Last week, I had the opportunity to do something different. I was a judge in the final round of Alabama Launchpad’s 2011 Business Plan competition here in Mobile.

I am an attorney by trade, and my practice is concentrated on  general business, technology, international trade and intellectual property law. So naturally, I was curious to see what would be presented by the nine finalists. I was very impressed – both with the quality of the business plans and the detail of their presentations.

The technologies were varied…they ran the gamut from chemistry to materials engineering, to software development and pier construction.

The level of detail and current accomplishments addressed by the finalists were very impressive.

Now that I’ve participated in the competition, I can enthusiastically endorse what Alabama Launchpad and our state universities are doing to promote this non-traditional means of economic development to Alabama entrepreneurs. Awarding $175,000 to three highly deserving companies to help them pursue their business plans was both exciting and fulfilling. I left the competition knowing that my fellow judges and I had just contributed to Alabama’s economic development efforts in a meaningful and hands-on manner.

I am enthusiastically committed to further the good work of Alabama Launchpad. Alabama needs new companies that will create high-skilled jobs in the state, and to attract companies from outside the state to find the success that so many others have already found. The programs created by Alabama Launchpad are a strong contributor to that effort and I look forward to following its evolution.

The following comes from the State Science and Technology Institute (SSTI) regarding the future of Small Business Innovation Research funding.  SSTI a terrific organization and resource for those interested in technology-based economic development.  This brief report is a great summary of the current situation and comes from the March 23rd edition of the SSTI Weekly Digest.  For those of you interested in this field and topic, we highly recommend that you subscribe to the Weekly Digest.  It’s free!  Just visit www.ssti.org for more information.

SBIR and STTR funding is critical to innovation and technology commercialization, and we felt that it is important to share this information with the Alabama Launchpad community.

With the Senate in recess, debate over SBIR/STTR reauthorization has been temporarily put on hold for the week. The reauthorization act has landed at the center of a larger congressional debate over federal spending, due to the more than 80 amendments that have been submitted for consideration. Most of these amendments propose spending cuts unrelated to SBIR. The main text of the bill would extend the SBIR and STTR programs through 2019 and increase award levels for Phase I and Phase II awards. It would also allow companies that are majority-owned by venture capital firms to receive some awards.The SBIR/STTR Reauthorization Act of 2011 would be the first long-term reauthorization of the program since 2000. Temporary extensions have been used since 2008, the latest of which is set to expire on May 31, 2011. By authorizing SBIR through 2019, potential SBIR recipients, as well as others in the innovation and commercialization community, would have a more reliable source of support for early stage technology development.

The act also makes permanent the increase from $100,000 to $150,000 for Phase I SBIR awards and from $750,000 to $1 million, with annual inflation adjustments. The award guidelines for SBIR initially were raised last year, through a Small Business Administration (SBA) policy directive. That increase was the first change in SBIR funding levels since 1992. The act would also limit awards to no more than 50 percent more than the guidelines. In the past, some agencies had made larger awards, reducing the number of companies that could receive funding. Agencies may still supplement the SBIR awards with their own funds. Companies may receive subsequent Phase II awards from another agency, as long as it is properly reported and the funding is not duplicative.

Within SBA, the legislation would create a new Office of Technology to oversee the SBIR and STTR programs. Overall funding for the program would increase, with the SBIR allocation at all participating agencies growing from 2.5 percent to 2.5 percent over 10 years. The STTR allocation would increase from 0.3 percent to 0.6 percent during the same period. Up to 3 percent of the total amount would be available for administrative costs at the new office if there is an allocation increase. The Federal and State Technology Partnership Program, which provides outreach to rural and underrepresented states to increase participation in SBIR and increase technological competitiveness, also would be reauthorized.

The National Institutes of Health, the Department of Energy and the National Science Foundation would be able to allocate up to 25 percent of their SBIR and STTR funding to businesses that are majority-owned by venture capital firms. The Department of Defense and other agencies may allocate up to 15 percent of their awards to these companies. SBIR agencies would be required to provide decisions to applicants within 90 days after the close of the solicitation process. The administrator would be able to issue an extension for up to 180 days. A new NIH pilot program, Accelerating Cures, would help design new programs that encourage the development of cures for diseases that the private sector has little incentive to research due to unprofitability.

Debate over reauthorization is expected to continue when the Senate reconvenes next week.

