Miscellaneous Stories 1996-97

Stories that earlier appeared in Nelson's News 
Note 1: Carl Nelson Consulting, Inc is not an investment adviser and may hold a financial interest or client relationship in companies discussed.
(Note 2: Carl Nelson Consulting does not endorse these companies or organizations or their activities.) 
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Happy New Year, Tech Coast. That's right. In 1998, Southern California will come into its own as a bona fide technology capital, local tech leaders say. From Internet content to biotechnology to commercial aerospace, the Southland's increasingly high-tech flavor will make it a worthy neighbor to Silicon Valley. ... a handful of local Web firms that are emerging as industry leaders in the Internet content game ... UCLA and Rockwell's Science Center in Thousand Oaks, who are developing wireless networks of tiny sensors that can read data from global positioning system satellites data or measure vibrations or listen for sound waves. ...The activity has been fueled in part by a newly energized Southland venture capital community. ... Perhaps the single institution with the most potential for shaping the future of technology here is the new Getty Center, said Dataquest's Lavin. By providing grants and coordinating in-house activities with other local institutions, such as the American Film Institute, the Getty can help solidify Los Angeles' place as the content center for the Information Age. [LA Times, Dec 28] "Many scientists are hesitant to make that leap into popular culture because some sense that it might be demeaning. But it hasn't been for me, and I think people are craving to know more about their world." ... Physicist Lawrence Krauss is boldly going where scientists have rarely gone before--out of the halls of academia and into the alien world of mass media. [Associated Press, Dec 29] Something to remember when you are writing a serious SBIR proposal - you are competing for the eyeballs of government experts. Sounding solemn may soothe your fears of looking less erudite than your self-image demands in front of your fellow scientists, but will hurt your chances of feeding that self-image.

It's been 15 years since Feinstein, a cardiologist at Rush-Presbyterian-St. Luke's Medical Center in Chicago, first developed his concept to give physicians a simple and relatively inexpensive way to look at a patient's heart to diagnose cardiac problems more quickly and accurately. Now that idea could soon be a product widely available to physicians. Its backers estimate the initial market for the new product could be $200M, and it could help patients diagnose disease earlier and more accurately, helping patients and reducing cost of care. [Chicago Tribune, Dec 24] Now, if you were writing a SBIR proposal for this concept at its infancy, how would you describe the commercial potential (on the assumption that the government would pay any attention to whatever you said)? Notice that this article defines sales but fuzzes savings. Which is fine for a VC seeking profits but not fine for a government wanting new technology and lower health care costs. Remember, though, you have a dilemma with cardiac care that lengthens life and thus increases lifetime health costs for those patients who would have otherwise long before died of the heart condition (and cheaply and suddenly, too). You could ignore the economics (most do so) and tell heart warming stories of the future patients or the sweetness of the technology in terms of diagnostic resolution. You're probably safe taking either line since it isn't clear that government SBIR reviewers know or care about economics. They are technical experts and the agency relies on their estimate of "scientific and technical merit" because to do otherwise raises a lot of questions that the agencies don't want to face.

High-growth industries don't necessarily provide the greatest opportunity for new companies, according to the study, titled "Hot Industries 1997." Surprisingly, older, slower-growing industrial sectors often contain larger percentages of high-growth companies, or "gazelles," than do the booming industries. ... said David Birch, founder of Cognetics Inc. ( and inventor of the gazelle) ... Start-ups that want to grow can apply new technology or methods to dull, lackluster industries and find success there more easily than in high-growth sectors, Birch said. [LA Times, Dec 24]

Carl, I just got back from a tour of NelsonVille. I felt right at home. Perhaps I should see my doctor.... As you may recall, I've had my share (at least) of experience in NelsonVille. Also, you can add my quip (if appropriate, which it may not be) about you being so generous (as an SBIR Tsar) that you gave folks even *more* than enough rope for a bungee jump. As opposed to only enough rope to hang oneself. [a former SBIR user]

Think the most expensive college grad to hire is a geek? Not exactly, it's a chemical engineer (a noble profession), average starting salary $44.6K. Computer science is second at $38.7K. Journalism in a mere $24.5K. [Source: Michigan State U Collegiate Employment Research Institute]

The innovation treadmill. For the same money you spent 18 months ago on a upscale laptop, you can now get twice the speed, four times the hard disk, and 60% more RAM. If you had submitted a Phase 2 proposal to DOD or NSF 18 months ago, you would still be in your first year of work.

