Newsflash: Business School Professors Wrong, Delaware is Not Always the Answer

I’m working on incorporating a start-up and I discovered something very interesting, Delaware is NOT necessarily the best place for initial incorporation of your start-up.   If you are profitable, public corporation, Delaware is almost a no brainer.  However, there is no tax liability associated with moving to Delaware and most start-ups are not profitable or public.

Being incorporated in Delaware adds complexity and several fees and expenses that you might not incur when incorporating in your home state.  Especially if your state follows the model corporation act, you might consider incorporating there.  If you are not profitable, the corporate income tax rate of your state is irrelevant, you save a bunch of fees, the complexity of having registered agents, and having to qualify as a foreign corporation in your state.

The advantages of being in Delaware are in legal provisions that only apply once you have many classes of stock, the taxes on profits once you have them, and the power of officers and directors, particularly once the corporation is public.  None of these matter if you are pre-seed stage and may not matter at all until an IPO.  If the VCs demand that you be a Delaware corporation, okay, no big deal it can get done in less time than it will take them to finish their paperwork, but in the meantime, you’ve saved some money and most importantly some headaches of dealing with a state that is constantly trying to put its hand in your pocket.

I had been told by several entrepreneurship professors that Delaware is the only choice for incorporation of a start-up.   I was surprised to learn that this is not necessarily the case.  Others seem to think so as well.  Pass it on and consult with your counsel to  make a decision that is right for your circumstances.

Hizook 2011 Notes

Be on the look out for a forthcoming analysis of the Hizook 2011 VC in Robotic List on Hizook about the funds that invest in robotics.   I’m publishing my research notes here so they don’t foul up the article.  Most of this was sourced from company websites, CrunchBase, local media, or whatever I could find using Google with my limited attention span, I think I even remembered to cite a few as I was making this.

The only thing I’d really like to call your attention to, dear reader, is the complete lack of transparency in the private markets.  You’ll see that there are places I could find a round, or an amount, or fund but nothing else.  A lot of the poor citation is me trying to find a better source.  Private transactions have no organized data so if this can be the faintest candle for finding funding for robotics, then I’ve done my job.

As always, I’d love feedback.  I’m hungry for data!

What cluster does a company with HQ in Boston but more offices in Silicon Valley belong to?

I’ve got more comprehensive data on public robotics companies due to some updates suggested over at hizook.  However, I’m at a loss as to how to classify Brooks Automation and Cognex.  They both make automation components for various kinds of industrial applications and they both have corporate HQ outside of Boston with two offices each (probably the legacy of acquisitions) in Silicon Valley.

At a loss as to how to classify them, I’ve made a new category for them on my charts.  If you have thoughts about how to get good acquisition data–especially as a lot robotics companies can be acquired in a transaction that is ‘immaterial’ to a 10-K/Q for public company–I’d love to hear them.

And here is the raw data.  Not all market caps were taken on the same day.

East Coast Chauvinism in Robotics: Time to Face Facts, Silicon Valley is Kicking Our Ass

A cleaned-up version of this article became my first post on Hizook.  http://www.hizook.com/blog/2012/06/25/east-coast-chauvinism-robotics-time-face-facts-silicon-valley-kicking-our-butt#comment-971

_______

I have lots of love for Pittsburgh in particular, but it really pisses me off when people on the East Coast repeat a bunch of falsehoods (See #8) about how Boston and Pittsburgh compare to Silicon Valley and the rest of the world.  Many people in Pittsburgh and Boston—including people I call friends and mentors—smugly think that the MIT and CMU centered robotics clusters are leading the world in robotics.  This is demonstrably false.

If leadership in robotics means forming companies, making money, or employing people, then Silicon Valley is crushing everyone—no matter what the Wall Street Journal editorial page says about their business climate.  I’ve previously published an analysis of the Hizook 2011 VC Funding in Robotics data that shows that the Valley gets 49% of total VC robotics investment worldwide.

I’d now like to add an analysis of U.S. public companies (see bottom of the page).  Basically, the ‘Pittsburgh and Boston are the center of the robotics world’ story is even more ridiculous if you look at where public robotics companies are located.  Silicon Valley is crushing the other clusters in the U.S. at creating value in robotics and in building a robotics workforce in public companies.  (A forthcoming analysis will show that this true worldwide and if you include robotics divisions of public companies not principally engaged in robotics such as Boeing and Textron.)

77% of the workforce at public robotics pure plays is in Silicon Valley companies.  An astounding 93% of the market capitalization is headquartered in Silicon Valley and even if you exclude Intuitive Surgical (NASDAQ:ISRG) as an outlier, the Silicon Valley cluster still has twice as much market capitalization as Boston.

The public companies that I deemed to meet the criteria of being principally engaged in robotics, that they had to make and sell a robot, and not have substantial value creating revenues from businesses not related to robotics are listed in the table below.

The one company that I believe might be controversial for being excluded from this list is Cognex (NASDAQ:CGNX).  However, while trying to do decide on whether to include them, I found their list of locations.  They have three locations in California including two in Silicon Valley.  That means that this ‘Boston’ company has more offices in Silicon Valley than in Boston.  I’m not an advanced (or motivated) enough analyst to find out what the exact employee breakdown is, but combined with the fact that they make vision systems and supply components rather than robots, I elected to exclude them. I acknowledge that a similar case could be made about Adept (NASDAQ:ADEP) that just made a New Hampshire acquisition, but I have decided to include them and count them towards Silicon Valley.   I do not believe that either of these decisions, substantively impact my finding that Silicon Valley is the leading cluster when it comes to public company workforce and value creation.