View the complete text of the SBIR/STTR Reauthorization Act and track its progress at: http://thomas.loc.gov/cgi-bin/bdquery/z?d112:SN00493:.

Alabama State University:  3 teams
Auburn University:  4 teams
The University of Alabama:  7 teams
University of Alabama at Birmingham:  17 teams
University of Alabama in Huntsville:  6 teams
University of South Alabama:  6 teams

As in our past years, the variety of business proposals is impressive.  Take a look at the breakdown by industry sector:

Biotechnology:  7 teams
Pharmaceuticals & Drug Delivery:  2 teams
Consumer Products & Services:  5 teams
Business Products & Services:  3 teams
Software & Web Services:  4 teams
Industrial & Advanced Materials:  6 teams
Education Services:  3 teams
Other: 9 teams (includes Nanotechnology, Energy, Mobile, Medical Devices, Health & Wellness, Healthcare IT and Media)

More information about the field will be shared soon.  The business proposals are now in the hands of our Phase II judges.  We tentatively plan to announce the Top 20 companies on Wednesday, December 8th.  Those 20 semifinalists will be paired with mentors from the business community to help them prepare for the next round of the competition.

In February 2011, the Top 20 will submit more detailed business plans, and a new crop of judges will then have the difficult task of deciding who goes on to the finals.  Eight finalists will be announced in March 2011, and the finals are scheduled for Friday, April 15th at the University of South Alabama.

Many thanks to all those who have made the 5th year of the Launchpad program possible.  Please visit our updated Sponsors Page to see our current list of funding partners.  Also, many thanks to our participating universities for their commitment and guidance.  It’s shaping up to be another great year!

Innovative Composite Solutions (ICS) won the third season of the Alabama Launchpad business plan competition in April 2009.  The company’s core competency and technology focuses on the design and manufacture of thermoplastic composite materials.  Applications for the technology include mass transit, automotive, transportation, defense, infrastructure, energy and sporting good sectors.

One of the initial targets for the technology was the design and production of thermoplastic composite components to retrofit a large number of rockets in the US Army arsenal.  The aeroshell and baseplate pieces are part of a trajectory correction kit (TCK).  ICS negotiated and executed an exclusive license with the UAB Research Foundation (UABRF) to produce the TCK aeroshell and baseplate.  The prototypes have been tested by the US Army Aviation & Missile Research, Development & Engineering Center (AMRDEC) at Redstone Arsenal and the technical validations have been completed.  The company is currently waiting for final approval from the military.

From April to December 2009, ICS developed a new product: a polymer eye patch for Eyenovations Inc., a Birmingham company that caters to patients post eye-surgery.  The ICS developed patches provide optimized translucent characteristics, allowing a controlled amount of light to pass through the patch and helping in the patient’s recovery.  To date, ICS has produced approximately 100,000 proprietary eye patches for Eyenovations.

Since the end of the competition in 2009, ICS has exhibited at several trade shows across the region.  These include the Space and Missile Defense conference in Huntsville (August 2009), the Defense Manufacturer’s Conference in Orlando (December 2009), the American Composites Manufacturer’s Association trade show (February 2010), and the Alabama Composites Conference at UAB (August 2010).  Several key contacts have been made at these shows to further the company’s presence in the composites industry space.

Members of the ICS leadership were part of the Governor’ trade mission to India organized by the Alabama Development Office (ADO) in April 2010.  ICS had very fruitful meetings with potential customers and collaborators in the Indian automotive, mass transit, heavy truck, rail, aerospace, energy and military sectors.  ICS is currently in advanced stages of business negotiations with one of the leading suppliers of automotive parts in India.  The use of composite materials in vehicles is gaining increasing attention due to the potential to reduce weight and fuel costs.

In August 2010, ICS added a new member to its management teams: Mr. Madan Moudgal, Director of Marketing and Business Development.  Mr. Moudgal holds a MS and MBA and has extensive experience in Business Development both in the US and overseas markets.

In the last 16 months since the competition, ICS has signed several non-disclosure agreements with companies interested in working with the company and its core technologies.  ICS is currently working with companies involved with aviation electronics and polymer compounding.  Parts include circuit boards, cylinders, blocks, bars and other stock shapes.

ICS is presently operating under a lease agreement with the UAB Materials Processing and Applications Development (MPAD) facility for use of the extrusion-compression molding equipment.  ICS will eventually expand into its own facility and setup the extrusion-compression molding operation.

