Check back over the next month as we will be highlighting the different programs created this year by the Nebraska Legislature through the Talent and Innovation Initiative.

Entrepreneurs can face many challenges as their businesses gain steam. One of those challenges is actually two-fold: how to find and attract talented employees and how to pay them. This article, part of a series on Nebraska’s Talent and Innovation Initiative, will examine InternNE, an incentive program designed to address this two-fold challenge.

InternNE was created by Legislative Bill 386, introduced by Elm Creek Sen. Lavon Heidemann. The law became effective in June and created a program administered by the Department of Economic Development to cover some of the costs of an internship, as well as provide a portal for employers and students to find one another.

Employers and students can register at InternNE.com, a site hosted by careerlink.com, after which they can look for either internship opportunities or potential interns, depending on the perspective.

Also at the site, employers can review eligibility documents and guidelines to find out whether their business qualifies them to receive grant funding to cover a portion of the cost of the internship.

What does all this mean for cash-poor startups? Opportunity.

Consider AgilX, a Lincoln-based software development company. Founded by Jake McElroy and Dustin Clonch, AgilX is in the favorable position of having boot-strapped itself into profitability. While this keeps the company’s corporate equity safe at home, it also leaves much to be desired in terms of paying employees.

McElroy and Clonch learned about InternNE and applied after having incorporated AgilX in March. They were approved to have two internships partially reimbursed under the new program. This perfectly matched their corporate goals and culture.

“We’re not just about selling software, we’re passionate about keeping high-tech jobs in Nebraska,” Clonch said.

The two internship positions have come at an opportune time in the lifespan of AgilX. The company’s goal was to maintain as much internal equity as possible without releasing liability to angel investors.

However, now AgilX is poised to ramp up its productivity, a difficult task without employees – and employees are difficult to bring on without capital. InternNE is making it possible, through subsidies, to bring on those employees below market rates, helping AgilX make its ramp-up easier, and allowing the company to bring on talented interns.

And it isn’t just software companies that are able to take advantage of this new program. “About 22 percent of the positions that have been approved fall within marketing, market research or sales and marketing fields; other highly requested internships are within the finance/accounting, IT/computer technology and engineering and architecture fields,” said Allison Hatch, business development consultant at the Department of Economic Development.

“About 60 percent of the businesses approved for the program are located in the Lincoln and Omaha area, and nearly 45 percent of the filled internship positions are located in Lincoln,” Hatch said.

So what does this mean for you, as an entrepreneur? If you’re looking to expand your staff, and want to utilize this program, there may be grant funding available to your company to reduce the cost of an internship.

Here’s what you do:

• Go to InternNE.com and register yourself as an employer.
• Also available on the InternNE website is the “Employer” section, which contains the necessary documents to be filled out and filed with the state:
• InternNE application form.
• Program guidelines.
• Request for reimbursement form.
• Student verification and evaluation forms.
• Documentation for the Nebraska State Treasurer and the IRS.

After having completed the requisite paperwork and getting approved, companies are then able to post jobs, recruit interns and receive reimbursement for their internships.

For more information on this program, contact Allison Hatch at the Department of Economic Development. Hatch is in charge of bringing employers on board and can be reached at 402-471-3368.

“Bootstraps can only get you so far, and then there is this huge area of maybe a couple of hundred thousand to a million or $1.5 million that’s that next level of investors,” said Randy G. Nitz, executive director of the Nebraska Angels. “Venture capital won’t move down into the area under $2 million and in many cases under $5 million of an investment.”

That area between $100,000 and $2 million is where the Nebraska Angels dare to tread. The Nebraska Angels isn’t a single fund; instead it’s a non-profit mutual benefit corporation designed to share information with the individual angel investors who comprise the group as a whole. In other words, though the members of the group collaborate in due diligence in an attempt to minimize the inherently risky business of angel investing, members invest in companies as individuals and not on behalf of the Nebraska Angels.

