded of one of the Dr. Seuss books (The Sneetches) in which one group has a star on their bellies and purports to be superior to the non-starred crowd. The latter gets an enterprising entrepreneur to put stars on, which causes the previously starred group to hire the same entrepreneur to remove their stars. In the end, of course, … Next Page »

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A short holiday week still left us with plenty of good tech news to chew over in the Puget Sound region. Here’s the quick version of the headlines and deep dives from the past seven days here at Xconomy Seattle, from big players and VCs to startups and researchers:

—Cue the circa-2000 sock puppet jokes—Amazon.com (NASDAQ: AMZN) subsidiary Quidsi debuted Wag.com, a new online portal for pet products. Quidsi, which was acquired by Amazon in November for $500 million, already operates sites like Diapers.com and Soap.com. Amazon, of course, owned about a third of Pets.com, whose microphone-wielding doggie puppet mascot became a much-lampooned symbol of the dot-com bust. A few days after bringing us that news, Xconomy New York’s Arlene Weintraub wrapped up what looks like a flurry of recent pet-related tech tidbits.

—Facebook founder and CEO Mark Zuckerberg made the “awesome” product announcement he alluded to during a recent visit to Facebook’s Seattle office, bringing up Skype CEO Tony Bates to show off the new video-calling feature embedded in the world’s largest social network. The Facebook side of the work was done mostly in Seattle, with just one full-time engineer in charge (he did have some part-time help). That would be Philip Su, who sported the Space Needle-logo Facebook Seattle T-shirt as he gave the new Skype feature a test run during the news conference.

—On the startup side, I offered this look at what Seattle’s Iota is planning for the next-generation consumer RFID sector. Iota’s team is made up of T-Mobile veterans who want to get fun, fashionable non-phone mobile devices into the hands of the roughly two-thirds of Americans who are still packing around feature phones—especially teens. Iota’s plan is to get ahead of the Googles of the world in deploying a fast, easy, cheap network of RFID tags that can be read through “near-field communication” technology.

—Seattle mobile game startup Zipline revealed that its Moai platform, which lets developers quickly build and host mobile games, was being used to develop the first game for Bungie Aerospace—the new mobile label from the makers of the Halo game franchise. Moai is based around Lua, a common programming language for games, and offers a single open-source platform for both the front-end and the infrastructure of a mobile game. Jordan Weisman’s Harebrained Schemes imprint is using Moai to develop stealthy title “Crimson” for Bungie Aerospace.

—Over in Boston, Xconomy’s Greg Huang got a look at what the gang at Microsoft’s New England Research and Development Center have been up to for the past three years. It’s one of several R&D labs around the world for Redmond, WA-based Microsoft (NASDAQ: MSFT), but the details of just what they’re cooking up behind the doors of the NERD haven’t really been aired until now.

—Xconomy’s Bruce Bigelow checked in from our San Diego office with this report on a pair of studies gauging the health of the venture capital industry in 2011. As Bruce wrote, the surveys—from Dow Jones, and Thomson Reuters/National Venture Capital Association—show that VC fundraising is up, but the kitty is split between fewer funds. That means the industry is contracting around the name-brand funds out there.

—Finally, a trio of quick financing updates from the Seattle tech scene: Zillow amended its IPO paperwork to add an estimated share price range of $12-$14; compensation data provider PayScale raised $7 million in VC to expand sales and marketing; and mobile security software company Finsphere raised another $1.75 million from undisclosed investors.

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Whether you’re part of the Boston-Cambridge technology community, or just an interested observer, you’ve probably been to the Microsoft New England Research and Development Center (known affectionately as NERD) at least a few times in the past year. But do you know what Microsoft is actually working on there? I didn’t.

Until last week, that is, when I visited Microsoft Research New England, one of the main groups at NERD, housed near Kendall Square. The tower at One Memorial Drive rises majestically from the banks of the Charles River, but it guards its secrets closely. Jennifer Chayes, the managing director of Microsoft Research New England, which occupies the 12th floor, reveals the projects her group is working on slowly. But she does reveal them.

OK, it’s an open research lab with hundreds of visitors and collaborators from academia and industry, so secrecy isn’t the culture here—at least, not amongst the research community. But from the lab’s opening in 2008 until now, Chayes, an expert in discrete mathematics, networks, and game theory, has said very little to the technology and business media about what her teams have been working on—and what it all has to do with Microsoft’s (NASDAQ: MSFT) business. And that’s just fine, because I’m about to tell you.