For more information, please visit the ICS website: http://www.innovativecompositesolutions.com/

When Geoffrey Moore introduced Crossing The Chasm in 1991, it quickly became required reading for any executive in the high-tech industry.  While it focuses primarily on introductions of new products and services in the high-tech industry, I believe the principles discussed in the book have application for any company that launches a significantly new product or service.

In the book Moore describes a flattening or even a decline in sales early in the product life cycle he termed “The Chasm.” as shown in the illustration.

“The Chasm” is defined as “a pause of indeterminate length in market development, when the early market interest has waned and when there is no preordained or natural customer among the mainstream market for the discontinuous innovation, owing to its immaturity and lack of widespread deployment.”

Many promising young companies fail during this chasm period.  Many new innovative products from established companies fail during the chasm period.  So what is going on during this period and why do some companies successfully succeed in crossing “The Chasm” and achieve breakout growth?

In a nutshell, “The Chasm” represents a period where there is a meaningful disconnect between the perception of the product or service being offered and the existing problem that mainstream customers will pay to have solved.  The product or service being offering includes many things: the actual product, the marketing message, the channel of distribution and the other 5 “P’s of Marketing”.  All components of marketing mix must be materially right before significant sales to mainstream customers will occur and breakout growth can be achieved.

Many times companies don’t realize that sales to “innovators” and “early adopters” in the above illustration are relatively easy compared to mainstream customers.  These early customers are looking for a solution to their problem.  They search you out.  They find you at trade shows; they “google” you; they scour your website looking for nuggets that will solve their problem.  They are willing to accept a less than complete solution and make it work for them.  They like hearing about the innovative technology you have introduced with your product.  They are willing to help you fix the shortcomings of your product, if necessary.

Sales to mainstream customers, on the other hand, is much more difficult.  These customers aren’t looking for you.  You have to find them and have the right marketing message to quickly get them interested in your product.  You have to understand their problem and figure out to position your solution to solve their problem in a way that they immediately grasp and accept.  They are skeptical and will be turned off if your solution is not ready for prime time.  They are not interested in the technical aspects of your solution that your engineers think are cool.  They only “google” you and visit your website during the due diligence process.  The sales cycle is generally much longer and failure can occur at any step in the process.

So, what is the secret?  Don’t become overconfident based on the early success of the product.  Recognize in the beginning that it will be difficult to cross “The Chasm” and translate early sales wins into a formula for reaching mainstream customers.   Study your early successes and carefully analyze why the early adopters are buying your product and what problem you are solving for them.  Make sure you have the product right.  Don’t let your product design engineers move on to the next product until the bugs and feature deficiencies are worked out of the new product.  Keep testing the marketing message with customers until you get it right.   Don’t be lulled to sleep by the early customers who love the technical features of your product; future mainstream customers won’t care.

The best way to evaluate your early successes is to assemble a small team from sales, marketing and product development to work together and spend meaningful time truly listening to your early customers understanding their problems and learning how to craft the product and marketing message.  Understand the personas of both the champion of your product and the economic buyer.  Fix any product deficiencies immediately.  Consider adding an outside consultant to the team who can independently evaluate the responses from customers without the biases of your internal team.

Most likely, you are not going to get it right the first try.  Listen to many customers and hone your message multiple times until you get it right.  Learning to get it right is an iterative process that requires continual trial and error as illustrated below.

It’s not easy.  The objective is to determine the “secret sauce” of the right product, sales approach and marketing messaging that will resonate with customers, shorten the sales cycle and keep “The Chasm” narrow and shallow. You will know that you are getting it right as sales begin to ramp and the selling cycle shortens as customers understand and favorably respond to your messaging.  That’s when you are on your way to achieving breakout growth!

The events started on Tax Day, April 15th, with a welcome dinner at the Jackson Conference Center for the finalist companies, university officials, sponsors and other special guests.  The venue and atmosphere were terrific, and it was very satisfying to see the competing entrepreneurs mingle and interact with each other.  Our speaker, Brian Pollack (co-founder and former CEO of OpenBiosystems), provided excellent guidance and suggestions to the entrepreneurs as they move forward with their businesses.

The final presentations took place the next day at UAH, and I want to publicly thank everyone at UAH for making it a terrific venue and event – especially the outstanding A/V crew.  All the presenters did an excellent job, and the judges asked tough, challenging questions.  From my perspective, this appears to be the most commited group of finalists we have ever had, and the judges truly had a difficult time picking the winning companies.