Science Experts Assert. Were you expecting next some certain truth from the experts? From the same kind of experts who serve on committees to judge SBIR proposals? Well, amid the global warming hoopla that the politicians have mixed in with their selection of scientists who agree with the least painful remedy for any problem, comes an asertion that the next Ice Age is practically upon us. Geologists said at the American Geophysical Union that movements of ocean ice that ushered in the last big chill appear to have started again. Gerard Bond and his colleagues have found that the same increase has occurred in sediments over the past 6000 years. "History seems to be repeating itself," he says. The team is now looking for independent indicators of frigid climate ahead. If the data do presage a drop in temperature, Bond calculates that the real cold snap may begin in only 4000 years. [New Scientist, Dec 20-27]

Business with fewer than 100 people are credited with creating two out of every three of America's net new jobs. Last year 37% of its venture capital investment went ot start-ups, compared with 12% in Europe. The NFIB boasts that America's small businesses count as the world's third-biggest economy in their own right. .. Over half the owners of small businesses take home less than $50,000 a year in pay. .. One particular irritation for small businesses in the tax coe, which is riddled with loopholes and exemptions, many of them created by large businesses. .... A Japanese saying is that "the nail that sticks up gets hammered down"; in Palo Alto, it drives a new Ferrari. [The Economist, Dec 13]


Tech is a four-letter word. Everywhere you look in high-tech land there are bodies. On Friday, Electronics for Imaging crashed 62% after saying it would not meet analysts' expectations. Among the Massachusetts tech stocks, Teradyne and PRI Automation, both test equipment makers, have seen their shares cut in half; Unitrode is down 60%; Digital Equipment down 27% since early November. The list goes on. The Morgan Stanley high-tech index was down a stunning 13 percent in four ugly days last week. There's money to be made in this panic. Clearly scared investors are sometimes dumping the baby with the bath water on their way to the exits. But how to separate opportunity from a painful tax writeoff a year from now? [Steve Bailey & Steven Syre, Boston Globe, Dec 16] At this moment in history, there is nothing in our financial world that it's better to be than a venture capitalist. There are perhaps a thousand VCs in the world and tens of thousands of VC wannabes. These days VCs condescend to mere Wall Street investment bankers. Investment bankers, they say, don't understand business. The condescension sticks mainly because venture capitalists make more money than Wall Streeters. A lot more. [Michael Lewis, Slate, Dec 17]

Oh, that nasty Asian flu. Cypress Semiconductor sharply reduced estimates of its quarterly earnings -- just one week after pronouncing analysts' estimates sound. Battered by competition from Intel, a production bottleneck and financial turmoil in Asia, the San Jose memory-chip maker also said it will shut down certain businesses and close some plants. [Wall Street Journal, Dec 16] Cypress thus has an acceptable excuse for lower earnings that exonerates management that cannot compete so well with Intel. But at least give CEO anti-subsidy TJ Rodgers credit for not whining to the federal government for help.

When is it irresponsible to spend too little on research? Most corporate executives will give you a blank stare if you ask them this question. That's because they probably think it is irresponsible to spend anything on research. [N Myrhvold, Fortune, Dec 8] So, you think Microsoft just sells software. Microsoft has a research department to rival the best in America and hires only the best to staff it. The DOD people who decide SBIR think it is responsible to spend money on research, provided somebody else does it. DOD tried the same attitude when SBIR was being invented in 1982 - nice program; include us out.

Any Multilateral Agreement on Investment treaty will include the principle of National Treatment which means governments must treat all investors -- foreign or local -- the same. A country that wanted to give its own companies a break, for example, on access to government contracts could not do so. Nor could it limit what foreigners could own, nor forbid their access to federal irrigation water or to government- sponsored research and development programs. [San Jose Mercury, Dec 15] It would make SBIR illegal if ratified by the Senate as a treaty, unless the Senate tried to force favorable (to the US) and unequal condition on the treaty as it wants to keep the right to do in the trade.

For any company grappling with new technology systems, Oxford [Health Systems] offers a lesson in how not to proceed - and in how hotshot technology can create even worse problems that the ones it was intended to solve. [Wall St Journal, Dec 11] Take note, SBIR proposers. Your vague ideas about how technology will be adopted and used are too often based on wishful thinking especially about mousetraps. But one the other hand, they government reviewers know even less than you about how that world works.

"We've been investors for 800 days, but it seems like 800 years," said Mike Moritz, a partner in Sequoia Capital. "This is life on the Internet, and it's been a very rushed experience."


Double Your Money The research community has the answer - more money. A coalition of research orgs says the US should double its research spending in the next ten years. The three paragraph sermon from the mount Unified Statement on Research uses the usual words "lifeblood", "essential", "secure health and prosperity", and "Twenty-First Century" to make its case for dipping into the federal trough Survive in an Incubator The US has 50 times as many business incubators as in 1980 and they raise business survival chance by 75%, says a recent survey. Typically, businesses stay for a few years before breaking out on their own. The survey was conducted by Ohio University; the National Business Incubation Association in Athens, Ohio; the University of Michigan; and the Southern Technology Council.

