5 Years Into a 20-Year Journey

Here is a blog post I wrote 5 years on the journey of building a startup community in Memphis.  Tomorrow marks 10 years!  This was original post on the Startup America Partnership blog which has since gone away.

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The First Five Years: Know When to Pivot

 

Brad Feld, co-founder of TechStars, stated 'that in order for a community to transform its entrepreneurial ecosystem six people need to work tirelessly without stopping or being distracted for 20 years'.  

I agree.
 

I'm one of these people for Memphis, TN and I'm a quarter of the way in.

 

Five years ago on August 31st, 2006 I left my job to chart a new course for entrepreneurship in Memphis.  

 

Like all entrepreneurial journeys mine started with a problem. I saw a lot of great technologies being built in our community (universities, etc.), but I could count the number of tech startups on one hand.  My working hypothesis was if you coupled the founders with small amounts of capital and experienced mentors, we would have more tech startups in Memphis.

I was armed with neither experience nor capital. For any entrepreneur this is not a problem (or so the story is told). So, I found an experienced partner and we set out to raise the money. It turned out that no one would fund us, so we decided to forget the money and bootstrap. That same year TechStars got its start and so did our entrepreneurial "accelerator" Mercury Technology Labs (disclaimer: it was not cohort based).

 

Mercury Technology Labs was a tough effort made tougher by the fact that we were in Memphis. To give a little context, when we started there was an incubator and there were three venture capital funds that wouldn't touch early stage tech deals, especially ones in Memphis. There was no angel network.  If you were an entrepreneur and wanted incubation, you needed to pay the rent at the incubator. If you needed seed/angel money, good luck. It was not very vibrant.  

 

Our portfolio at the time consisted of three tech startups. Bootstrapping meant operating out of cafes. Thankfully we were able to get their products to market with some sales, though eventually all but one failed.  It wasn't a bad start those first six months, but it was too much of a grind. We realized we would be unsustainable long term unless we worked to change our community's entrepreneurial infrastructure and culture. If our goal was to increase tech deal flow, it meant we would have to invest our time and energy in new ways.  

We had to pivot.

 

First Pivot:  Space for Startups to Grow

We needed enough space to enable us to create value faster and make our teams more productive. In 2007, within our local incubator we built the Launchpad, a 1200 sq. ft. co-working space for digital nomads, hackers, and founders. To this day we still charge no money to use this risk-oriented space.

The point is to lower the economic barrier to entry for incubation to be zero dollars. Founders can use the space 24/7, create value, and exchange knowledge and feedback with peer startups going through similar points of pain.

Instead of paying for incubator rent (or five overpriced coffees a day), the founders can invest in product development and marketing.  

 

That wasn't enough though.

 

Second Pivot: Founder Connectivity and Risk Culture

In 2008, we started LaunchMemphis. In five months what started as a community based project became the in-demand source for the dynamic innovation economy programming we saw in other cities -- such things as Startup Weekends, Ignite Nights, Pitch Competitions and more. LaunchMemphis, a 501c3, reaches out to the invisible potential entrepreneurs of our community and gives them a chance to 'try-on' entrepreneurship and get early feedback on their startups.  

 

Third Pivot: Exposure

Now more potential founders were entering the system and quality of deals began to improve. Others started to take notice. In 2009, the State of Tennessee turned to us to help share our knowledge in ecosystem development to other parts of the Tennessee. This increased our connectivity to peers across the State and elevated our local startups to a higher platform.  We now have connections to incubators, investors, and founders across the State and region.

 

Forth Pivot: Leadership

The next year, with a change of mayorship in Memphis, the opportunity seemed right to start changing minds on the home front. In 2010, we reached out to local civic leaders and helped them re-position their economic development strategies to bring focus to entrepreneurship, as differentiated from small business. Now entrepreneurship on a state and local level is a top priority and money is heading towards our work and that of our peers.

 

 

The icing on the cake came this year.

 

Fifth Pivot: Capital

You know you are on to something when external investors begin to enter your local startup scene. In 2011, Solidus Company, a venture capital firm in Nashville, invested capital to fund Seed Hatchery, our mentorship driven seed accelerator. We gave the six teams of our inaugural cohort, money, mentors, and milestones in the form of a 90-day marine-style bootcamp for entrepreneurs (think TechStars). The teams are now selling to customers and finding follow-on investors.

 

It has been a tough yet rewarding 5 years. Looking back most people won't see the mountain of failures and false starts under my watch, but they were all necessary to get to this day. Both the successes (we had some along the way) and failures were worthy work and will continue to be. To my many collaborators over the years, thank you for diving in and investing … but let me remind you we still have 15 more years ahead -- or at least I do.  

 

What will the next 5 years hold? Stay tuned. The work is far from done in Memphis, TN.

