A lot has been written in the last week about the scandal at Canopy Financial, a venture-backed, high-flying start-up that attracted $75 million in capital at increasingly higher prices from top-tier firms, only to come crashing down in a dust of rubble and fraud. The VC community suffered a very similar scandal at Seattle-based Entellium last year, but few reporters seem to remember that one, perhaps because it wasn’t located in the heart of Silicon Valley as Canopy was.

Many of the VCs I’ve spoken to are frankly not surprised that these kinds of fraudulent schemes could have occurred. In truth, our industry is built on a trust model. We do our best to conduct due diligence on the team, market, strategy, technology, but at the end of the day many of these investment decisions get made in short periods of time (30-60 days) with incomplete information, particularly when a deal is competitive. Bandwidth-limited general partners and frenetic CEOs are under pressure to move fast and get things done, leading to rushed, sloppy work to secure the deals.

Indiana University is launching a new $10 million venture capital fund designed to spur the commercial development of in ... [Subscription Required]

At the World Newspaper Congress at Hyderabad this week Dow Jones CEO Les Hinton ?took on Google and used some strong language to stir things up. He called Google a digtial vampire and a parasite. He goes on to further bash the internet content Kleptomaniacs whose business model depends on purloining the expensive journalism of mainstream media (read more about what he said over here).

The issue that i want to highlight is what gives the Newspaper industry so much courage to take on Google (Rupert Murdoch: “I think we will remove our websites from Google’s search index”). Is it foolhardy or is it based on some statistics. So here is the rub. With the rise in social media the landscape has changed dramatically. In the same conference Associate editor of Daily Mirror, Matt Kelly shared why his company is relying less and less on Google SEO. According to Matt Kelly the traffic from Google Search is now much lower than what they are getting from referrals, bookmarks and Social Media platform like Twitter and Facebook.

The White House didn’t invite the firms that will create new jobs to its “job summit” — dominated by the CEOs of big firms, Ivy League economists, and union officials — because they weren’t available. Many of them don’t even exist yet.

Our economic gospel says that small businesses create most jobs, although size doesn’t matter as much as age. In a new study on job creation, the Kauffman Foundation found that “from 1980–2005, nearly all net job creation in the United States occurred in firms less than five years old.”

To access a copy of the Small Business Survival Index 2009 report, please click here.
To access the media release, which summarizes the report and state rankings please click here.

[The thumbnail at the right is acutally an interactive map.  It's available by using the link to the original article included below.  --ed]

As America struggles to get its mojo back as a preeminent center of innovation and thereby prosperity, metropolitan and national economic leaders would do well to study the case of Israel. Israel? Yes, Israel. As Dan Senor and Saul Singer make clear in their bracing new book Start-Up Nation, Israel is a country of just 7.1 million people that may well be the world’s top techno-nation, yet in a way that has huge relevance for those thinking about America’s renewal.

In the face of war, internal strife, and rising animosity from other nations, this embattled sliver of sun-baked desert has flourished as a technology hub. The country boasts the highest density of start-up companies in the world, with a total of 3,850 now operating at a rate of one for every 1,844 Israelis. In 2008, the nation attracted more than $2 billion in venture capital in 2008, as much as flowed to the U.K.’s 61 million citizens or the 145 million people living in Germany and France combined. And for that matter, some 63 Israeli companies were listed on the Nasdaq in 2009, more than from any other foreign country, including Canada, Ireland, the U.K., Singapore, China, or India. Nor have the wars Israel has repeatedly fought slowed the country down. Since 1995, Israel’s broader economy has grown faster than the average for the world’s developed economies. During this decade, the Israel’s share of the global venture capital market did not decline--it doubled, from 15 to 30 percent.

Two of my favorite scholars, Carliss Baldwin and Eric von Hippel, have bridged the Charles to team up on a joint manifesto pushing their related views on innovation. The paper is subtitled (or is it supertitled?) “Modeling a Paradigm Shift.” Here is the abstract.

In this paper we assess the economic viability of innovation by producers relative to two increasingly important alternative models: Innovations by single user individuals or firms, and open collaborative innovation projects. We analyze the design costs and architectures and communication costs associated with each model. We conclude that innovation by individual users and also open collaborative innovation increasingly compete with — and may displace — producer innovation in many parts of the economy. We argue that a transition from producer innovation to open single user and open collaborative innovation is desirable in terms of social welfare, and so worthy of support by policymakers.

Khalifa Fund for Enterprise Development, an entity established to support and develop small, medium and developed enterprises and Abu Dhabi University (ADU), announced the initial key note line up for the Abu Dhabi Innovation Forum, scheduled to take place on January 11th and 12th, 2010 at the Shangri La Qaryat Al Beri Hotel in Abu Dhabi.

The first round of confirmed headline speakers for the two-day conference - which has been specifically designed for local businesses looking to harness the power of innovation - includes Microsoft's Regional General Manager, Charbel Fakhoury; Global Head of Mobile Marketing for Procter & Gamble, Khurram Hamid; and Head of Strategy and Partnerships at Philips Research, Dr. John Bell.

Different perspectives on the definition of metrics for intelligent cities, reflecting the structure and measuring their performance, converge to a few building blocks of metrics (broadband connectivity and e-services, knowledge workforce and talent, innovation) outlining innovation and connectivity as core dimensions of intelligent cities.

The Intelligent Community Forum defines five factors that determine a community’s competitiveness in the Broadband Economy, which are success factors for Intelligent Communities in both industrialized and developing nations: (1) broadband connectivity, (2) knowledge workforce, (3) digital inclusion, (4) innovation, and (5) marketing and advocacy.