Any entrepreneur who has been through the process of courting investment from angels  has learned the hard way that attracting their attention isn’t easy. As states go, Nebraska doesn’t have a lot of angel investors, and those that do exist aren’t there for charity. There is a lot of competition for the Nebraska Angels’ dollars.

“We have deals that are coming into us from entrepreneurs all across the country,” Nitz said. “We are more inclined to invest in Nebraska-based deals because that’s why we exist, but at the same time we will look at deals in the region.”

Any entrepreneur who wants Nebraska Angels backing first needs to impress the Angels’ seven-member screening committee. If the entrepreneur impresses the committee, he’ll then be invited to a dinner meeting where he will get to pitch his business idea to the Nebraska Angels’ full membership.

“We’re constantly doing that screening process,” Nitz said. “The screening committee is meeting twice a month and the members are coming in and seeing either one or two deals pitched to them at once a month dinner meetings.”

The Nebraska Angels were founded five years ago and have invested in roughly two companies a year ever since. Companies that have received funding from the Nebraska Angels include Lincoln-based MRail and Virtual Incision and Omaha-based SkyVu Entertainment. The group last invested in Wichita, Kan.-based startup Nitride Solutions in July 2011. Nitride Solutions plans to produce aluminum nitrite substrates for use in manufacturing commercial and consumer electronics. The Nebraska Angels coordinated with two other angel investment groups to raise $1.8 million for the deal.

So how can Nebraska’s aspiring entrepreneurs impress the Angels and get an opportunity to raise that kind of money for their own companies?

“In my opinion,” Nitz said, “it’s very much about the entrepreneur and the management team that the entrepreneur has been able to put together.”

An entrepreneur’s attitude and the way he presents himself and his team in front of the angels is almost as important as the idea he has. The name of the game is confidence and competence, as in, can an entrepreneur inspire an angel’s confidence in his or her competence?

Tim Berry, an author and entrepreneur who has been recognized by both Business Week and The New York Times as one of the top entrepreneurs to follow on Twitter, has a video that gives advice on how to pitch angel investors linked to the Nebraska Angels’ website. He refers to pitching to angel investors as “show business,”  saying aspiring entrepreneurs need to leave their bullet points, frumpy graphs and charts at home. If entrepreneurs want to catch an angel’s eye, they need to “sizzle.”

Berry’s video is one of nine different tabs in the Entrepreneur FAQ drop-down box on the Nebraska Angels’ home page. The drop-down box has all sorts of tips and advice for entrepreneurs who hope to garner angel investment. It’s a good place to start for entrepreneurs who’ve never been through the process before.

“The Nebraska Angels website really does lay down a good checklist of things you need to bring to the table,” Sky Vu Entertainment President and co-founder Benjamin Vu said.

A great stage presence and a well-organized pitch is a must for entrepreneurs trying to attract angel capital, but most important of all, according to Nitz, is taking care of all the tedious work and details in advance so that when an entrepreneur is pitching, he knows all of the important details that could make or break the presentation. A dream cooked up one night in a coffee shop and written on the back of a napkin just isn’t going to cut it. Entrepreneurs need to show more if they expect to draw the eyes of angels.

“They really need to do their homework and think through their business model,” Nitz said. “You’ve got to have a well thought-out business model; you’ve got to be going into a market that shows some opportunity for you to get a small percent of that big market. A niche is OK if you can grab that niche, (but) you’ve got to have a business plan that makes some sense. You’ve got to have some idea of the financials and you need to be able to prove to the investors that what you’re going to do with their money will build the value you say it will.”

While a couple of million dollars in investment money never hurt anybody, for those who make the cut and get the support of the Nebraska Angels there’s a lot more than money that comes along with it. The connections that angels can provide combined with the experience that they bring to the table is almost as important as the capital they invest in the company.

“What the Angels bring to the table is decades upon decades of business building experience. A lot of those traditional skills underlie everything we do in the media business. It’s paid off in so many ways,” Vu said.

Angel investors are typically less predatory than regular venture capitalists. Accepting funding on the scale of hundreds of thousands to millions of dollars is inevitably going to mean giving up some control of the company, but angels are generally not trying to take over the businesses they invest in. Angel investors usually look for a scenario where they can eventually exit the business and take nice chunk of cash with them.