 

--

Eric Mathews works to change entrepreneurship and community engagement in Memphis, TN.  He is the co-founder and partner of Seed Hatchery, a mentorship-driven seed fund and is also the Co-founder and President of LaunchMemphis (501c3), an organization to support entrepreneurial action.  Follow him on twitter at @ECMathews

 

SXSW Application Opens for 2017

For the third straight year I've been asked to participate on the SXSW Accelerator Advisory Board.  In its ninth edition it showcases some of the web's most exciting innovations and your company could be one of them.  This event provides an outlet for companies to present their new online entertainment or gaming products, social media / networking technologies, or mobile, payment and fin technology, or health technology to a panel of industry experts, early adopters, and representatives from the angel / VC community.  Past judges have included Tim Draper of DFJ, John Sculley of Apple/Pepsi, Tim O'Reilly of O'Reilly Media, Paul Graham of Y Combinator, Naval Ravikant of AngelList, Guy Kawasaki of Alltop, Chris Sacca of Lowercase Capital, Chris Hughes of New Republic/Facebook, Mark Suster of Upfront Ventures, Albert Wenger of Union Square Venture, Scott Weiss of Andreessen Horowitz, and Bob Metcalfe of Ethernet/3Com. We invite your company to join us for this incredible event, as we highlight the technology market's most impressive new innovations.  The application deadline is Friday, November 11^th at 11:59pm CST., and the event itself will be March 11 & 12^th, 2017 in Austin, TX.   Please apply sxsw.com/interactive/accelerator Let me know that you've applied and wish you the best with this!

Advisor for AARP Health Innovation @50+

This year I am really honored to be an advisor for the Health Innovation@50+ LivePitch event on April 27 at Plug and Play Tech Center in Sunnyvale, CA, and I think your startup is perfect to apply to present at the event.

Innovation@50+ is a one day pitch competition for emerging startups in the healthy living space with a focus on caregiving. At the pitch competition, 10 finalist companies will present their business focus on stage in a rapid 3 minute presentation to a panel of industry expert judges, most of whom are venture capitalists and angel investors focused on the aging health tech space.

We are also very pleased to announce Lisa Suennen and Alexandra Drane will be co-hosting this unique one day dual-pitch event. Lisa and Alex represent legendary venture capital connections and entrepreneurial experience, and promise an engaging and entertaining day of hosting.

For more information on Applying to Pitch, see http://health50.org/apply-to-pitch/

Newest YEC Member

This week I'm honored to accept membership in the Young Entrepreneur Council (YEC, http://yec.co), an invitation-­only organization comprised of the world's elite founders and business owners.

They only accept a select number of entrepreneurs to join their ranks every year. Since they began, over 15,000 have applied to join and only 1,500 have been invited to join.  Beyond the quantifiable metrics of having either $1 million in annual company revenue or $1 million in financing since company inception, they look for entrepreneurs with exceptional character.  Further, the membership consists of founders who are active participants in their local communities and helping others achieve business success.

Certainly our work at Start Co. is about helping others achieve business success.  Hopefully, many of our founders will one day be members of YEC too.

Calling All Startups to SXSW

SXSW Accelerator returns for its seventh edition to showcase some of the web's most exciting innovations - could your company be one?  This event provides an outlet for companies to present their new online entertainment or gaming products, social media / networking technologies, or mobile, news, music, or health technology to a panel of industry experts, early adopters, and representatives from the angel / VC community.  Past judges have included Tim Draper of DFJ, John Sculley of Apple/Pepsi, Tim O'Reilly of O'Reilly Media, Paul Graham of Y Combinator, Naval Ravikant of AngelList, Guy Kawasaki of Alltop, Chris Sacca of Lowercase Capital, Chris Hughes of New Republic/Facebook, Mark Suster of Upfront Ventures, Albert Wenger of Union Square Venture, Scott Weiss of Andreessen Horowitz, and Bob Metcalfe of Ethernet/3Com. We invite your company to join us for this incredible event, as we highlight the technology market's most impressive new innovations.  The application deadline is Friday, November 7, and the event itself will be March 14 & 15^th, 2015 in Austin, TX.   Please apply sxsw.com/interactive/accelerator Let me know that you've applied and wish you the best with this!

SXSW V2V Deadline is Approaching

I'm on the advisory board for #SXSW Accelerator and their #V2V program.  Startups should definitely get engaged in both programs.  Right now though, startups should take advantage of the opportunity to showcase their emerging technology product or service in front of industry leaders by participating in the 2014 SXSW V2Venture. This event takes place on July 15 & 16 as a part of the SXSW V2V Event, during which the startups can improve their product, launch, attract venture capitalists, polish your elevator pitch, receive media exposure, build brand awareness, network, socialize and experience all that SXSW V2V has to offer. The deadline to register is Friday, April 11, 2014, so visit http://sxswv2v.com/venture to enter today.