Despite all the roll-up-your-shirtsleeves myths and stereotypes, when you got right down to it, working in a corporate start-up meant you spent 80% of your time doing complete bullshit - chasing venture capital money, writing technical documentation, hiring people - and all of it involved dumbing down your work. And the meetings! It was inevitable that at some point the system of for-profit entrepreneurship rewarded engineers who were good at dumbing down their work. To participate in the game would be a waste of God-given talent, it would be a crime against Francis's very own nature. Now, who would have such an aloof attitude? The hobby SBIR company who loved technology advance but didn't want to pay the price for financial success (or as it turns out, even adoption of the technology)? The tenured academic? In this case it is a technical whiz, non-profit research center character created by Po Bronson for his novel The First $20M is Always the Hardest


[Upside Magazine] listed Guilder (sic), a senior fellow at the Discovery Institute, among the ''visionaries'' [of the digital revolution] because of his watchdog efforts, ''snapping at the ankles of industry front-runners in the name of dogged conservatism.'' [Boston Globe, Nov 26] As with new computer products, many won't match the hype. Miscreants will find ways around biometric identification. Companies will run out of money. Challengers will appear. Yet such venues as Comdex allow small firms to enjoy moments of glory regardless of the outcome. [Boston Globe, Nov 26]

Meet Steven Rogers, Kellogg's Professor of the Year according to balloting by the graduate school's 1,200 students, and one of the country's top entrepreneurial business professors, according to Business Week. After just two years on the Kellogg School faculty, the 40-year-old is regarded as one of the leading champions of entrepreneurship, often referred to as the engine of today's economy and one of the fastest-growing majors in top business schools. What makes Rogers so popular among students--and respected by colleagues-- is his tough teaching style, his academic credentials and the practical knowledge he gained from a decade as a consultant and small-business owner. [Chicago Tribune, Nov 27] Ask SBIR user Winston Fu about Kellogg's regiment. Winston was employee Number Four at Vixel.


I was 24 when I wrote DOS. It's an accomplishment that probably can't be repeated by anyone ever. More copies of DOS have sold than any other program in history. When Microsoft offered to buy DOS outright from Seattle Computer, Seattle was a hardware company, not a software company, so it made sense to sell. Microsoft paid $50,000. It was a good deal as far as I'm concerned. DOS became big only because of Microsoft's muscle. It wouldn't have been anything if Seattle Computer had retained ownership. [Tim Paterson, Forbes ASAP, Dec 1] So, you want SBIR so you won't have to sell even part ownership in your wonderful idea? What deal will you offer the taxpayer in exchange for humoring you? Think you've got the magic formula for the next can't-miss cereal or potato chip or chocolate candy? Well, the manufacturers of America have a message for you: Keep it to yourself. Many of the nation's best-known companies, wary of costly and complicated patent fights, are decidedly standoffish when it comes to new product ideas from customers. Those companies and many others tune out consumer suggestions to avoid a battle over who owns the idea - and who deserves to profit from it. [M KAUFFMAN, Hartford Courant, Nov 21]

Does the Cincinnati area need a 21st-century technology strategy? Gary Conley, president of the Institute of Advanced Manufacturing Sciences, thinks so. Pointing to a recent newsletter survey ranking Cincinnati first among 20 central U.S. cities for high-tech jobs in emerging firms, Mr. Conley said, "We need to identify emerging-growth industries within our community and take steps to enhance those industries." Technology Industry Growth Forecaster, by CorpTech, recently ranked Cincinnati first with 15,632 jobs in emerging companies employing fewer than 1,000 employees. .. CorpTech also found that Cincinnati had one of the largest employment concentrations nationally in emerging factory automation companies. [MIKE BOYER, Cincinnati Enquirer, Dec 5]


Big Guys Innovate, Too
(Dec 8) Big Guys Innovate, Too. Texas Instruments announced a breakthrough in semiconductor manufacturing technology that leapfrogs major recent developments - a method for insulating the microscopic copper wiring on the surface of a semiconductor with a material called xerogel, a clear jellylike substance composed of tiny, hollow glass bubbles. All major chipmakers are trying to use copper for the wiring that connects transistors on a chip, following the lead of IBM who found a way to use copper in chips. Motorola, too. Today's chips use aluminum. Copper conducts electricity better but copper can contaminate the silicon surface. [Alan Goldstein, Dallas Morning News, Dec 5]Return to Index
More Big Guy R&D Bristol-Myers Squibb plans to double the number of drugs it has in early development next year and then double that number again by 2003. It plans to double the 1,000 scientists responsible for discovering new drugs and increase the entire 4,000-employee research staff to 6,000 in the next five years. [Wall St Journal, Dec 8] Another spike through the theory of SBIR. If BMS adds 1000 jobs in R&D, shouldn't SBIR decrease by 1000 jobs or close to $100M in the drug invention technologies?

The time is approaching, some venture capitalists say, when they could make a living by focusing on Arizona. ... Despite the general optimism, one thing is clear: Arizona needs more in-state venture capital funds. Many of the funds represented at the conference were from out of state, but as the state's stable of successful entrepreneurs grows, investors likely will want to be closer to the action. [Naaman Nickell, Arizona Republic, Dec 7]

Every day some geek with a gleam in his eye quits Oracle or Sun or Hewlett-Packard to start his own company. You can barely call it initiative: An entrepreneur in Silicon Valley is doing only what the Valley is telling him to do. If he shows even the faintest hint of promise, he is immediately offered cheap office space, free legal and accounting services, millions of venture-capital dollars, and résumés from a dozen other people just like him who want to leave their large corporations. In the Valley, the riskiest career move is to remain loyal to one company. "I see nine years at one place on a résumé," says Eric Ver Ploeg, "and I say, 'What's wrong with this guy? Is he a bureaucrat or something?'"