According to Nitz, the Nebraska Angels are ready to invest again. The group’s members are just waiting for the right opportunity to invest in another promising Nebraska startup.

“We’re out there working hard to get companies to apply,” Nitz said. “Our investors are all about trying to fund and help grow Nebraska-based companies.”

Four Nebraska companies that are spinoffs of University of Nebraska research are highlighted in a nationwide “success stories” report released today by The Science Coalition.

The report – “Sparking Economic Growth: How federally funded university research creates innovation, new companies and jobs” – identifies 100 companies across the United States that trace their founding to breakthrough research conducted at a university and sponsored by a federal agency. According to The Science Coalition, these 100 companies now collectively employ more than 100,000 people and have annual revenues of nearly $100 billion.

The report was released one day before the House is expected to debate reauthorization of the America COMPETES Act, which will authorize funding over the next five years for key scientific agencies such as the National Science Foundation and the Department of Energy’s Office of Science.

The Nebraska companies included in the report are: J.A. Woollam Co., Inc., of Lincoln; LI-COR Biosciences of Lincoln; Virtual Incision Corporation of Lincoln; and Ximerex, Inc., of Blair.

“These companies – which represent a small sampling of all the businesses spun off from University of Nebraska research – demonstrate that one of the best strategies for ensuring strong economic growth is investment in university research,” said NU President James B. Milliken.

“The University of Nebraska has a long history of leveraging its research successes to help the people of the state – and around the world – lead healthier, higher-quality, more productive lives. Strong federal investment in basic research will allow us to continue our mission of service to Nebraska.”

According to The Science Coalition, universities conduct the majority of basic research – 55 percent in 2008 – in the United States. The federal government is the primary source of funding for basic research, which is key to fundamental scientific discoveries.

The Science Coalition is a nonprofit organization of 45 of the nation’s leading public and private research universities, including the University of Nebraska. The full “Sparking Economic Growth” report is available at www.sciencecoalition.org/successstories/.

More about the Nebraska companies highlighted in the report:

• J.A. Woollam Co., Inc. Founded in 1987 as a spinoff from research done by John Woollam, an electrical engineering professor at the University of Nebraska-Lincoln, J.A. Woollam Co., Inc., has become a world leader in the manufacturing of spectroscopic ellipsometers for non-destructive thin film and bulk material characterization. The company has secured more than 100 patents internationally and employs 40 people, most of whom are scientists and engineers. Woollam’s research has been funded by the Department of Defense, NASA and National Science Foundation.

• LI-COR Biosciences. In the 1960s, UNL launched a project to develop sorghum as a food product. William Biggs was hired to develop research instruments for the project, and he helped design one that attracted global attention after it was featured in the journal Ecology. In 1971, Biggs founded Lambda Instruments Corporation to manufacture the instruments; the name was changed to LI-COR in 1978. LI-COR now employs nearly 300 people, and more than 30,000 customers in more than 100 countries use LI-COR instruments.

• Virtual Incision Corporation. Founded in 2006, Virtual Incision Corporation is the result of a collaboration between University of Nebraska Medical Center surgeon Dmitry Oleynikov, who is interested in improving surgery practices, and UNL mechanical engineer Shane Farritor, who has expertise in designing robots. Through their company, Oleynikov and Farritor will develop and commercialize the first inexpensive, remotely operated, in vivo miniature robotic surgical tools and camera systems that operate within the abdominal cavity. The robots can be inserted through a tiny incision to perform minimally invasive surgeries, significantly reducing pain and recovery times. Oleynikov and Farritor’s research has been funded by the Department of Defense, NASA and National Institutes of Health.