SXSW Accelerator

I'm honored to serve on the advisory board of the SXSW Accelerator.  The program returns for its sixth edition to showcase some of the web's most exciting innovations.  It serves as an outlet for companies to present their new online entertainment or gaming products, social media / networking technologies, or mobile, news, music, or health technology to a panel of industry experts, early adopters, and representatives from the angel / VC community.  Past judges have included Tim Draper of DFJ, Chris Hughes of Facebook and Jumo, Paul Graham of Y Combinator, Craig Newmark of Craiglist, Robert Scoble of Rackspace and Scobleizer, Jeff Pulver of 140 Conference, Chris Shipley of Demo and Guidewire, and Tom Conrad of Pandora to name a few.  

Your innovative startup company should definitely join us for this incredible event, as we highlight the technology market's most impressive new innovations.  The application deadline is Friday, November 8, and the event itself will be March 8th & 9th, 2014 in Austin, TX.   

Please apply http://sxsw.com/interactive/accelerator.  Please let me know if you have applied.  Best of luck!

Old Personal Narrative Seems Out Date

I revisited webpages buried on my personal website today after realizing they were picked up too strongly by search engines.   It explains why folks introduced me with an old bio.

 Some content needs to either be updated or removed on the web.

Tonight I'm removing this portion created in 2006 or 2007.

==

Personal Narrative

In my youth I enjoyed mathematics, chemistry, physics, and biology. Growing up during the PC revolution, I did my fair share of experimentation including crashing a few systems. I also learned about the internet in the dark ages before the browser by simply dialing in. Taking this curiosity for science and technology, I matriculated at Rhodes College and studied chemistry. While at Rhodes College, I conducted artificial intelligence research through the psychology department and also entered into the service of the Cognitive Science Lab at the University of Memphis. Upon graduating with a bachelor of science degree from Rhodes College, I decided to continue the research I had come to enjoy by entering the master of psychology program at the University of Memphis. While there, working on multimillion projects such as AutoTutor, HURAA, and Coh-Metirx, I published and presented papers on discourse processing, intelligent tutoring, and artificial intelligence. With a proven track record in conducting studies and developing technology tools, I became the Associate Director of the Institute for Intelligent Systems (IIS). The IIS is State of Tennessee recognized organization of approximately one hundred faculty, staff, and students conducting artificial intelligence research with approximately $1-2M a year in funding from such sources as the National Science Foundation, Office of Naval Research, and Defense Advanced Research Projects Agency among others. At the Institute for Intelligent Systems, I primarily focused on external relations through the cultivation of outreach programs and research monies from businesses and other agencies.

Shortly thereafter, I was asked to co-found and co-direct the Advanced Distributed Learning Workforce Co-Lab (while continuing my post at the Institute for Intelligent Systems). There I helped to grow the Co-Lab from an idea into a reality with agreements from the US Department of Defense. Starting with nothing, the staff grew to seven, and under my guidance, we collectively organized and executed a program of activities, procured initial funds, space, and resources in excess of $200,000, and submitted competitive solicitations in excess of $1.5M with approximately $500,000 landing soon after my departure.

When the FedEx Institute of Technology opened in November of 2003, I was recruited to become the Assistant Director of Research Development and later became the Associate Director of Corporate Research and Development. By bridging the gap between industry and academic research, I supported a research portfolio of over $8M annually and administered funds in excess of $3M to expand research at the Institute. In the 12 months prior to my departure, I worked closely with corporations and other partners to obtain over $1.5M and directed those funds toward new Research and Development (R & D) efforts, fellowship posts, and in-residence programs, as well as developing and commercializing new materials. As a result, I founded and developed award winning and publicly covered research centers and projects in robotics, lighting design, nanosensors, multimedia arts, healthcare technologies, and sustainable design. When I spearheaded and organized publicity, marketing, and communications efforts in the 18 months leading up to my departure, the FedEx Institute's work had been covered by over 80 print and other mediums (radio, web, and TV) in local, national, and international outlets including the Today Show, G4, BBC, Al-Jazeera, Mumbai Mirror, Agence France Presse, Yahoo News UK, AOL.com, Sydney Morning Herald among many others.
While at the FedEx Institute of Technology, I worked to stimulate technology transfer by organizing the Mid-South's first business plan competition. Furthermore, I cemented relationships with the regional incubator (EmergeMemphis), outside corporations, intellectual property attorneys, and capital groups to focus on technology commercialization. During this time period I found that while both the technologies and talent were great, there were only a handful of new technology-based start-ups coming from the academic institutions of the Mid-South region of the United States.

Seeing a market need, I left the FedEx Institute of Technology to co-found Mercury Technology Labs. Mercury Technology Labs is an innovation connector and venture creation company that takes raw research technologies and talent from corporate and academic research labs, invests business expertise and capital, and starts new technology-based businesses. By pioneering a new business model for seed-stage business development in Mid-South United States, we have a portfolio of 6 companies in various stages of start-up. Furthermore, we have agreements to externally commercialize technologies from the R & D labs of a Fortune Global 200 Company and a national university. Mercury was recently covered in the Financial Times and other news outlets, and we continue to grow for the benefit of our partners, investors, and regional economy.