Microsoft Research New England is three years old this month. Although the full-time research staff has doubled in size since inception, it’s still a fairly small operation—12 staff researchers (including deputy managing director Christian Borgs), another dozen postdocs, a half-dozen software development engineers and support staff, and any number of students and interns. Their research breaks down into six main areas—computer science (including algorithms, cryptography, machine learning and vision, and security), computational biology, economics, mathematics, networks, and social media. (Microsoft declined to say how much it has invested in the lab so far.)

It’s not a typical lineup for a Microsoft research lab, of which there are six worldwide, including the mother lab in Redmond, WA. “Our lab has gone into certain areas that haven’t been nearly as emphasized by the other [Microsoft Research labs]. Most of them are fantastically strong in mainstream computer science disciplines,” Chayes says. “One of the reasons for opening the lab here was because we wanted to help advance the state of the art at the boundaries between computer science and other fields. And Cambridge is a place—of course it’s very strong in computer science—that’s phenomenally strong in other fields.”

Take empirical economics. Susan Athey, the renowned Harvard economist (and Microsoft consultant), heads up a year-old group in the lab that’s focused on analyzing huge datasets that Microsoft has access to—things like online advertising trends and performance, search-engine user behaviors, Xbox Live networks, e-mail and instant-messaging patterns, healthcare trends, and so on. Chayes pitched the idea for the economics group to CEO Steve Ballmer in December 2009, and he said to go for it.

The group’s goal is to find patterns in databases that could make various systems more efficient. Little did they know this would lead to the lab’s first technology to become a Microsoft product. … Next Page »

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Eli Lilly today unveiled a multi-million dollar initiative to expand its biotech R&D in protein engineering, a move that includes hiring biochemists and biologists to work in “multi-specific therapeutics” in San Diego and Indianapolis. A spokeswoman says Lilly plans to hire about 20 scientists in each city. With its extensive expertise in biologics, Lilly says it is possible to engineer compounds so that one medicine provides multiple therapeutic effects. Lilly gained much of its experience in protein engineering through its 2004 acquisition of San Diego-based Applied Molecular Evolution.

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Let’s see if this produces some much-needed new drugs for Pfizer’s pipeline.

The New York City-based pharmaceutical giant (NYSE: PFE) announced today it is starting a five-year, $100 million research collaboration in Boston with Beth Israel Deaconess Medical Center, Boston University School of Medicine, Children’s Hospital Boston, Harvard University, Partners HealthCare, Tufts Medical Center, Tufts University, and the University of Massachusetts Medical School in Worcester.

The partnerships are part of Pfizer’s broader R&D network, called the Centers for Therapeutic Innovation (also in New York and San Francisco), which aim to close the gap between basic research and clinical trials of new drug candidates. Pfizer said it has signed a lease for lab space at the Center for Life Science in the Longwood Medical Area in Boston, which will serve as the headquarters for the R&D network. The Boston program’s $100 million price tag includes support for research programs, potential milestone payments to partners, and operational costs of the new lab.

Back in January, Pfizer announced a research initiative involving seven medical institutions in the New York area. That move, which came on the heels of a similar announcement in San Francisco, was made in conjunction with a new lease at the Alexandria Center for Life Science, a biotech park on the East River in Manhattan.

These research partnerships are part of a broader effort by Pfizer to boost its R&D efforts—a mission that’s becoming all the more urgent as its patent for the blockbuster cholesterol drug Lipitor approaches its expiration later this year (anticipated in November). The challenge of getting new drugs into the pipeline is shared by many other big companies, including Sanofi-Aventis, Eli Lilly, and Merck, and remains a fundamental problem for the pharmaceutical industry.

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U.K.-based drug giant AstraZeneca (NYSE: AZN) is planning to lay off 135 employees at its facility in Westborough, MA, starting at the end of May and continuing through the end of 2011. The news was reported today by the Boston Business Journal, which cites a notice to state labor officials. The Westborough plant, which makes supply and packaging for allergy and asthma drugs, among other products, went through a previous round of layoffs in 2009, according to the report. Before that, AstraZeneca employed some 1,000 workers in the state between the Westborough plant and an R&D center in Waltham, MA. The new layoffs are part of a broader corporate restructuring (including 3,500 job cuts worldwide) that was announced in early 2010.