Remember, Webport Maine Portland is marketing itself as a small-city alternative to urban technology centers at the Microsoft Explorer 97 Conference, the only municipality to do so. They call it Webport. Portland would be one of the smallest cities in the country trying to bill itself as a high-technology mecca. No other municipality has reserved exhibit space at the Microsoft show. [Portland Press Herald, Dec 2] And where will it get the geeks that the high-tech companies need? Having thousands of unemployed and hungry shipyard workers and cod-fishers doesn't quite attract company that relies on geeks.

In Dallas (far from Maine in all respects), for example, TI has about 1,000 open positions and nationwide, about 190,000 U.S. information technology jobs go begging at any one time, according to the Information Technology Association of America. The U.S. Commerce Department recently estimated that 95,000 new jobs will be created in each of the next eight years for people possessing computer-related skills. At the same time, bachelor's degrees awarded in electrical and computer engineering and computer science last year hit a 10-year low. [facts from Dallas Morning News, Dec 9]

Life in a Fishbowl Public life apparently took many companies by surprise, too. Nearly half of those in the Ernst & Young study said they weren't ready for the rigors of publicly traded existence. "Most were surprised at the amount of time and energy and money that was required to meet all the regulatory requirements they took on," says Sarah Mavrinac, research director on the Ernst & Young survey. She says companies reported that it costs on average $250,000 a year to keep up with regulatory chores, including voluntary investor-relations gestures such as conference calls, analyst meetings and news releases. [D Lohse, Wall St Journal, Dec 1]


An algorithm is a procedure or formula for solving a problem. The word derives from the name of the 9th Century Arab mathematician Al-Khowarizmi. [ChiTrib, Dec1] "Percussive maintenance" - The fine art of whacking a device to get it working.

R&D pioneer Westinghouse is no more; it's now an entertainment company - CBS. The core high-tech stuff, like military radars for the F-16, are on the block. New tech aficionados can take some heart, though, in the latest DOD study that recommends more gizmos and fewer troops to use them. Which will continue to fuel the debate about how the military will look in a few years - fighter pilots or drone mechanics? Guys and gals, or gizmos, since the taxpayers won't stomach paying for both? The right answer? Sorry, life's not that simple.

Never Satisfied
(Nov 24) Illinois Superconductor's largest shareholder filed [another] lawsuit Friday against the company and its directors over a series of recent financing agreements. News of the suit drove down Illinois Superconductor shares nearly 32 percent on the Nasdaq. [Chicago Tribune, Nov 22]

Think you've got the magic formula for the next can't- miss cereal or potato chip or chocolate candy? Well, the manufacturers of America have a message for you: Keep it to yourself. Many of the nation's best-known companies, wary of costly and complicated patent fights, are decidedly standoffish when it comes to new product ideas from customers. ``Here at Hershey Foods we love to hear from our consumers,'' reads the beginning of the company's official Idea Policy, ``but please, please DON'T send us your ideas.'' It's the same door-in-your-face policy at many big companies, from Quaker Oats to Levi Strauss to Hallmark to Pillsbury. (``Recipe Ideas? Yes!'' crow the folks at Pillsbury. ``Product Ideas? Sorry, No.'') Those companies and many others tune out consumer suggestions to avoid a battle over who owns the idea - and who deserves to profit from it. [M KAUFFMAN, Hartford Courant, Nov 21] High-tech SBIR companies who take ideas to Intel get the same treatment. It's not Intel's fault; it's the fault of the legal system that encourages litigation over almost everything.

Only Two? A businessman in a Dallas SPIE audience asked just how many of the Forbes 200 and Inc 500 firms got there with SBIR when I suggested that such lists be a measure of how well SBIR is doing as an economic program. (Not as a political program.). When I said, "Two on each list", he retorted "Wow, that's not very good."

High technology employed 4.3million workers in 1996 and has been the driving force behind the nation's recent economic growth, according to a new study by the American Electronics Association and Nasdaq. The wealth of jobs in the industry was matched by the wealth of its employees, who earned an average of close to $49,600 annually, the study found, 73 percent higher than the average private sector wage. As labor shortages abound in the industry for qualified workers, software services employees commanded the highest average salary at $61,500. According to the report, dubbed Cybernation, high tech is the top exporting industry and the largest manufacturing employer in the United States. The industry also represented 6.2 percent of U.S. GDP last year, barely trailing private health services, which tallied 6.5 percent. "The state of California is the high-tech mecca leading this drive," said John Hatch, spokesman for trade association AEA.[San Francisco Chronicle, Nov 18]

Says Jack Welch to the Financial Times, There is an excess capacity in almost every industry. So, if you intend to sell a "commercializable" innovation to GE on the basis (your dreams) of making a better industrial product, think about how GE would sell it. Better will get you nowhere if the market is collapsing and your innovation makes a present product more expensive. Yes, most of your innovations increase cost by adding some irresistible feature.