As a serial entrepreneur, I am also engaged with other firms including ShareCastle, Tee Box Marketing and Distribution, International Consulting Partners, and National Custom Hollow Metal. Charitably, I am chairman of the board of Lantana Projects (501c3) and also sit on the school board of Incarnation Catholic School in Collierville, TN. I am an Eagle Scout and I completed a master of cognitive psychology degree at the University of Memphis along the way. I have been quoted in over 50 international, national, and local media outlets on technology and business topics. I completed the Leadership Academy's Fellows program and I was recently recognized as one of the Top 40 Under 40 by the Memphis Business Journal, which recognizes young professionals in the Mid-South United States.

Citizens Need to Be Engaged: Americans and Ancient Romans

As Tacitus stated, his fellow citizens of Rome "understood the age of Nero . . . that even under bad emperors men can be great, and that a sense of duty and discretion, if backed by ability and energy, can reach that peak of honor that many have stormed by precipitous paths, winning fame, without serving country."  

If you are not helping your community to improve in meaningful ways, you need to re-evaluate what living a great life means.

Read more on societal engagement in ancient and modern times in this great blog post: http://www.themindroom.net/2011/09/agricola-v-society.html

My post originally appeared on the Startup America Partnership Blog

THE FIRST FIVE YEARS: KNOWING WHEN TO PIVOT

by Eric Mathews, co-founder of Seed Hatchery and LaunchMemphis

Brad Feld, co-founder of TechStars, stated 'that in order for a community to transform its entrepreneurial ecosystem six people need to work tirelessly without stopping or being distracted for twenty years'.  

I agree. I'm one of these people for Memphis, TN. I'm a quarter of the way in.

Five years ago on August 31st, 2006 I left my job to chart a new course for entrepreneurship in Memphis. Like all entrepreneurial journeys mine started with a problem. I saw a lot of great technologies being built in our community (universities, etc.), but I could count the number of tech startups on one hand. My working hypothesis was if we coupled the founders with small amounts of capital and experienced mentors, we would have more tech startups in Memphis.

I was armed with neither experience nor capital. For any entrepreneur this is not a problem (or so the story is told). So, I found an experienced partner and we set out to raise the money. It turned out that no one would fund us, so we decided to forget the money and bootstrap. That same year TechStars got its start and so did our entrepreneurial "accelerator" Mercury Technology Labs (disclaimer: it was not cohort based).

Mercury Technology Labs was a tough effort made tougher by the fact that we were in Memphis. To give a little context, when we started there was one incubator and there were three venture capital funds that wouldn't touch early stage tech deals, especially ones in Memphis. There was no angel network. If you were an entrepreneur and wanted incubation, you needed to pay the rent at the incubator. If you needed seed/angel money, good luck. It was not very vibrant.  

Our portfolio at the time consisted of three tech startups. Bootstrapping meant operating out of cafes. Thankfully, we were able to get their products to market with some sales, though eventually all but one failed. It wasn't a bad start those first six months, but it was too much of a grind. We realized we would be unsustainable long-term unless we worked to change our community's entrepreneurial infrastructure and culture. If our goal was to increase tech deal flow, it meant we would have to invest our time and energy in new ways.  

We had to pivot. 

1. Space for Startups to Grow

We needed enough space to enable us to create value faster and make our teams more productive. In 2007, within our local incubator we built the Launchpad, a 1200 sq. ft. co-working space for digital nomads, hackers, and founders. To this day we still charge no money to use this risk-oriented space.

The point is to lower the economic barrier to entry for incubation to be zero dollars. Founders can use the space 24/7, create value, and exchange knowledge and feedback with peer startups going through similar points of pain. Instead of paying for incubator rent (or five overpriced coffees a day), the founders can invest in product development and marketing.  

That wasn't enough.

2. Founder Connectivity and Risk Culture

In 2008, we started LaunchMemphis. In five months what started as a community based project became the in-demand source for the dynamic innovation economy programming we saw in other cities -- such things as Startup Weekend, Ignite Nights, Pitch Competitions and more. LaunchMemphis (501c3), reaches out to the invisible potential entrepreneurs of our community and gives them a chance to 'try-on' entrepreneurship and get early feedback on their startups.  

3. Exposure

Now more potential founders were entering the system and quality of deals began to improve. Others started to take notice. In 2009, the State of Tennessee turned to us to help share our knowledge in ecosystem development to other parts of the Tennessee. This increased our connectivity to peers across the State and elevated our local startups to a higher platform.  We now have connections to incubators, investors, and founders across the State and region.

4. Leadership

The next year, with a change of mayorship in Memphis, the opportunity seemed right to start changing minds on the home front. In 2010, we reached out to local civic leaders and helped them re-position their economic development strategies to bring focus to entrepreneurship, as differentiated from small business. Now entrepreneurship on a state and local level is a top priority and money is heading towards our work and that of our peers.

