A Few Thoughts On Industry Clusters And Startups

If I suggested a way for your clean energy startup to set-up shop near a bunch of companies involved in things like renewable technology and the smartgrid, what would you say? If I sweetened the deal and told you the list of companies included a few of the Fortune 500 and a slew of established mid-market companies, you’d probably say, “sign me up!”

So goes part of the argument for industry clusters, a term that Harvard Professor Michael Porter explored in the late 1990’s. And with the economy in somewhat of a rebound, there’s more discussion around how industry clusters can spark regional growth. But there’s obviously more to it than filling up business parks with like-minded corporations in similar verticals. Or is there?

recent Forbes piece highlighted an industry cluster in the Midwest, where a smaller startup was able to ramp up operations because of its alliance with a larger, more established company.

Vadxx Energy has gained a lot of value from being part of an active cluster of advanced energy companies and organizations. In fact, one of the big reasons our partnership with Rockwell Automation occurred was because of Vadxx’s participation in Northeast Ohio’s advanced energy cluster. Joining forces with a credible, multinational company has helped us accelerate our commercialization activities, raise additional capital, and attract new customers.”

But proximity and a burgeoning market only guarantee so much. It starts with human capital, driven by the innovators and risk-takers that comprise much of the entrepreneurial community. That’s where I see the bridge to Austin’s community, as well as its strength.

Washington Post columnist Vivek Wadhwa amplified that point.

“A recent analysis of 1,604 companies in the five largest Norwegian cities underscores what’s missing from this prescription for a knowledge economy: people. The prerequisite for a regional innovation system is knowledgeable people who have the motivation and ability to start ventures. To succeed, these people need to be connected to one another by information-sharing networks. Basic infrastructure is always needed, but fancy science parks and big industry are just nice to have.”

Now granted, Norway (and other Scandinavian countries) isn’t the most culturally heterogeneous region by any stretch. But more importantly, its leaders are committed to maintaining global ties and welcoming new ideas and inputs — outside of their regional comfort zones. Without that, as the study concludes, regional and national clusters are mostly “irrelevant” to innovation.

Whatever the results, Austin is a classic fit for much of the positives associated with clusters. When you add in the emphasis on human capital, strong industry segments, and access to a top-tier university, it’s hard to see how doubling down on the idea doesn’t make sense.

NYT had a recent piece on manufacturing, but I was more interested in this stat on where most of the R&D activity in the US takes place.

“American multinational companies that account for about 84 percent of all private-sector (non-bank) business R.&D. in the United States still place about 84 percent of their R.&D. activities in the United States, often in clusters around research universities..”

Again, manufacturing aside, that’s a big percentage of spending that hovers around clusters. And Austin’s familiar with the scenario, especially with Austin Technology Incubator’s alignment with the University of Texas and the fact that accelerators are moving closer to downtown hotbeds of startup activity. And that R&D spending? It’s companies like Dell, Facebook, Samsung and others spending those dollars.

So whether or not you buy into the cluster concept, here’s an excerpt from a recent ITIF report on cities and innovation I’ll leave you with.

“One reason why technology industries drive income growth is that average wages in high-tech clusters are $63,970 versus $43,180 in non-high tech traded clusters. One key factor that appears to drive higher incomes in a region is a higher share of employment in knowledge-based industries.States with higher concentrations of knowledge-based industries, including professional services and high-tech manufacturing, have higher incomes.”


Startup Figures Are Encouraging

The bright spot in this report is that 140 million entrepreneurs around the world say they expect to add at least five new jobs over the next five years. That’s why we think entrepreneurship is the economic engine that will revive our international economy

Here’s An Interview I Did With Austin Startup 9WSearch

If you wanted to start a company based on the financial markets, Austin might not be your first choice. Technically, for 9WSearch CEO Susan Strausberg, it wasn’t. “My husband and I picked Austin to start a green-oriented business, but it took a little longer than expected,” said Strausberg.  ”So we went back to our roots and started 9WSearch.” 

Those roots run the deepest in financial services, and with Strausberg’s track record in the industry, it probably doesn’t matter much where she sets up shop.

“We’re creating a new paradigm for the presentation and consumption of financial information,” said Strausberg. In the mid 1990′s, she had similar aspirations as the co-founder of Edgar Online, whose model accelerated as the SEC mandated that information had to move online. This time, it’s another ruling that’s proving to be a catalyst.

In 2009, the SEC ruled that companies would have to provide operating data in an easy to use format, opting to push forward with theeXtensible Business Reporting Language, or XBRL. That opened the floodgates for 9WSearch and others. Now companies had a standard to work with, making the development and delivery of specific apps and services much easier. Strausberg says the XBRL mandate, coupled with the fact that between eighty and ninety per cent of companies have a basic commercial or industrial classification, 9WSearch can create a curated view of company data and financials.

“We can create a custom template that gives our clients a tailored view of a company’s core information,” explained Strausberg. Her team has already accomplished much of the heavy lifting, so templatizing a business sector or company profile is a snap says Strausberg. They’ve essentially cleaned up some of the finance-speak and distilled the data down to simple and understandable terms, something 9W likes to describe as “actionable intelligence.”

Co-founder and CIO, Marc Strausberg, says there are more than 18000 tags that were approved under the XBRL mandate. So while the delivery is standardized, there’s still a big challenge fitting all the terminology into a standard taxonomy.

“The reality is many of the descriptions don’t add a lot of value, and what 9W does is surface the items that have value to an end user,” said Mr.Strausberg. He gave the example of an energy company that might be reporting on the success of its exploration efforts. “If we have 200 oil and gas companies and can whittle things down to “dry holes,” we’re saving people a significant amount of time,” he added.