Founders judged tops in business. Move over chief executives, almost all of the owners of fast-growing companies and more than half of the executives from Fortune 500 companies consider entrepreneurs the heroes of American business. According to Risk & Reward, a 1997 phone survey of 700 executives from Inc. 500 and Fortune 500 companies, those questioned say the rating of entrepreneurs has changed significantly in the past 10 years. Also in the survey: Ninety-one percent of the builders of fast-growing companies said they started a business because they saw the right opportunity at the right time. Eighty-eight percent said they wanted more personal satisfaction from what they do, and 78 percent said they wanted more control of their lives. A smaller percentage of corporate executives ranked each. Seventy-four percent of creators of fast-growing companies said they risked their own money getting started, and 66 percent said they risked their economic security. Eighty-six percent of women entrepreneurs said they start businesses to get control of their lives. The survey involved 500 interviews of Inc. 500 company founders, or builders, and 200 interviews of Fortune 500 executives. [LISA BIANK-FASIG, The Cincinnati Enquirer, Nov 9]

Founders judged tops in business. Move over chief executives, almost all of the owners of fast-growing companies and more than half of the executives from Fortune 500 companies consider entrepreneurs the heroes of American business. According to Risk & Reward, a 1997 phone survey of 700 executives from Inc. 500 and Fortune 500 companies, those questioned say the rating of entrepreneurs has changed significantly in the past 10 years. Also in the survey: Ninety-one percent of the builders of fast-growing companies said they started a business because they saw the right opportunity at the right time. Eighty-eight percent said they wanted more personal satisfaction from what they do, and 78 percent said they wanted more control of their lives. A smaller percentage of corporate executives ranked each. Seventy-four percent of creators of fast-growing companies said they risked their own money getting started, and 66 percent said they risked their economic security. Eighty-six percent of women entrepreneurs said they start businesses to get control of their lives. The survey involved 500 interviews of Inc. 500 company founders, or builders, and 200 interviews of Fortune 500 executives. [LISA BIANK-FASIG, The Cincinnati Enquirer, Nov 9]

Don't solve problems. When you solve problems, you end up subsidizing your weaknesses, starving your strengths, and achieving expensive mediocrity, and in a competitive global economy expensive mediocrity goes out of business. G Gilder, Cato Policy Report S/O97

In the U.S., demand is still strong--partly because prices continue to tumble. And that, says Loewenbaum & Co. technology analyst Ashok Kumar, could be a problem next year. Intel Corp. and Gateway 2000 Inc. recently had negative earnings surprises because of price pressures, and 1998 could bring more of the same. ''We're not recommending people add to their holdings of PC and semiconductor [stocks],'' he says. Dell, Compaq, and Hewlett-Packard have prospered in 1997 by taking share from second-tier companies, he notes. In 1998, they'll be gunning for each other. ''The fun is just beginning,'' he says. Fun, carnage--another golden buying opportunity?

an independent central bank must persuade the public that it should be allowed to take decisions of which they might disapprove in the short term, by reassuring them that it will be acting in their own long term interest. To secure this consent, the central bank must always explain its actions and be prepared to defend them after the event. [R Chote, Financial Times, Oct 20] Can you think of a better principle for SBIR? The public needs to know that the funds were intelligently spent, and the many losers need to be assured that they got a fair judging. A few anecdotes of commercialization and a mumbled debriefing does not meet Chote's test.

The New Era can be a Golden Era again. I see a global economic recovery [from a stock market dive in 1999], led by massive high-tech capital spending to replace compouter and embedded-chip systems that failed to be Y2K compliant. So a Dow of 15,000 is still visible" [ Ed Yardeni, Barron's, Nov 3]

Holding more stocks dilutes the impact of a manager's best ideas. You had 50 stocks in your portfolio. Now you have 150 because you added 100 that wouldn't have met your criteria earlier." [L Brenner, Consumers Rule, Bloomberg Personal, Dec97] The mutual fund manager has the same problem as an SBIR manager - more money than high potential ideas. Oh, there are plenty of applicants, all right (which the SBA interprets that as a competitive program). And almost all offer some incremental improvement to the tech base. But something with a high return potential? No, much rarer. Unfortunately, the evidence says that the agencies can't (or won't) distinguish improvement from revolution.