Looking back at the whole season, I believe it was our best yet.  I say this every year, but it’s true!  Forty-five companies entered the competition in the fall of 2009, and the quality of the proposals – the whole field – was the best we’ve seen in the four years of the program.  No question about it.  We also improved several of our processes.  For instance, we added more judges during Phases II and III to mitigate variations in scoring.  Instead of three judges per plan, we had five, and the extra reviews provided more feedback to the competing companies.  And, our sponsors and partners pledged more in-kind services to the finalists and winners this year than ever before.

So all-in-all, Year Four was a great success.  This now brings the four-year total to $700,000 of seed capital awarded to 12 Alabama startups.  Many past winners (and non-winners) are achieving great success, and the interest level and excitement around Alabama Launchpad is greater than ever.

So in closing, I want to say “thank you” to everyone that helped make this year possible.  Thanks to our board of directors, our sponsors, our judges, our mentors, the competing companies and everyone else who helped along the way.  Alabama Launchpad has grown up quite a bit these last four years.  It’s a true statewide effort to support and promote high-growth entrepreneurship in Alabama.

The fifth season will kick off in August 2010, and we can’t wait to get started!

Breakout Growth can be achieved a number of different ways.  We’ve identified 5 core approaches: Organically, Market Expansion, Product Expansion, Acquisitions or via Alliances & Joint Ventures.  All of these provide some measure of growth, at some cost and with varying degrees of expected and actual results.  In this article, we are going to focus on one approach to achieving Organic Breakout Growth.  This approach is a summary of the methodology Harvest has developed in helping our clients strive for Breakout Growth.

In working with our clients we’ve learned to break the process down into four phases:

I.  Find the Tipping Point – This is similar to the Strategic Nerve.  This is the step where you make a deliberate and dedicated attempt to truly understand that gap between the value proposition of your offering and the market’s pre-existing emotional and visceral desire for that offering that you are unaware of.  This phase includes an accurate, and potentially independent, baseline of the current offering to include market perception, pricing, ROI, market sizing and share, and so on.  After the baseline step it is essential to perform in-depth research in customer dynamics (usage, pain-points, personal motivations, etc.), competitive and brand positions and other factors influencing the sales process and cycle.  In summary, you are looking for those nuggets of information that will shed a thousand watt light bulb on “why customers really buy your stuff”.  In fact, you may have identified several reasons, or tipping points.

II.  Test – Once you think you’ve found them, then it’s time to validate and rank.  No sense in going any further until you’re pretty sure you’ve hit the nerve.  To do this, you go through an iterative process of: testing the hypothetical tipping point or nerves to validate that they make a real difference, prioritize them in terms of probable results, and field testing with customers and prospects.  Iterate until you are down to one or two candidates.

III.  Design & Implement A Solution – Now you have it, or think you do.  You have found the real reason or reasons that customers will buy your stuff at a dramatically increased pace.  This might be due to modified pricing, features, advantages or benefits of your offering.  But most likely, it will be a result of some human dynamic, aspect or characteristic related to the decision making process.  This is the secret sauce.  Don’t underestimate the power of personal emotion in the decision making of anything anyone buys.

So it’s now time to design a solution.  The solution is essentially a set of all potential changes you will need to make to the offering, business processes including sales & marketing, customer support and product management to take advantage of the Tipping Point you so earnestly worked to find.  But first, better test the solution before going all out.  In other words, conduct a pilot with the changes you think will be needed in one geographical market or sub-segment.

IV.  Scale – Your pilot proves that you have found Steve Hindman’s Strategic Nerve.  Now it’s time to scale the solution enterprise wide and go for real market share gains for the first time.  This may include buying or building additional capability from a product or market standpoint.  It may also entail significant adjustments to marketing, the sales process and force as well as back office operations.  The good news is that you have sufficient evidence to justify significant new investment into making these adjustments.

Many thanks to David and Harvest for letting us share this terrific information and insight.  Stay tuned for the other sections!

What is Breakout Growth and why do we care, especially in a shrinking or stalled economy?

Just Google, Bing or Yahoo the words, “Surviving, Business and Economy” and you’l have an endless list of articles to choose from like these.

So what’s the big deal?  Why is Breakout Growth important?