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[This post was co-authored by Joseph Steig of VentureWell---Eds.]

The United States needs new, bold science innovation to address the challenges facing people and the planet—and to create jobs and a strong economy. Yet what is glamorous in popular business culture is not science innovation, but rather bold pitches, business innovations, fast and big exits. The face of this culture is not the technology innovator but the CEO, pitchman, business leader, King who can crack the deal, make the VCs or the Street happy, and move on to the next game—all the while making speeches from the podium of the next conference about innovation, entrepreneurship, and the Next Big Thing.

Why does this neglected focus on innovation matter? If we don’t put focus back on the innovator and on scientific innovation, our nation will be left behind, the challenges of sustainable energy, global health, adequate food and water will go unanswered, and the meaningful, economically viable jobs they bring will not be created. But it’s not an either/or proposition, not business innovation versus science innovation. It has to be both.

At a recent Fast Company “Innovation Uncensored” conference, JetBlue and Hulu were called out as exemplars of innovation. As wonderful as those companies are, conflating such business innovation with innovation writ large is a dangerously limiting view. It is essential to cultivate innovators who not only love the lab but love the market too, who can see the world through both the lens of science and the market. It’s only with that binocular vision that more fundamental innovation can be unleashed.

But don’t scientists and engineers really want to be back in their labs grinding out cool science? And isn’t it up to business leaders to extract the science that can be commercially valuable? This perspective is at the root of the problem. The skill of combining market and technology innovation is at the very heart and soul of profitably and effectively commercializing and reaping the rewards of science or engineering research. As a country we have to redouble our efforts to support the commercialization of real scientific and research innovation. But we also have to support scientists and engineers to become players in the global game of business innovation—where the stakes may actually be as high as the survival of the planet as we know it.

So how did we get here? First, it wasn’t the build-to-flip Web 2.0 culture that began the trend of undervaluing science innovators and creating a view that innovation means the next cool app or a nicer way to fly. Global companies that were built on their skills and inventions started that ball rolling, and initially the reasons were appropriate—the need for R&D to move more rapidly to commercial products aligned with existent market needs. Starting in the late 80s the trend of aligning … Next Page »

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The overnight consensus from the twittersphere is that Joichi Ito—a globetrotting Internet entrepreneur, investor, activist, and blogger with few academic credentials—was a daring and unconventional choice to lead the 26-year-old MIT Media Lab. And that, says search committee leader Pattie Maes, is exactly the effect the lab wanted to achieve.

The Media Lab “has always been a place that likes to do things differently,” says Maes, who directs the lab’s Fluid Interfaces group. “So almost everybody I talked to during the selection process found that [Ito's lack of college or graduate degrees] was a feature rather than a bug. The universal answer was ‘Yeah, let’s show them! We are still bold, we can do things differently.’ We are not going to pick somebody based on titles, but instead we will look at what they have accomplished.”

And Ito has accomplished a lot. He helped to start Japan’s first ISP and its first commercial search engine in the 1990s. He’s backed a roster of influential startups such as Twitter (where his handle is simply @Joi). And he’s won fame as one of the technology world’s most-traveled, best-connected people; in fact, he blogged back in 2003 that he was getting invitations every day to parties all over the world, “‘Just in case you’re in the neighborhood.’…The funny thing is, sometimes I am in the neighborhood.”

Those invitations and connections will come in handy as Ito begins to follow through on what Maes called the search committee’s number-one priority: building a more active profile for the Media Lab in the global community.

“We felt that the lab, while doing excellent work right now, has not done a good enough job being present on the world stage, talking about what we do,” Maes says. “Our story has been a little big vague and not front-and-center. So we decided that we needed somebody who would be very much an externally facing director, who is very much a global player with many connections.”

That’s certainly Ito. And he’ll have plenty to talk about: the Media Lab is not the place many outsiders may remember from Stewart Brand’s 1988 book or the dot-com era, Maes asserts. It now employs neuroscientists, artists, economists, and others who are using a variety of tools “to come up with the next generation of technologies that we think will really bring about revolutions,” she says. “The overall vision is still very much the same, in that the lab is about empowering people with technology, but we have evolved away from just looking at digital technologies.”