Its filtering and curation expertise is really where the company is banking on separation from its competitors. Although finance is one of the largest silos on the web, mobile access to this information is severely lacking. Both founders also say they plan to involve their early freemium customers in the process of determining what the marketplace will want. In addition, 9W currently has basic social media capabilities, with the ability to share across most social networks.

On the customer front, 9W says it doesn’t have one ideal segment, but there are some obvious ones. Knowledge workers inside corporations should be easy pickings as 9W launches, especially as the company adds vertical product sectors.  It also wouldn’t be a stretch to see LinkedIn, Salesforce or other B2B software providers take a serious look at its portfolio. Salespeople, HR managers and certainly the C-Suite are used to buying and integrating content for the business. The difference in 2012 is the modularity of those content assets. You don’t need to buy the whole package from a media company, just the niche you need.

“There’s a gigantic shift in the way people will use information and most of us aren’t educated in the fine points of finance,” said Strausberg.

Neither are most businesses.

Steve Case On Job Growth

Good Points On The Startup Pitch

There are several key elements that make or break the pitch. The first is to clearly explain the problem you are trying to solve and demonstrate how big a problem it is. The second is to clearly define what your solution is. You should state what your company does in five words or fewer.

Some investors look at the team, while others look at the market segment, and still others consider the product or service offering, so you need to define those points also.

The “state of cleantech VC” series

Good read from Matthew Nordan.

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Software Is Eating Nonprofits Too — A Conversation With Austin’s Affinity IG

When you hear someone talk about disruption in technology, it almost sounds passé. But if you ever want a simple cheat sheet to impress your friends,read this piece by Netscape Founder and Venture Capitalist Marc Andreessen.

It’s basically a series of case studies in disruption, each showing how software-driven services are invading companies large and small.

Recently, I caught up with two tech execs that want to accelerate the way nonprofits are being eaten by software.

lizgreen“There’s all these tools out there, whether they’re free or in-house, and clients are having a hard time pulling anything cohesive together,” said Liz Moise, Managing Partner at Affinity IG, an Austin-based interactive agency. And Moise should know. She’s held a number of positions in the non-profit sector, most recently as head of marketing at Goodwill Industries here in Austin.

If what Moise describes sounds familiar, it’s by design. Affinity IG is taking its years of experience in corporate and startup environments and applying that to advocacy and nonprofit groups. And even though her experience played a big part in Affinity IG’s roadmap, it was the agency’s Founder, Mark Courtney, that refocused its efforts about a year ago.

“We wanted to attack things a little bit differently”, explained Courtney. “We knew we had the DNA of a social enterprise, and with Liz coming on board, working with nonprofit and advocacy organizations just made sense,” said Courtney.

mark_courtneyCourtney started the company almost three years ago, mostly helping organizations build online communities. With more than a decade of managing large-scale websites before that, he realized Affinity’s new direction was the perfect fit for Moise’s marketing and branding expertise. The culmination of that can be seen in a recent white paper, “Think Like A Startup, Execute Like a Social Enterprise.” It targets nonprofit marketing and development teams and does a good job blending digital strategy and old-fashioned execution.

“What we wanted to do was provide the strategy and creative on a technical level, without sacrificing our domain expertise in the advocacy area,” Moise said.

Affinity’s heavy digital focus is warranted. Some projections peg the online giving market as high as $30 billion in the United States, according to a 2010 report from Giving USA Foundation. But having solid digital chops is only part of the battle when trying to raise money and recruit new members. You better know the ins-and-outs of the nonprofit world.

Courtney says one of Affinity’s advantages is its growing roster of alliance partners.

“We have some great alliances already”,said Courtney. “Our content and collaboration partners love our model because we’re so agnostic, we’re focused on the business first,” added Courtney.

As basic as it sounds, that’s a hard thing for some of Affinity’s clients to digest with all the tools and technologies available. “For us it’s easy, we put Advocacy at the forefront, then refine it with the right tools and support,” added Moise.

Apparently that strategy is attracting attention from some big names.

In early 2012, Affinity is launching an International version of Fox Trial Finder for the Michael J Fox Foundation, a leader in providing support for Parkinson’s Disease (PD). Affinity says the platform will match clinical trials around the world with PD patients, caregivers and healthy volunteers touched by the disease.

Moise says the development work included matching algorithms and custom analytics, a welcome boost for the foundation as it gears up for Parkinson’s Awareness month in April.

Affinity’s work with the Fox Foundation also shows how client expectations are changing in the nonprofit space. Service providers and agencies aren’t just user interface (UI) and branding practitioners, they’re system integrators and business strategists.

In the past, organizations would look to incumbent software providers for solutions that worked on top of their platforms, often succumbing to the proprietary nature of their systems. These days, in the spirit of open data, those same applications are giving way to more open and expandable systems. Yes, the nonprofit sector is finally experiencing the same consumerization that’s been gripping corporate enterprises for several years.

That should signal opportunity for Affinity IG and others. Not only are there plenty of silos in advocacy organizations, (think integration, collaboration) but it also has its share of clunky, monolithic software vendors.

Addressing those challenges and already having some of the right pieces in place, should make it an interesting year for the agency. Budgets aren’t back to pre-crash levels, but there’s plenty of demand for firms providing turnkey services to an underserved market.

Let’s hope Affinity IG is the harbinger for not only the rise of the social enterprise, but its staying power.