5. Capital

The icing on the cake came this year.

You know you are on to something when external investors begin to enter your local startup scene. In 2011, Solidus Company, a venture capital firm in Nashville, invested capital to fund Seed Hatchery, our mentorship driven seed accelerator. We gave the six teams of our inaugural cohort, money, mentors, and milestones in the form of a 90-day marine-style bootcamp for entrepreneurs (think TechStars). The teams are now selling to customers and finding follow-on investors.

It has been a tough yet rewarding five years. Looking back most people won't see the mountain of failures and false starts under my watch, but they were all necessary to get to this day. Both the successes (we had some along the way) and failures were worthy work and will continue to be. To my many collaborators over the years, thank you for diving in and investing … but let me remind you we still have 15 more years ahead -- or at least I do.  

I don't know what the next five years will bring, but I know the work is far from done in Memphis, TN.

Executive Summary for Filmmakers

I was recently asked to speak at a business planning session for film makers.  While film making is a little different than a technology startup, I was happy to lend my expertise on making a great executive summary.  I tailored my talk as well as my sections to filmmakers and it was well received.

Introduction

First, we must acknowledge that you only have 30 seconds to impress anyone in life.  That is especially true if you are trying to pitch an investor for money.  An executive summary is your written form formal pitch.  Your Executive Summary is that 30 second window. 

The reader in this case an investor needs to be intrigued enough by your executive summary to read on as well as meet you.  Intriguing does not mean you should use your artistic talent and use fanciful story telling.  The summary consists of the most salient points -- your business plan is the time to be long winded.  Just give the reader the facts with no embellishment.  This is a business proposal, not a script.

Here are the 7 sections your film making executive summary should have as well as 1 optional section.  At the end of these sections I provide my 5 pro tips on making an executive summary for your film.

Enjoy.


Executive Summary for Filmmakers

Section 1: Strategic Opportunity (aka Overview)

•     What's the name of the company?
•     What type of film or films are you making?
•     Who are you?

Section 2: Management Team

•     Give the investor an idea of the team's experience and expertise.
•     Well known people should go first.
•     Don't list people who have not officially signed!
•     Note that the investor is investing in a business.  The business team is very important and distinct from the artistic team.

Section 3: The Film(s)

•     Only the most important information about your proposed film(s).
•     This is not the place for a synopsis.
•     Indicate notable artistic attachments (director, actor, producer) -- no bios though.
•     Don't list people who have not officially signed!

Optional Section: The Industry

•     What's the health of the film industry at the box office, ticketing, indie, mainstream?
•     For investors that are less savvy they will need this section to assess whether film is a good investment for them in general.

Section 4: The Market

•     What are the target markets for your specific film(s) and products.
•     Demographics and numbers around your market.  Be specific.
•     What self marketing methods can you use and how valuable will they be?

Section 5: Distribution

•     Worst answer: we will get distribution.
•     If you have distribution already list the names, but only those that have really signed!
•     We have interest is good PR but bad business planning.
•     Describe your knowledge for how distribution will work for this specific film(s) you are making. 
•     Give reasons and show your knowledge in the area of distribution.

Section 6: Financial Highlights

•     This summarizes all the financial information in your plan.
•     Summary of projected profit and loss over five years (especially for a multi-film plan)
•     Always qualify expressions of future gain with one of these words: projection, forecast, and estimate

Section 7: Investment Opportunity

•     Always include how much money you want -- people leave that out all to often.
•     Do not keep it a secret.
•     How will investors get their money back?

My 5 Pro Tips:
#1 Don't list people who have not officially signed.  Interest doesn't count either.
#2 Less is more.  Get it down to 1 page.
#3 Do not deviate from the path of the outline you have already chosen for your full business plan.
#4 Anything you say here has to appear in more detail somewhere else in the proposal.
#5 Meaningless generalizations in the summary will lead investors to believe they will find them in the rest of the plan.  Don't do it.
   

Why Innovation Centers Fail

Innovation is inherently difficult because the innovations have never been made before. There's no guidebook, rulebook, or template. Organizations can only execute to determine if a solution will work or not. Most organizations are poor at innovation. Why? They usually don't have confidence in the process of grinding it out, and they are unwilling to let a project fail fast (or even accept mistakes). Without mistakes and failure nothing is learned to inform the next project or next possible solution set. Without the support and resources to make mistakes and fail, innovation will not occur. Here are some of the other reasons an "Innovation Center" (whether they be academic, corporate, or public) can easily fall short.

Legal Problems.
Legal clarity is important. However, in the innovation game, there's plenty of data that shows that confidentiality agreements and onerous contracts early in the process do not protect anyone, and only waste time and energy. Furthermore, innovation departments often need to chart new paths for organizations and partners where law has not been thoroughly established. Innovation is inherently new.
Counter action:
1) Realize that it is best to look backward with legal, not forward in an innovation center.
2) Consider open sourcing all solutions and publish the results for others across the globe to use and replicate.