• Ximerex, Inc. Founded in 1993, Ximerex, Inc. grew from research conducted by William Beschorner at UNMC and Johns Hopkins University on xenotransplantation – transplanting organs from one species to another. The company is dedicated to the treatment of tissue and organ failure by transplanting cells, tissues and organs from pigs with little or no anti-rejection drugs. This would help address a severe shortage of human organ donors. Ximerex intends to pursue FDA-allowed clinical trials of its proprietary technologies and, if successful, would explore corporate partnerships to distribute its products. Beschorner has received funding for his research from the National Institutes of Health and National Institute of Standards and Technology.

Contact: Melissa Lee
(402) 472-7127
(402) 580-3297 (cell)
melissalee@nebraska.edu

Betty Sayers and Nancy Herhahn, Nebraska Rural Living founders

When sisters Betty Sayers and Nancy Herhahn graduated from Holdredge High School, educators and parents told them they could be more successful if they left Nebraska. And so they did.

Herhahn worked as a real estate company executive, living in Chicago and then San Diego. Sayers taught at a community college in Belcourt, N.D., then wrote and facilitated grant proposals and co-authored a book in Detroit Lakes, Minn.

While living outside Nebraska, the two returned for occasional visits with relatives. Sayers said they saw a discrepancy between outsiders’ perceptions of rural Nebraska and what the sisters observed on those return visits. Sayers said media stories about rural Nebraska at the time described towns as decimated and desperately poor with no services. In contrast, she said, the sisters saw the opposite during their visits: prospering small towns, good schools, safe communities with amenities and strong health care systems.

“We just saw green and prosperity,” Sayers said.

When the two returned to Nebraska – Sayers in 2003 and Herhahn in 2004 – they decided to create a Web site, Nebraska Rural Living, to promote the version of rural Nebraska they see. With Sayers now in Holdredge and Herhahn in Lexington, they chose to focus on their region, working under the umbrella of the South Platte United Chambers of Commerce.

Sayers said a regional focus is important in rural areas. While one small town may not provide every want and need, a group of small towns in a region can provide amenities competitive with city living, she said.

Around the time the sisters returned to Nebraska, they read a quote by Jim Clifton, CEO of the Gallup Corporation, that helped prompt the site’s entrepreneurial focus, Sayers said. An article in the Omaha World Herald reported Clifton saying that Nebraska needs to “recognize and appreciate great entrepreneurs and inventors the same way it recognizes and appreciates great quarterbacks.”

“And that inspired us,” Sayers said. “Because we know that the entrepreneurs, the small businesses, are the strength of Nebraska and particularly rural Nebraska.” However, entrepreneurs sometimes operate quietly in garages or other nondescript buildings, she said.

“Sometimes the communities don’t even know about them,” she said.

The site includes a “Rural Success Stories” column where they feature an entrepreneur from their region every month. The column now has more than 50 rural entrepreneur stories. Some featured companies have mostly regional or Nebraskan markets, like the greenhouse Oasis Gardens near Loomis. Others have markets that span the United States, like orthotics company Burns Podiatric Laboratory in McCook. And yet others have world-wide markets, like sprint-car engine builders D & F Service & Speed in Holbrook and ready-to-bake frozen pie business The Village Piemaker in Eustis.

The site’s “Rural Foodies” column gives eateries in the region a boost. Sayers said city dwellers worry they’ll miss fine dining and ethnic food if they move to a rural region.

But their reviewing team has already eaten in and reported on 17 food enterprises in their region that, according to the site, provide “good food, well-prepared,” including down-home food, fine dining, ethnic food and specialties like wine and sausage.

“And honestly, every month we think, ‘All right, this is the last one. We’re not going to find another one. This is the end,’ and then somebody will make a suggestion. If it’s within 60 miles, you’ll find us there,” Sayers said.

Currently the site features 13 Nebraska communities. Participating communities pay roughly $1 per citizen to be featured. Sayers said they negotiate this rate, since it might be too much for some communities. The site encourages tiny communities to pool their resources and join as a regional area if they can’t afford to join alone, she said.

When a community joins, Nebraska Rural Living creates a community profile that includes information important to people considering moving to the area, like school quality.