Fortunately for the lab, “Joi has always been a visionary, somebody who really lives in the future rather than just talking about it,” Maes says. “He really believes strongly that technology can unleash the creativity in people and give them more freedom to take their lives into their own hands.”

High on Ito’s to-do list, judging from what Maes told me, will be orchestrating a hiring binge at the lab. She says Ito turned the tables on the search committee during their interviews, quizzing them about how hiring works at MIT and whether he’d have free reign to … Next Page »

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[Update: 3:12 pm ET] Christoph Westphal, the Boston-based biotech mover/shaker, is leaving GlaxoSmithKline (NYSE: GSK) later this year to focus on Longwood Founders Fund and other business interests, according to a press release this morning. Westphal is currently president of SR One, GSK’s venture capital arm. London-based GSK is also an investor in Longwood Founders Fund, the relatively new VC fund started by Westphal, Michelle Dipp, and Rich Aldrich.

Westphal originally came to GSK in 2008 through its $720 million acquisition of Sirtris Pharmaceuticals, the anti-aging biotech firm where he was CEO and co-founder. Before that, he was a general partner at Polaris Venture Partners in Waltham, MA, and a founder of Alnylam Pharmaceuticals (NASDAQ: ALNY), Momenta Pharmaceuticals (NASDAQ: MNTA), and Acceleron Pharma, among other companies. In 2010, Westphal left the CEO post at Sirtris to focus on VC as head of SR One.

GSK’s chairman of research and development, Moncef Slaoui, said in a statement: “Christoph remains a committed advisor to [Sirtris's] efforts as well as leaving us with a stable foundation in place at SR One. I believe that Christoph’s contributions have made a significant impact in GSK and I am very pleased that he chose to remain within the company for an extended period following the acquisition. In addition to his achievements at Sirtris, he has brought an entrepreneur’s perspective to our thinking on deals to help us implement R&D’s strategy to diversify through external collaborations and venture capital investments.”

[Update: 3:12 pm ET]. Dipp, who has worked with Westphal at Sirtris and GlaxoSmithKline, will also be leaving her job at Glaxo this year to focus on Longwood Founders Fund, according to a spokesperson for Longwood. Both Westphal and Dipp have agreed to stay at Glaxo until their successors are recruited. Dipp and Westphal are expected to make their transitions to Longwood Founders Fund in the third or fourth quarter of 2011, the spokesperson said.

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A rehab-robotics startup out of MIT is getting a second lease on life. And if the company succeeds in reaching the masses with its latest effort, a lot of stroke patients might just feel the same way.

Myomo, a Cambridge, MA-based rehabilitation and medical tech firm, announced this week it has rolled out version 2.0 of its powered robotic elbow brace that helps people with neurological impairments move their arms. The idea is simple, and it seems to work: stroke patients can wear the sleeve-like device to regain some range of movement and to strengthen their muscles over time. The technology works by picking up electrical signals on the skin when a patient is trying to move a partially paralyzed limb; the robotic system then provides a small amount of force to help the person extend or bend their elbow, to do things like pick up a plate or hold onto a walker. (More on what’s new with the system below.)

This is a classic story of a new technology that has been hard to sell—and the ups and downs of a young company that has taken its lumps but has lived to fight another day. Xconomy first wrote about Myomo in 2007, when the startup received FDA approval to market its first product, and again in 2009, when the firm pulled back and focused on research and development after slow sales. Myomo went down to four employees at the end of 2008, but is now back up to 12 full-timers.

“This is the path of perseverance,” says Myomo CEO and co-founder Steve Kelly. “We’re on track to ship more units this year than in the entire history of the company.”

Why should Myomo fare any better this time around? Let’s start with the latest incarnation of its product. Kelly and executive vice president Ela Lewis say the previous version was more of a “clinical product,” whereas the new version is more of a true “assistive device” that patients can use at home. The current product is streamlined and more portable. It has two electrode sensors (for biceps and triceps) instead of one. It includes wireless networking that connects to a mobile phone via an Android app that lets patients track their progress—range of motion, how many movements they’ve done, and so on. And it will include a structured program for clinical and home use, complete with video-game mechanics … 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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