Fiscal Flexibility in Bureaucracies or the Public Sector.
Getting bids and utilizing selection criteria that mask the traits of innovative contractors diminishes innovation center efficacy. Agility and failing fast are necessary in effective innovation offices because technology changes every three months or so. If the bidding process takes three months on average to process then everyone loses. Using small amounts of money quickly is rewarded with feedback that either signals success or failure. The ability to transfer money and make decisions quickly is tough in bureaucracies.
Counter action:
1) Generally a few methods exist to support flexibility but these will need the direct support of the head of the organization (think President).
2) No bid contracts and using public corporations or foundations (used more in public university settings) to issue money.

Placing Innovation under a Rock.
Crazy. Foolish. Wasteful. Defiant. Infringing. These words will be use to describe all of the activities of innovation centers and more. Other departments and leaders in the organization will invariably not support innovation activities because innovations eventually mean change. Stopping actions in the innovation center through many methods prevents change from coming for these leaders and employees. We generally call these change prevention practices and they lead to failure of innovation centers.
Counter action:
1) The most successful innovation centers report to the CEO, Mayor, or head of the organization and him/her alone. Nesting the innovation center or having it report to two or more leaders invariable stifles innovation.
2) Normal rules cannot apply to the innovation group. By its very nature the innovation group needs to operate in an environment that has no rules. It needs to be protected to flourish – otherwise the planted seeds will be “crushed” before germination.
3) Change prevention teams work to reduce adoption of proven solutions killing the return on investment in research and development; the only counter point is the support from the head of the organization to adopt.

Coordinated or Unorganized Change Prevention Teams.
Change prevention teams will be present during all phases of project development and adoption. It is very easy to say no – it means less effort and time for the department being changed or people being acted on.
Counter action:
Reward risk and provide incentives for people to change and work with the innovation department.

Adoption.
When handing off a successful project, innovation departments often find that the final resting place for an innovation will resist adopting the solution because they were not included in the development of the solution. It happens a lot in major companies all the time. This kills the return on the research and development investment.
Counter action:
1) Create innovation liaisons in each department to provide input throughout the development of innovation project.
2) Create incentives for adoption.

Accepting Failure.
Innovation is about taking risks and seeing the results. If failure is not an acceptable outcome, then you aren’t risking anything and you will only be making incremental changes rather than innovating. Incremental change is not innovation; it is development. To double the real successes in innovation centers, you need to double the failure rate. Furthermore, failing at a slow rate wastes time and organization money.
Counter action:
1) Rapid prototyping with constant feedback loops is the best route to success.
2) Kill bad projects early when the writing is on the wall and learn from them.
3) Give away the success and failures so that others may learn from the projects.
4) Publically acknowledge failures along sides success to support cultural change.
5) Reward good failures equal to good successes.

Not Expecting Success.
Day-to-day the innovation needs to focus on how the organization will look when it gets it right. Most of this can be solved with vision. It is hard to innovate without a distinct purpose and passion.
Counter action:
1) Create an innovation agenda
2) Issue “Grand Challenges” to focus on what the future looks like when the innovation center succeeds

Disciplinary Focus.
Innovations occur at the intersection of disciplines. Innovation offices need a group of innovators from all walks of life. Only having programmers or only having engineers will perpetuate incremental changes.
Counter action:
1) Interdisciplinary teams will succeed more than singularly focused teams. This means having different team members from many disciplines on the team.
2) Especially in less technologically focused organizations, select those individuals that are high on execution and have knowledge of the scientific method.

Killing Enthusiasm.
Exploring the unknown is tough because more is at stake than money. Bravery, initiative, and excitement are also on the line. Capturing energy, amplifying it, and building on new ideas is the order of the day. Innovation centers that have poor morale take ideas and make them smaller, instead of making them bigger. This changes the return on investment.
Counter action:
1)Select innovators with high energy, self starting mentalities.
2) Accept that when innovators dream big they seem crazy and other leaders in the organization will treat them as such.

The Value of an Idea.
There is not a shortage of ideas in innovation centers. In bad innovation centers there is a shortage of execution. Successful innovation teams build and build fast to prove something out and then go back and sort out the details and polish it up. They do not design silver bullets. They find real bullets at the end of the process and polish them up into silver bullets.
Counter action:
1) Take quick small actions early in the process on multiple fronts using an options management philosophy. This will catalyze execution early on a project.
2) Get feedback early and often during rapid prototyping stage.

Teams are not created equal.
Innovation centers will often be asked to partner with another department to help it innovate. Not all departments are created equal. Innovation departments need to work with proven partners that have change momentum.
Counter action:
1) If a department is not oriented for change it is best to conclude a project early but respectfully if it does not meet a threshold of innovation culture.
2) Be mindful of resource allocation and human capital expenditure when partnering. If the contributions are not equally with the innovation center giving more, then re-evaluate the project.