A group of moonlighting cops wants to make surfing the Internet easier for business travelers. Anyone with a credit card to sit down, sign on and surf the World Wide Web, check their e-mail back home, conduct a network conference or connect to a remote computer anywhere onEarth. The cost: $5 for each 25 minutes, up to a maximum of 120 minutes at a time. Sky Link has installed about seven kiosks across Canada, and has plans for a handful of others in Canada and places such as Aruba. The company's first venture into the United States is in Phoenix, where Sky Link has installed a kiosk at the Sheraton Crescent Hotel. Spearheading the company's efforts in the United States is Andrew Eagleton, an officer and helicopter pilot with the Phoenix Police Department. [Arizona Republic, Oct 30]

M-DOT wouldn't be where it is today if a friend hadn't told him about the SBIR,[CEO]Seegers said. "It's the most significant pool of idea money, period, in the US," said Steve Zylstra, of Simula Inc and a long-time SBIR supporter. ... Last year, 92 Arizona companies won contracts worth $14.3M. It's a steady improvement over four years ago,(oh, sure, because the program doubled!) when 63 companies received $10.4M .... "California goes crazy taking advantage of this program," said Tom Inderlied, of the Arizona Technology Incubator and the Industry Network Corp. ... At Simula, which won 37 contracts between 1984 and 1994, Zylstra said, "it allowed our company to expand into technical areas where we had good ideas but not necessarily a core competency. Companies can get hooked on doing research and never turn their work into a commercial success. They either don't have the desire or they don't have the ability to take the next step. That's definitely a criticism of the program." [Arizona Republic, Oct 23]

Herbert Stein looked back to his birth year 1916 to gauge how far we've come. 90% of blacks lived in the South where they couldn't vote nor get equal education nor justice; women could not vote; real per capita income is now four times as high; even after the new-fangled income taxes the average American has much more real income nd despite all the onerous regulations, much more freedom. Stein's conclusions include that government need not be the enemy of freedom, that there are more important freedoms than freedom from government. [Wall Street Journal, Oct 21]

A Nation of NerdsThe boom in the high-tech industry, set in a generally high employment economy, is boosting salaries and creating a significant mismatch between the demand and the supply of skilled technologists. Everywhere, high-tech managers are complaining about the lack of talent for open positions. Here in Austin, the growth of the semiconductor industry may be capped by the shortage of workers able to produce state-of-the-art chips. In Silicon Valley, companies are raiding each other's employees with higher salaries, more benefits, stock options, bonuses and even incentives for current employees who find new hires. ... The difficulty is that we simply can't turn millions of people into nerds. And .. Bachelor's degrees in computer science have fallen more than 40% since 1986. Gary Chapman, LA Times, Oct 20] To this fire, curiously, Congress feels compelled to add gasoline in the form of job-creating SBIR. The only salvation is that most of the money doesn't go where it would fuel this fire anyway. We do have precedent to examine for policy - after World War 2 we were as critically short of engineers of all types. I remember kids in the early 50s (there weren't enough Depression babies) with a talent for math and science being nudged toward engineering. By 1970 we had a glut of aerospace and electrical engineers. Gary Chapman directs the 21st Century Project at the University of Texas at Austin. Chapman's Texas was the champion state in adding more technology jobs than any other state 1990 to 1995, says Angelou Economic Advisors Inc. The report backs up with numbers an assertion that people have been making for years - that Texas is undergoing a profound transition from an economy based on resources to one based on technology which is now 44% of Texas exports, leading all other categories [Dallas Morning News, Oct 20]

Meanwhile, Maryland is thinking about lowering tuition to attract tech students to attack a growing worker shortage in those fields, perhaps a 25% discount for EE and IT majors. And Coppin State opened its AT&T supported ($200K) tech education center. [Baltimore Business Journal, Oct 20] In Philadelphia, they're complaining that th4e state legislature (not in Philadelphia) is so slow that New Jersey, across the river, is eating Philadelphia's lunch in getting workers. [Philadelphia Business Journal, Oct 20] In Sacramento, they're noodling over worker shortage. Area technology companies met with educators and government officials last week to discuss a looming shortage of trained workers. Technology firms big and small are worried over a huge gap between the number of trained technicians coming out of area schools and the numbers they'll need on the assembly lines. In attendance were Intel, Hewlett-Packard, Packard Bell, and NEC. [Sacramento Business Journal, Oct 20] Meanwhile, in Washington the national politicians argue about prayer in the schools and national testing while the local jurisdictions wrestle with a mismatch between school results and job openings. Guess which will decide the outcome!

Massachusetts ranks first in patents per capita and second to California in Internet hookups per capita. Massachusetts eighth-graders outperformed students in the other six states on standardized math and science tests; roughly one-third of the state's work force has a college degree, also tops among the competitor states. Average annual pay in Massachusetts climbed 6 percent between 1990 and 1996, compared with an average gain of just 2.3 percent in the other six states. But not all of the news is good. Between 1987 and 1996, the number of engineering degrees awarded by Massachusetts colleges fell by 35 percent, compared with a national drop of 14%. Massachusetts has been manufacturing exports. Between 1991 and 1996, those exports climbed only 21 percent here, compared with a gain of 31 percent nationally and 73 percent in Illinois. ... Index of the Massachusetts Innovation Economy compares high-tech health of 7 states, California, Florida, Illinois, New Jersey, New York, and Texas. [C Stein, Boston Globe, Oct 14]

Reading in Print Land. Glenn Zorpette's reviews in IEEE Spectrum of two novels beg their reading. The Uncertainty Principle by Steve Frank spoofs VCs, patent attorneys, television newspeople, and philandering dentists says Zorpette who finds "compelling entertainment for technically mature audiences". But The Deadline by Tom DeMarco puts a laid-off middle manager abducted to a fictitious country where he is put in charge of a software knock-off house. Zorpette finds that "if everyone who manages more than 10 people were to read this book, the business world would be a far, far better place.

