Spencer Trask Blog

1 TRILLION hours each year. That’s the amount of free brain time Clay Shirky, author of ‘Cognitive Surplus’, says is available annually within the world’s educated population.  Our challenge lies in understanding how to leverage the connected world and draw upon our natural human instincts to create and share – to do something vs. doing nothing.

We’ve all played a part in social media’s transformation of society from passive consumers (spending nearly a quarter of our free time in front of the TV) into active participants (think back to Time’s Person of the Year: You).  As a global technology-oriented community, we’ve turned the contributions of millions of people into the behemoth we all know as Web 2.0.  As consumers, we’ve forced businesses to give up their monologues in place of open dialogues with customers, suppliers, and partners.

This has lead to a fundamental shift in how businesses operate and innovate. And it’s just the beginning.  From P&G’s Connect + Develop approach in product development to IBM’s Smart Cities Initiative, companies are increasing their transparency and giving voice to consumers/customers/suppliers/outsiders.  Businesses that fail to see the value and embrace open collaboration are going to be left in the dust.

Successful ventures know the importance of open innovation and collaboration; intellectual diversity can be critical to a start-up’s success. A Harvard research study showed that complex problems are often solved by groups of people with expertise that is six disciplines away from the original focus of the problem.

One of our recent ventures, InnoCentive, has scaled the open innovation approach in the scientific R&D realm by leaps and bounds.  The company’s online platform publishes very specific challenges to its community of engineers, scientists, and innovators – drawing upon their diversity, engagement, and Cognitive Surplus to find the uniquely prepared mind with the solution.  Boasting a 50% solve rate, the company has formed strategic partnerships with NASA, Nature, SAP, The Economist, Rockefeller Foundation, GlobalGiving, and others.

As business builders, our vision at Spencer Trask is to leverage these collaborative tools and practices to accelerate new venture development and innovation while providing the unprecedented transparency that our investors demand.

So how can we leverage the Cognitive Surplus of our network to create value?  We believe the answer is in providing opportunities which allow direct investor participation: bringing transparency to business building, giving a voice to investors, and letting them influence and engage with their investments.  This can transform a community of passive investors into engaged and active participants in the value creation process.

Our objective is to attract the right community of sophisticated investors, business leaders, and entrepreneurs and tapping into their “free brain time” to connect channels of influence and catalyze venture development. While this has always been our philosophy and practice, even before the days of Web 2.0, we look forward to deploying the new tools and platforms that can truly lead to game-changing innovations.

72 days later, the BP oil spill remains a severe economic and ecological threat along the Gulf Coast, and the problems continue to mount. There are tropical storms to worry about, animals to rescue, industries to save, and  several reports now focusing on the oil’s interaction with the region’s ‘dead zone.’ Will it exacerbate the problem? Will the dispersants shrink the dead zone? No one really knows yet. But at least it is shedding more light on this environmental disaster that has grown to the size of New Jersey.

The growth of the Gulf’s dead zone, the largest on record, continues a decades-long trend, threatening the fishing industries as well as the ecosystem. Fertilizers, animal waste, and sewage from the midwestern states feed increasing levels of nitrogen and phosophorous into the Mississippi River, which in turn dumps into the Gulf of Mexico. These chemicals create algae blooms and deprive the natural ecosystem of essential oxygen and create an uninhabitable ecosystem and disrupt the local industries.

Each winter the dead zone all but disappears. It’s the summer melting and flooding of the Mississippi River that washes a new supply of tainted water into the ocean, each year expanding the zone to the previous year’s size — and then some. But if we decrease levels of output and filter the contaminates before their introduction to the Gulf, we could substantial reduce the size of the dead zone and its staggering ecological impact.

Today New York City took steps to significantly lower its nitrogen output — announcing a signed contract with ThermoEnergy to deploy a state-of-the-art ammonia recovery system at the Wastewater Treatment Plant in Jamaica Bay.  Improving the health of Jamaica ‘Dead Horse’ Bay and saving the ecosystem’s dying saltwater marshes has been a top priority under Mayor Bloomberg’s Jamaica Bay Watershed Protection Plan.