Who Decides?
It does not make sense to work on a line of innovation unless it is clear in advance who must say yes to adopt it. As discussed in the section change prevention teams, we know everyone can say no.
Counter action:
Innovation centers need to intentionally limit the number of people who are allowed to weigh in and are clear to themselves and their potential partners about exactly who can (and must) give the go ahead.

Not Measuring.
There cannot be success without deciding how success is defined on a project-by-project basis. Each project will be different. Money is often used as a measuring tool, but in innovation departments, alternative measures need to be included as well.
Counter action:
1) When project is scoped, the innovation center needs to define the measures that can be used to determine the extent or degree of success.
2) Leaders and decision makers need to agree to the measures and communicate them to stake holders in advance.

Bad Process.
Bad innovation centers waste time in endless meetings with random vendors and internal naysayers and even hassle about tiny details up front. They do not actually get things done.
Counter action:
1) Good innovation centers have an agenda and a project manager's understanding of what it means to get things done.
2) They publish the process and share it with anyone who wants to know.

Poor Context.
You cannot create value in a vacuum. Yet organizations do not provide the specific context for innovation occur.
Counter action:
1) Build co-working environments and project spaces for the innovation office.
2) Avoid traditional office trappings and introduce objects that encourage “play”.
3) Silo or separate the innovation team to remove social and other pressures not to build sweeping solutions.

Phantom Works -- Proposed Accelerator Model

Investors should consider the seeding of multiple, concurrent ventures in order to take advantage of the confluence of technology and talent in their cities. Traditionally overlooked regions such as the Nashville, Memphis, or Little Rock area have a serious opportunity to seed new ventures.

How do you successfully seed multiple ventures concurrently? Work on pre-seed stage technology ventures simultaneously and rapidly incubate them. A few modest successes would have a tremendous impact and provide necessary returns to investors.

Phantom Works Method

Target Businesses
The organization will be targeted towards businesses that meet the following criteria:
a. Can be developed, launched and operated (at least initially) by a small team of highly capable, actively involved founders.
b. Initial start-up expenditures less than $200K and likely less than that.
c. Can be ramped up and brought to market quickly.

Stages of Incubation
Stage 1: Proof of Concept
If approved, the business team will receive a $10,000 promissory note. The funds will be used to establish the project’s viability within 4-6 weeks through refinement of the business plan, creation of a technology roadmap and the design and development of a product prototype. This first round will be structured as debt to ensure the team’s active participation in the incubation process. If the project fails to pass this stage, but the team exhibits active, good faith participation (including the project postmortem), the debt will be forgiven.

Stage 2: Viability Assessment
The business plan, technology roadmap and prototype are presented to a review board for assessment. The board will review the proof of concept and ultimately decide whether or not to fund the project to the next stage.

Stage 3: Development
i. Product development will proceed in quarterly funding iterations. At the beginning of each quarter, the team will receive a round of funding in exchange for a minor portion of equity, in accordance with a pre-determined funding schedule.
ii. Phantom Works will provide shared office space and resources for member companies.
iii. Every 14 days, the team will be required to provide a regular status update, including:
1. Live demonstration of new product development
2. Roadmap review and estimates for the next status update
3. The teams will be assessed for success, setbacks, and overcoming challenges in a timely manner.

Stage 4: Launch or Scrub
i. Launch: Within a predetermined timeframe (ideally 3-6 months), the product should be released and get to dollar one. Once launched, revenue milestones will be tracked and managed accordingly.
ii. Scrub: If the team is unable to successfully launch, the board will decide to scrub the project. In this event, all active members of the business team and associated mentors will be required to participate in a post-mortem activity (as required by the terms of the initial loan and subsequent funding rounds). The purpose of the postmortem will be to identify factors that contributed to the project’s failure and use the information learned to mitigate risk to future teams. Furthermore, it is designed to help the teams reform and start again on a new startup as possible, quickly.

Reason for Method
The process is designed for the startups to fail fast, and build strong experienced startup teams that can be serial entrepreneurs. Unlike traditional investment banking and venture capital models, the goal is to quickly incubate lots of businesses with an expectation to get several successes. Rather than pour large sums of money into a handful of businesses in the hopes that one will be a billion-dollar lottery ticket, this model is designed to spawn many, successful businesses that can have an adequate market impact to attract either acquirers or venture investors.

City Ventures -- My Proposed Program for Creative Venturing

Synopsis: For the cost of one job saved in Shelby County, Tennessee by the American Recovery and Reinvestment Act ($1,381,502.90), City Ventures could empower ~100 individuals to make their own creative industry job in film, music, visual art, or high growth business startup by becoming entrepreneurs. These entrepreneurs would, on average, create 4 additional jobs in each of the next 5 years as their business expands. Beyond the economic impact, the social and cultural impact for the city would be profound. Exemplars, data, and other indicators show that small investments in creatives coupled with cohort experiential programs, do far more for a city’s future than other methods. Extensive research shows that entrepreneurs are made, not born.