“Surviving a Slowing Economy” – Entrepreneur.com
“Surviving the Storm” – Business Week
“How Businesses Survive A Recession” – StartupNation
“A Better Way to Cut Costs”- McKinsey and Company

And so it goes.  They all have recurring themes focused on holding down costs, cash management, reorganization, leadership and organizational changes, R&D strategies and the like. We call these Bunker Strategies.

These are all certainly sound approaches to survival.  If you don’t use them you may indeed fail.  However, a huge opportunity may be missed if that’s all you focus on.  Instead, we advise our clients to always think more aggressively about growth, especially in tough markets and economic conditions.  Harvest has coined the term Breakout Growth to reflect this strategy and approach.

First, if successfully executed, it gets you into the BCS, or Bowl Championship Series.  This metaphor implies that you will find yourself as one of the top competitors in your space, if not one of the top two, which should be your goal.

Second, it will keep you from failing.  Sure, you can grow yourself into trouble. Unchecked growth can cause a lot of problems that could conceivably lead to failure.  But that’s a scenario we would all like to be forced into managing.  Growing will prevent failing.

Third, having a crystal clear breakout growth strategy will keep you and your team focused on what is important.  As you will learn in a moment, focusing on the customer, their pain and how and what they buy is what you should be paying attention to day in and day out, and losing sleep over every night.

Last, it creates real shareholder return and wealth – faster.  If your growth curve consistently exceeds your competition, then you are in play for an attractive exit or other liquidity scenarios.

Here is our definition: Breakout Growth is a dramatic positive shift in market share accompanied by significantly higher profits.  It is evident when a condition is reversed and a significant improvement in market share occurs.

Companies with offerings that have real market potential, but that are experiencing slow, flat or modest growth are missing out because they have not found what is known as the Strategic Nerve, a term Steve Hindman coined.  It helps a company close the gap between the value proposition of its offering and the market’s pre-existing emotional and visceral desire for that offering.  The result will be a dramatically increased growth curve that delivers a significant, profitable market share.

Breakout Growth is important in both good and bad times, perhaps even more so as a strategy in bad times.

Get into the BCS.  Go after one of the top two slots in your competitive mix – winners don’t fear risk, they manage it.  If you don’t care about breakout growth your chances for wealth creation are low, certainly lower.  Just the attempt and process will improve the value of your enterprise.”

To view the full article, please click here.  The parts below revolve primarily around the opportunities that entrepreneurship can provide.

Obama should launch his own moon shot. What the country needs most now is not more government stimulus, but more stimulation. We need to get millions of American kids, not just the geniuses, excited about innovation and entrepreneurship again. We need to make 2010 what Obama should have made 2009: the year of innovation, the year of making our pie bigger, the year of “Start-Up America.”

Obama should make the centerpiece of his presidency mobilizing a million new start-up companies that won’t just give us temporary highway jobs, but lasting good jobs that keep America on the cutting edge. The best way to counter the Tea Party movement, which is all about stopping things, is with an Innovation Movement, which is all about starting things. Without inventing more new products and services that make people more productive, healthier or entertained — that we can sell around the world — we’ll never be able to afford the health care our people need, let alone pay off our debts.

Obama should bring together the country’s leading innovators and ask them: “What legislation, what tax incentives, do we need right now to replicate you all a million times over” — and make that his No. 1 priority. Inspiring, reviving and empowering Start-up America is his moon shot.

This commitment provides more than just financial help.  It provides validation from the highest levels of our efforts to create an entrepreneurial and innovation-based economy in Alabama.  As a young organization, Alabama Launchpad already claims impressive results from its first three years of managing the business plan competition.  For example:

• Alabama Launchpad has provided seed funding to nine startup companies with non-dilutive cash prizes totaling over $500,000
• Alabama Launchpad alumni have gone on to attract over $8 million in follow-on money from the investment community
• Alabama Launchpad alumni have created approximately 75 new jobs in three years, and several companies are currently looking to add staff and expand operations.
• Alabama Launchpad has built a network of experiences entrepreneurs, investors and service professionals willing to donate time and provide feedback and guidance to early-stage companies.

This is a proverbial “shot in the arm” and should give all of our supporters in the university and business communities even more reason to be excited about the future.

Alabama Launchpad thanks the Alabama Research Alliance and Governor Riley for this tremendous commitment.  We also thank our many supporters across the state who have assisted us these last four years.  Together, we are helping Alabama entrepreneurs and building new innovative companies, and we believe this is only the beginning.