Activists have been demanding improvements to the damaged bay, which has lost over 70% of its marshland in the last half century.  The bay spans over 25,000 acres of water and land across Brooklyn and Queens, has 4 water treatment centers, and dumps 45,000 lbs of nitrogen into bay each day.  ThermoEnergy’s CASTion Ammonia Recovery Process is reported to prevent 2.4 million pounds of ammonia (a major source of excess nitrogen in the U.S. waterways) from entering Jamaica Bay each year.

ThermoEnergy reports its process of BioCAST draws 85% of the nitrogen out of the water – a solution suitable for “municipal and industrial wastewaters, landfill leachate, agricultural wastewater and many other high strength waste streams” — the very contributors to the  creation of dead zones. “The BioCAST process has the potential of treating high volumes of water with a small footprint (approximately 1/6 that of a wholly biological process) and high efficiency significantly reducing the costs of nitrogen reduction as well as reducing the emission of nitrous oxide, a green house gas.”

Honored earlier this month as a Top Innovator in Global Water Technology, ThermoEnergy’s resource recovery solutions work with local water treatment facilities as well as agricultural drainage systems — filtering out clean, reusable water and converting the captured ammonia into concentrated ammonium sulfate, a commercial grade fertilizer.

Thousands of tons of nitrogen, in the form of ammonia, are being discharged into local waterways everyday by wastewater treatment plants throughout the US and around the world — contributing to the global expansion of dead zones. We need more sustainable and efficient solutions to the “public enemy number one” within the wastewater treatment industry.  As an increasing amount of attention is focused on water contamination and growth of the dead zones, eco-conscious solutions like these will begin to steer our output back to sustainable levels.

President Obama recently asked lawmakers to schedule an up or down vote on healthcare legislation in the next few weeks. He reinforced in remarks at the White House, “We have debated this issue thoroughly, not just for a year, but for decades.”

At Spencer Trask, the topic of health care reform is particularly meaningful, and we’re inspired by a company we co-founded called Health Dialog, as it relates to the Health Care issue. The potential impact of this small company on the giant health care industry should not be underestimated. It began in 1997 as a vision driven by truth, knowledge and the power of informed decision-making for individuals, and achieved a sale in Q4 2007 to Global Healthcare Management provider BUPA (British United Provident Association), the biggest private health insurer in the United Kingdom, in a $775 million deal.

Health Care and Infinite Returns – Beyond the Financials

We see this story as an embodiment of our commitment to companies that aim for delivering what we call “infinite returns”. By infinite, we mean going beyond mere financials to a “higher-order” positive global impact.

Health Dialog put into practice the research of Dr. John Wennberg, a previously unknown visionary. Health Affairs magazine recently named Wennberg “the most influential health policy researcher of the past quarter-century.” Using his Comparative Effectiveness Research (CER), and data on Empowered Patient Decision-Making and Evidence-Based Medicine, Health Dialog’s game-changing health care management and delivery strategy proved to simultaneously drive-down costs while dramatically improving patient outcomes and satisfaction. In an October 2008 New York Times interview, Wennberg’s “Annals Of Internal Medicine” landmark study results were echoed:

“30 percent of care rendered today, according to some studies, is unnecessary, redundant and, in some cases, even harmful. We need to get waste out of the system. That means $700 billion in a $2.4 trillion system.”

The Blue Cross Blue Shield Association insures 102 million Americans — one in three people — and has networks that include 90 percent of the nation’s providers and 80 percent of its hospitals. Their experience is illustrative for change on a National scale.

Health Dialog has created an inspiring template for wide-scale impact on the world that could potentially make a positive impact on the life of every human being in our county. The impact Health Dialog realized for their stakeholders, customers and partners is the type of return that sets Spencer Trask apart from traditional venture firms. We are uniquely committed to the realization of a mission without typical constraints of “traditional” VC firms. Social entrepreneurism and corporate social responsibility have recently become enticing buzz-words, but the concepts are not new to Spencer Trask – they are the essence of our organizational DNA and what drives us to propel the success of ventures in our portfolio.