Description: City Ventures would be the first experimental city venturing program that focuses emerging creative talent on constructing their own economic opportunity in four areas: film, music, visual arts, or high growth business startup. Learning by doing, prototyping, and other experience-based approaches produce real returns, but are often discouraged due to fear of failure. This fear stifles innovation, entrepreneurship, and cultural activity. We can reverse this trend, embrace risk, and enable our creative citizens to build entrepreneurial ventures for the first time in their lives with an inexpensive investment of money, resources, education, and systemic accountability. The short-term return is cultural vibrancy. As creative individuals learn to monetize their creative product, the long-term outcome is economic productivity and retained talent in a city that faces creative talent erosion.

In Practice: City Ventures would employ a cohort program of industry specific milestones, mentoring, peer collaboration, culminating demonstrations and unveilings, along with entrepreneurship lessons in each of the 4 creative focus areas. The participants will make real products appropriate to their industry (i.e. filmmakers make films), while learning and implementing strategies for monetizing their products in the real world. Too often economic realities, such as paying rent, can derail entrepreneurial action. To insure that participation is unfettered by these issues, small monetary stipends or investments are coupled with the “tough love” program -- approximately $15,000 per creative venture plus a system of accountability. There are strong indicators that small investments with cohort programs act as a major catalyst in technology and arts entrepreneurship programs (TechStars, Y-Combinator, Bizdom U, CreateHere). City Ventures extends these successful models.

The Math: To run this venturing program in each of the four areas would be comparatively cheap with high economic impact:

4 Areas of Creative Entrepreneurial Action

x 10 Groups of 1-3 People per Area

x $15,000 per group

$600,000 in Total Direct Investment

+ $600,000 Program Operating Cost (Estimated)

$1,200,000 Total City Ventures Budget

or Less than the cost of one saved job in Shelby County

On average, City Ventures would impact ~100 individuals in each year of operation and empower them to “be their own boss,” while pursuing their passion. After 3 years, the ~300 creatives would have a major cultural influence, while simultaneously contributing economically. Every dollar invested is expected to return ten or more in economic impact.

“New School” Economic Policy: Economic development policy that focuses on persuading existing businesses to relocate or enticing a big studio to film in your city is good PR. However, such a policy ignores a much bigger opportunity: transforming creative talent into home-grown creative businesses/industries. Transforming existing talent into creative entrepreneurial ventures provides lasting social and cultural returns, and utilizes the human capital that is already present in our cities.

Shelby County, Tennessee has received nearly $478 million in ARRA funding. The number of jobs saved to date with this money is 346 (Memphis Business Journal). That equals $1,381,502.90 per job saved. For the cost of one job saved, City Ventures could empower approximately 100 creative, entrepreneurially minded individuals to create their own jobs and as their business grows, to create even more.

The City Ventures’ model is based on over 30 years of economic data, which proves that individuals betting on themselves, and the city in which they live, will create more jobs with remarkable efficiency, especially when public and private systems invest in individuals. Extensive research by the Kauffman Foundation has shown that entrepreneurs are in fact made, and not born.

National Facts (Kauffman Foundation)

Fact 1: Over the past 30 years, young companies (0-5 years old) have accounted for more than two-thirds of all net new jobs.

Fact 2: Each young company creates an average of 4 jobs every year.

Fact 3: Since 1977, without startup companies, net job creation for the American economy would be negative in all but a handful of years (meaning we would have lost more jobs than we created over the past 30+ years).

Memphis Facts (Smart City)

Fact 1: On average three to five 25-35 year olds including our creative talent leave Memphis each day searching for a better opportunity or lifestyle.

Fact 2: On average three middle income families leave Memphis each day as they look for cultural and economic opportunity that builds hope for all citizens.

Fact 3: Contributing to a loss of hope: 35% of Memphians are unemployed or have been without work for so long that they have stopped looking.

Fact 4: Cost of Loss of Hope: A Year in Prison ($30K+), A Year of Welfare ($20K+)

Fact 5: ~$14K: Average startup costs in film, visual arts, music, or high growth business

Why Memphis? Why Now? Every citizen desires a chance to do something great with their life, yet few cities provide outlets that empower individuals to be bold in art, film, music, or high growth business startups. The greatest economic tool ever invented is applied entrepreneurship, regardless of industry. Entrepreneurs in the creative industries don't just do it to become rich; they do it to build creative products that can influence their community and society.

Closing Summary: City Ventures will enable emerging talent to bet on themselves, their city, and their innovative ideas, without fear. Creative entrepreneurship will yield positive social, cultural, and economic returns for the city smart enough to empower its citizens.

"Why not start a city creative capital venturing fund – virtually unheard of in other cities.”

– Eric Mathews, LaunchMemphis – eric <@> launchmemphis.com