Weary executives who have sat through endless second-rate residential courses will recognise the tone of the fatuous homilies of the chapter headed "The Future Is Tomorrow: Time is getting shorter. Speed is getting faster. We're arriving at the New Millennium sooner than was predicted. We're building tomorrow today, or tomorrow morning at the very latest. You're not getting any younger". This is all good, knockabout fun, a tempting amuse-gueule if you are browsing in an airport bookstall and cannot quite stomach the earnest tomes displayed all around you promising instant success if you follow their exhortations. But the book also hints at a deeper truth: that the age of the quick-fix business guru could be over.[P Apsden's review of The Book That's Sweeping America! or Why I Love Business!, By Stephen Michael Peter Thomas, Financial Times, June 24]

International finance has become so interdependent and so interwoven with trade and industry that ... political and military power can in reality do nothing.... These little recognized facts, mainly the outcome of purely modern conditions (rapidity of communication creating a greater complexity and delicacy of the credit system), have rendered the problems of modern international politics profoundly and essentially different from the ancient. Globalization as a protective screen for high-tech business and for the general public against war? Those 1997 words... Oops! Those words were penned in 1910 and helped earn their author a Nobel Peace Prize (1933). How times stay the same. [quoted by Peter Beinhart, The New Republic, Oct 20]

To be successful in the fast-paced, ever-changing high-tech industry, a company has to make its products obsolete. Whose advice? Motorola's Wayne Pasco, the new head of the Albuquerque plant. ... which is why Motorola restructured its company ... Motorola's multilayer ceramic products technology was born in Albuquerque about seven years ago with one or two people working on the infant technology. Now about 40 people work with multilayer ceramic products. Even though the company has put seven years in the development of the product, it is still young, said Pasco. He predicts it will be another 10 years before the more complicated products fully mature. [Sherri Chunn, Albuquerque Journal, Sep 17] Motorola's attitude is good news for innovative high tech startups who can offer the new ideas that Moto would like to capture before its competitors. Moto has cooperated with and taken minority equity positions in SBIR companies but not unless the new idea has market potential. And convincing Moto to invest is a lot tougher but a lot more rewarding task than convincing government to insert a of SBIR.

Just knowing the Internet exists has touched off a collective nervous breakdown in government, academe and journalism. [J Katz, NY Times, Sep 7] Of course, who would expect hierarchies to understand a headless system?

A Troy (MI) company, grapeVINE Technologies, says it will take the potholes and speed bumps out of the information highway. And Netscape agrees. It has formed a joint venture to market to Fortune 500 companies. grapeVINE's expects the partnership with Netscape to at least quadruple earnings for the 25-employee firm to $10-million. GrapeVINE's main product is aimed at helping large companies make sense of the glut of information available via computers. Negotiations are under way with Microsoft Corp. to issue a version for individual Internet browsers at home. Manufacturing costs are nearly nonexistent. Since customers sign on merely by visiting a website and leaving a credit-card number, sales staff can be kept at a minimum. [A Effinger & J Ferry, Detroit News, Sep 3] Why no SBIR? Didn't need it for a low capital barrier business. Why do software companies get SBIR anyway? Government's a sucker for software stories. Why? In part because many government people don't think small business can do anything important and they thus downgrade their expectations. It's like the school that under-challenges students it doesn't think are smart and thus makes a self-fulfilling prediction. If you're a real SBIR candidate with real technology and a tough goal, try BMDO. (BTW, the authors called this company a prime example of a cutting-edge, high-tech business, typical home-cooking.)

Bankers had one question for Greg Craig when he was raising money for his high-tech start-up: Is Microsoft Corp. in the same market? ''You could be starting a bagel business and investment bankers will ask if Microsoft is getting in,'' said Craig, chief financial officer of InterActive WorkPlace of Burlington, Mass., which helps companies with their computer networks. ''If so, they won't touch it. The same is true for Intel Corp. and Cisco Systems Inc. These powerhouses are spending so fast and in such surprising ways - witness Microsoft's planned $150M investment in Apple - that they're casting ever-lengthening shadows on the technology landscape. That's making it harder for entrepreneurs to get backing for new ideas and forcing rivals to team up simply to survive. Investments by the three total $2.5B so far this year while their research budgets ballooned to $6 billion. [Anthony Effinger and Jeff Ferry are reporters for Bloomberg News in Portland, Ore. and Princeton, N.J., respectively, BG Sep 3] How should government respond to such inflows of capital into small business technology? Add fuel to the fire with SBIR? R&D tax breaks? Is more spending the answer for every R&D problem?

Untied Airlines is proud to have no relation to United Airlines, which is not responsible for the contents of this Web site, apart from providing the poor service that led to all these complaints. Wanna gripe publicly about United service? Untied.com is one of many new Web pages pinging on Corporate America's failure to deal with complaints. Says United through its clenched teeth, "Our customer relations department monitors the site and tries to fix bad information and answer questions when they can." Blowing off steam that way will help cushion the business fare increases of 15% this year and 6% next (says American Express Travel Related Services Co).