“Rural Nebraska, as well as all of Nebraska, has very good scores in that line and rural Nebraska is getting stronger and better because the class size is small,” Sayers said. “And I think that is just one of the prime advantages of rural schools … In rural Nebraska you can get a private school education with public dollars.”

Site writers also research and report on the quality of healthcare in the community or surrounding area, tourism opportunities, community governance and citizen participation, amenities and features including recreation.

Sayers and Herhahn volunteer their services to the Web site. The site employs a part-time editor and hires some Nebraskan writers and photographers.

The site also includes an “Articles and Essays” column where anyone can submit writing. The site publishes selected articles or essays in this column with the writers’ bylines, but doesn’t pay those writers.

Sayers said about 26,000 people visit each month and stay an average of 4.5 minutes.

“According to Constant Contact, our software provider, this puts us in the top 20 percent of the Web sites they support for people just paying attention and reading,” Sayers said.

More than 400,000 people have “visited” the communities online over the past couple years, she said.

When Sayers and Herhahn developed the site, they consulted with the Nebraska Department of Economic Development and the Center for Rural Affairs. Under the South Platte United Chambers of Commerce umbrella, they received two grants from the U.S. Department of Agriculture.

With enough funding, Sayers said they’d like Nebraska Rural Living to cover other regions of Nebraska and eventually the entire state.

Sayers and Herhahn have another Web site, Chicken Dance Trail, which provides online self-guided bird-watching tours. Grants from the Nebraska Department of Economic Development’s Division of Travel and Tourism and the Nebraska Environmental Trust they applied for via the South Platte United Chambers of Commerce helped pay for that site, along with in-kind contributions from GROW Nebraska. For the Chicken Dance Trail project, Sayers and Herhahn also consult with the Nebraska Game and Parks Commission.

Silicon Prairie News, a blog and event producer founded in Omaha in 2008, believes there’s a fine line between sharing your success stories and outright boasting. Furthermore, SPN is convinced Nebraska’s entrepreneurs are also aware of that intangible divide, and place their loyalties squarely on the side that inspires rather than alienates. Started after co-founder Jeff Slobotski toured the country’s urban centers and concurrent tech scenes, Silicon Prairie News seeks to celebrate Nebraska’s entrepreneurs and encourage others to follow their example.

“When Jeff came back to Nebraska, he knew entrepreneurs here were doing things similar to what was happening in bigger cities, but they were hidden under the woodwork or they were in their own worlds doing work,” said Dusty Davidson, SPN’s co-founder and current technical lead. “People in this region don’t really celebrate their successes the way people do other places. Here, it’s kind of heads down, kind of humble. SPN isn’t about boasting — it’s more about, ‘Hey I finally raised some money for my startup and I want to tell the world about it.’”

Realizing the value of telling entrepreneurs’ success stories — both to other entrepreneurs and to the community at large — SPN quickly set about cataloging Nebraska’s presumably nascent start-up culture. What Davidson and Slobotski quickly discovered, however, was that a vibrant entrepreneurial framework was already present in the state — it was simply sequestered from the public eye.

Dusty Davidson, Co-found of Silicon Prairie News, photo courtesy of Silicon Prairie News

“Three years ago, nobody mentioned ‘Omaha’ in the same sentence as ‘startups,’ and certainly not at the national level,” Davidson said. “We realized one reason there wasn’t a lot of discussion about entrepreneurship was because people who were interested looked around and didn’t see others doing it. So, our hypothesis was that if you build a community and showcase that entrepreneurs are out there, you help the the community grow as more people join the fold.”

Fresh off a new site design, SPN’s mission is twofold. First, to intertwine local entrepreneurs in a organic support network that bolsters the entire business community by connecting ideas with talent, and second, to promote the zenith of Nebraska’s entrepreneurial scene on the national stage. While the first goal is off to a great start, the second, more ambitious task will take some doing.

“Part of what we’re doing is just facilitating a discussion, just trying to put ‘startups’ and new ‘technology’ on people’s tongues when they’re talking about Omaha, because that isn’t really the case,” Davidson said. “How do you put Lincoln, Omaha, Iowa on the national radar? Right now, we’re trying to take some of the best success stories, use the best ideas, the best interviews, the best content that we have and push that out to a larger audience, really put us on the map.”