As I was chairing the first day of the Open Innovation Summit today, I was struck by something that many speakers acknowledged: Their companies converted to open innovation—relying on outsiders for their next products or services—only after falling into a crisis. Moreover, the panic struck most around the time of the previous recession in 2001, which suggests that we should start seeing many more open-innovation practitioners soon.

Among those that found religion a decade ago are Johnson & Johnson, Procter & Gamble, and Whirlpool. Others which came to open innovation more recently after moments of doubt are Rockwell Collins and the consumer-products unit of GlaxoSmithkline. As Cheryl Perkins, former chief innovation officer at Kimberly-Clark and now president of her own consultancy, Innovationedge, told us in her presentation: “Often open innovation starts with a burning platform.”

A couple of interesting studies came out this week that help us better understand the direction of entrepreneurship in our economy.

A study by Microsoft suggests the most of the new entrepreneurs today are either accidental entrepreneurs or at least not folks who had aspired to become an entrepreneur before the recession. The study found that about 70 percent of the respondents left their jobs to start their own businesses in the midst of the current recession.

The latest Global Entrepreneurship Monitor (GEM) report that looks specifically at the U.S. was just released by Babson College. It gives a very interesting snapshot of the real face of today's American entrepreneurs.

What determines whether a small business succeeds or fails? Well, we don’t have any definitive answers—yet. But the more we learn about this, the more it will help government officials create policies that better support small businesses. With that end in mind, the Kauffman Foundation has just released a new study, The Making of a Successful Entrepreneur, which offers insight into what successful entrepreneurs believe most affects the success or failure of a startup business.

The survey polled 549 founders of successful businesses in high-growth industries, including aerospace, defense, computing, electronics and health care. Here’s what they said:

If you want to start strong, steer clear of these funding fantasies.

Raising venture capital financing--as a first-time founder in particular--is a difficult task, even in the strongest of financial markets. At a recent conference, a panelist opined that over 95 percent of entrepreneurs decide not to raise venture capital. The response from another panelist: "Just like over 95 percent of my friends have decided not to date supermodels." Knowing what to expect can often be half the battle. The following are a few common misconceptions entrepreneurs often have when seeking early-stage venture capital financing.

When one thinks of states with entrepreneurial hotbeds, North Dakota probably doesn’t come to mind. After all, the Peace Garden State is the third least populous state in the U.S. and located in what’s often called “flyover country.”

But the government there is hoping to stir up entrepreneurial activity, recently passing a law that extends a sizable 45% tax credit to angel investors who back homegrown businesses.

Bendis had an opportunity to convene with Global Innovation leaders yesterday in NYC, and is proud to have been added to the Entovation E-100.

The timing could NOT be more important. Worldwide, it is clear that INNOVATION is the pathway to progress – especially necessary in the current economic meltdown. People are no longer asking “If”; they are asking “How”. Fortunately we have some of the answers to those questions finally being asked.

Now we – as members of a Knowledge Innovation community – have a responsibility to build some symbiosis among our own insights and make a contribution to the world dialogue. Few enterprises (or networks) have coalesced such global expertise of theorists and practitioners on innovation measurement on the micro-, meso- and macro-economics levels.

[E100 Alert] En Route to the New York – Agenda Shaping and Logistics

Venture capitalists have formed a foundation to stoke entrepreneurial fire among young people in New England cities.

Technology Underwriting Greater Good, founded in October by Hemant Taneja, partner of General Catalyst Partners, Jeff Fagnan, partner of Atlas Venture, and Dana Samuels, Atlas’s head of investor relations, intends to raise about $200,000 in donations in the next 12 months to fund fledgling organizations that help young entrepreneurs.

RALEIGH, NC - North Carolina plans to start an equity fund to invest in state-based companies, says State Treasurer Janet Cowell.

At Cowell's request, the state legislature gave her more room to manage state pension fund investments permitting her to start the Innovation Fund.

The fund will invest up to $250 million in companies with "significant operations" in North Carolina.

Cowell's office is palns to name the investment firm that will manage the fund next week.

A new survey suggests executives are overwhelmingly looking to innovate their way to new success--and hints at how they can do it.

After the worst recession in decades, companies are not just relying on incremental change to jump-start their businesses and drive growth. Rather, they're working to develop breakthrough business models. According to a global survey the consulting firm PRTM recently conducted with 65 senior executives in diverse industries, real change to the business model is becoming popular.

In the past only a few companies experimented with new business models. IBM ( IBM - news - people ), for example, began bundling office products and services in the 1990s to provide customer solutions. And everyone knows how Apple ( AAPL - news - people ) developed iTunes to drive the sale of iPods. By and large, however, companies have followed tradition by focusing on trying to develop the next great product within their existing lines. All that is about to change.

Can a new government fund to boost investment in innovative start-ups actually help Britain's beleaguered economy, asks Simon Wilson?

What's the new fund all about?
The UK Innovation Investment Fund (UKIIF) will be "bigger than other European venture capital funds", claims the science and innovation minister, Lord Drayson. The aim is to make it easier for start-ups in key sectors, such as life sciences, low-carbon technologies and digital and advanced manufacturing, to get access to equity funding. The new fund will help British scientists and entrepreneurs convert their ideas into flourishing businesses. Once a management team is in place (the government is currently considering tenders) UKIIF will operate as a 'fund of funds', channelling money into other venture capital funds and thus, it hopes, fostering "a climate of innovation and enterprise in the UK and Europe".

Seeking to create a new generation of home-grown venture capitalists in Michigan, a state economic development panel is looking to start a pre-seed capital fund to mentor and support young investors.

Citing the pressing need for more early-stage capital in Michigan, and the inability to fully fund another business-plan competition next year, the Michigan Strategic Economic & Investment Committee is planing to create an “accelerator fund” that would foster new venture investors and entrepreneurial talent throughout the state.