Principles or Payoffs? Sen. Bob Bennett, a Republican Utah conservative, wants Farmer Mac to enter the small-business market, where credit demand is booming, with a three-year pilot program (sound like STTR?) to purchase up to $1 billion in business loans. A principled conservative would kill agencies like Farmer Mac that compete with private market financing. Guess what drives Bennett? Farmer Mac's biggest stockholder is Zions Bancorp of Salt Lake City, a commercial arm of the Mormon church. [facts from Barrons, Sep 13] With VC investment and the stock market booming, SBIR has the same story, a political program doing what the free market won't do for the less deserving cases. Credit demand, like health service demand, obeys the laws of economics and expands when the price drops. Econ101.

If not Chinese, then .... High-tech consultant David Blumberg takes Hebrew lessons once a week and helps Israeli firms open offices in the Silicon Valley -- and his business is booming. At least 50 Israeli firms have popped up in the Valley in the past five years. There are now more Israeli firms listed on Nasdaq than any other foreign country except Canada. [Julia Angwin, San Francisco Chronicle, Sep 10] Now, if SBIR proposals writers would just translate their sci-gibber into English.


SF Hotel Hotline The hot San Francisco hotel business will find one for you. A new hotel hotline starts Labor Day 888-STAY-N-SF will connect visitors to a free reservation service for about 180 city hotels. [SF Chronicle] Denver Surfing. Wired entrepreneur guests at the downtown Embassy Suites in Denver can now surf the Web for $4 per half-hour on their TVs through an on-screen keyboard with a remote control. One of the first hotels in the nation to try the service. Not e-mail, though. Yet. [Erika Gonzales, Rocky Mountain News] Need a hotel "room with a clue"? Forbes has a list of many hotels with Internet pretensions for the wired (laptopped) traveler.

Scouring the CountryAcer America, one of the world's largest personal computer makers, is launching a venture capital arm to invest in technology startups. Acer joins a crowded field of tech companies investing millions to acquire cutting-edge technologies Within the past 10 years, Adobe Systems Inc., 3Com Corp., Cisco Systems., Intel, and Xerox have launched investment units that are scouring the country for startups and other small companies with new technologies. [Pete Barlas , Silicon Valley Business Journal, Sep 1]. With all that scouring, and $10B a year in venture capital, what is the rationale for SBIR? Or, should SBIR focus on some particular role that will feed that process without competing with it? Or, is it irrelevant because the federal agencies won't divert their R&D money to such a purpose anyway? The evidence favors the diversion theory.

In Oregon, Seattle-based Encompass Ventures has closed a $30 million venture capital fund that will invest in Northwest information technology companies. The partners operating the fund, Encompass Group U.S. IT Partners I, will use it to expand on a portfolio of earlier investments. Encompass Managing Director Craig McCallum. "But we don't see a lot of venture capital resources available to all these great companies that are getting started there." [Portland Business Journal, Sep 1]

Dangerous Devotion to a TheoryNot every startup gets VC, because not every startup deserves VC. In North Carolina, for example, a region bucking for high-tech recognition (a case of Texas envy) many young companies are forced to sell off without adequate funding, and then are eventually closed down or moved away by their new parent corporation. One recent example was the recent closure of former Triangle high-flyer DaVinci Systems by parent company ON Technology of Cambridge, Mass. "That's a good example of what happens (without venture capital)," said Jane Patterson, the governor's senior adviser on science and technology. "Companies get bought out and taken out to Route 128 (Boston's high-tech corridor)." One crucial effort launched by the state in that category is the state's initiative to boost its pension funds' investment in venture capital from $30M to $130M. .. The image of the Triangle's tech industry has come under fire recently with Forbes ASAP and Business Week, both labeling the region as a "wannabe" technology area. Forbes quoted one Massachusetts venture capitalist as saying the area "hasn't panned out quite yet." [David Strow, Triangle Business Journal, Sep 1] Now, that's a dangerous devotion to a theory - investing state pension funds in an industry that is not working out as planned.

Theories abound for politically driven "investment". Go to the National SBIR Conference to hear the beneficiaries rationalize the theory that government should bail out high-tech companies. State governments will also propound their theories.

One State's View. A recent study supports the conclusion that there is a substantial need for additional seed capital in Oregon. By analyzing historical patterns of investment, the study concluded that there will be an aggregate shortfall in funds available from local venture capital firms to finance Oregon businesses of between $41.5 and $66.5 million over the next five years. The study also found that this "capital gap" is far more acute for early-stage ventures than for later-stage investments and that the state's economy could support an annual allocation of $15 million for early-stage companies. [Annual report 1995-1996 of the Oregon Research and Technology Development Fund which has invested in 3C Semiconductor and Templex Technology, both BMDO Phase 2 SBIR investments.

helping small high-tech companies get from idea to market