Big Omaha - May 13-15 2010

In the meantime, Silicon Prairie News is devoting its energies toward preparing for Big Omaha 2010, a summit that will attract business innovators and startup gurus from around the Midwest. As SPN’s traffic steadily improves, so does its resolve to inform the world of the entrepreneurial whirlwind blowing through the Great Plains.

“We’re really excited with where things are heading,” Davidson said. “We started the site to promote some of those people hanging out in the shadows, so to speak, and to get their stories told.”

Matthew Wegener, president of the Turbine Flats board of directors and co-owner of the Turbine Flats building, said a community faces less risk investing in an entrepreneurial culture than spending economic development dollars trying to recruit a business from outside.  And local ownership and generation of wealth has long-term impact, he said.

“Those are the kind of people then that fund libraries and parks and things like that,” Wegener said. “But it takes investment from the community to help those people grow and become successful, and it takes failures along the way to learn from,” he said.

Creating such a culture takes time. You can’t make a few phone calls, get together and then have a startup culture six months later, Wegener said.

“It’s a continual work in progress,” he said.

Turbine Flats uses its Web site and Facebook page to promote entrepreneurial activities like networking events, workshops and contests in the area and to provide information on national small business trends.

In addition, Turbine Flats co-sponsors events like the Creative Capital Pitch Session, an “elevator speech” contest held at the building last fall, and Ignite Lincoln, a community speaker event planned for April. Turbine Flats has opened its building to nonprofit and community interests such as arts awards and displays, a straw-bale house building presentation, university business class tours and independent filmmaking.

Turbine Flats wants to renovate more of the building so it can house more businesses. Colby Thomson, Turbine Flats co-founder and board vice president, said an additional benefit of the expansion would be more space for community events.

Turbine Flats also wants to develop a seed fund to help early-stage businesses create proofs of concept.

Wegener said they’d like to work with the investment community to develop investment models tailored to businesses that target specific trades or narrow markets.   These narrow “vertical niche”-market businesses tend to have less risk and need less startup capital than broad consumer market or social-media product businesses, he said.  And businesses requiring less risk and less startup capital fit Lincoln’s culture well, he said.

“Lincoln is a kind of mecca, especially on the software side, for vertical-niche markets,” he said.

However, this type of business tends to grow more slowly than those aimed at broad markets and therefore requires a different investment model, he said.

An investor in a consumer or social-media product company might expect another company to buy it for its large social network. But this exit strategy doesn’t work for vertical-niche market businesses. Instead, Wegener said, a tiered investment strategy that moves vertical-niche market businesses from stage to stage with exits at each stage would benefit those businesses and their investors.

Wegener’s interest in entrepreneur-community building is based on his personal experience starting ISoft Data Systems. He knows what it’s like to be a lonely entrepreneur.i

“When I started ISoft, I had an office clear out in eastern Lincoln,” he said. “I was off my own and I didn’t know anybody and that was a problem.”

Eventually he rented an office suite near downtown Lincoln and sublet space to other startups. The businesses in the building started talking and exchanging ideas and became a support network for one another.

“It became obvious to me that there’s a desire to have a community where people are in the same stage in business life,” he said. “I started to see a lot of value in that myself.”

Three businesses from that original building and five others now share the Turbine Flat building, a renovated warehouse in an area sometimes known as the “research corridor” of Lincoln since it is between the University of Nebraska-Lincoln’s Beadle Center, Whittier Building and the planned Nebraska Innovation Campus.

Wegner said Lincoln’s lack of mountains and beaches shouldn’t hinder developing a thriving startup culture.

“If you have a community that draws the entrepreneurs and keeps the entrepreneurs, you don’t really need oceans,” Wegner said. “It’s do-able. It’s just really, are we here?  Are we ready to support them? Are we going to help them get through stage one to stage two and then to stage three? And are we accepting of all the color that comes out of it, so to speak?”