I’m hoping the people who are spreading the misinformation that Silicon Valley has to catch-up to Boston and Pittsburgh will publish corrections.  I believe that this is important, particularly because I want to see Pittsburgh reclaim its early lead in robotics.  So many robotic inventions can trace their heritage back to Pittsburgh, it is a real shame that Pittsburgh has not used this strength to create the kind of robotics business ecosystem that one would hope.

It is impossible for communities to take appropriate action if they do not understand where they stand.  I hope that this new data will inspire the Pittsburgh community to come together and address the challenges of culture, customer access, and capital availability that have been inhibiting the growth of Pittsburgh’s robotic ecosystem before they lose too many more aspiring young entrepreneurs—such as me—to the siren song of California.

Company (1) Ticker Employees (2) Market Cap $M (3) % of Employees % of Market Cap Robotics Cluster
Accuray NASDAQ:ARAY

                   1,100

  463

20%

2%

SV
Adept NASDAQ:ADEP

                       183

43

3%

0%

SV
Aerovironment NASDAQ:AVAV

                       768

  577

14%

2%

SV
Hansen NASDAQ:HNSN

                       174

 135

3%

1%

SV
Intuitive Surgical NASDAQ:ISRG

                   1,924

  21,840

36%

88%

SV
iRobot NASDAQ:IRBT

                       619

  606

12%

2%

BOS
MAKO Surgical NASDAQ:MAKO

                       429

  1,110

8%

4%

Other
Stereotaxis Inc. NASDAQ:STXS

                       171

 13

3%

0%

Other
Total

                   5,368

24,787

100%

100%

(1) Companies are U.S. public companies that have been identified by Frank Tobe’s or my own research as principally engaged in robotics
(2) Employee Count as of Last 10-K Filing
(3) Market Capitalization as of 6/24/2012

Who are the top 20 academic roboticists?

In trying to compare the clusters, one of the most important and difficult to measure factors is the quality of the academic pipeline in each of the three clusters.  I thought about looking at patent filings, but that seems too hard and not truly indicative enough of what we are trying to measure.

A single lab, without a single patent could potentially blow the doors off company formation and economic impact in robotics.  I’d like to propose a different measure, the top 20 (or some other number) roboticists in academia… then lets see where they are and where their knowledge is creating value.  On the Pareto principle, we expect most of the useful output to be from the top researchers.  Also, I’d like to call attention to the fact that I don’t have criteria for what makes a researcher “top.”  I promise it is less trying to curry influence than the RB50, but I fully admit to not having the full insight especially into Boston, Japan, and Switzerland.

So here’s the start of my list in no particular order with blatant bias towards CMU:

Sebastian Thrun; Stanford; http://robots.stanford.edu/ Corporate Work and Spinouts: Google Car, Google Glass, Udacity

Red Whittaker; CMU; http://www.ri.cmu.edu/person.html?person_id=339 Spinouts: Red Zone Robotics, Astrobotics

Rodney Brooks; MIT; http://people.csail.mit.edu/brooks/index.html Spinouts: iRobot, Heartland Robotics

Henrik Christensen; Georgia Tech; http://www.hichristensen.net/ Non-spinout: National Robotics Initiative

Homayoon Kazerooni;  UC Berkeley; http://www.me.berkeley.edu/faculty/kazerooni/ Spinouts: Ekso Bionics (Formerly Berkeley Bionics)

Rich Mahoney; SRI; http://www.sri.com/news/expertsources/mahoney.html License Arrangements: Intuitive Surgical, others

Sanjiv Singh; CMU; http://www.ri.cmu.edu/person.html?person_id=290; Spinouts: Sensible Machines

Hagen Schempf; CMU; http://www.ri.cmu.edu/person.html?person_id=267; Spinouts: Automatika (Acquired by QinetiQ-North America)

Howie Choset; CMU; http://www.ri.cmu.edu/person.html?person_id=47; Spinouts: Medorobotics

Behrokh Khoshnevis; USC; http://www-bcf.usc.edu/~khoshnev/; Spinouts: Contour Crafting

Who is on the federal dole in robotics? Texas?!!

I just posted my rankings for federal support of the robotics/unmanned systems industry in each of the three clusters.  What was really striking is how if you are in defense robotics, you actually probably don’t want to be in one of the clusters, but in the DC/MD/VA area–no surprise there.  However, if you want to win big in space robotics contracting you want to be in Texas.  Their space contracts that hit the search term robotic are about equal to everyone else’s robotic and unmanned contracts put together.  That’s pretty rich considering who the Great State of Texas send to D.C. and their fondness for research funding.

Off my soapbox, I’m going to call this one for Boston between the clusters.  They have done the best at least according to this crude metric, but as I note in my comments on the cluster summary, I would be willing to revise my methodology for comparing government investment if someone can propose a better method.  I would be particularly interested in focusing on basic research grants.  Comments public or private are welcome.

Needless Deaths

Fire season has just begun this year and already there have been two needless deaths that can be attributed to the FAA and Forest Service’s failure to embrace unmanned and robotic technology.  There is absolutely nothing about the fire reconnaissance mission or the tanker mission that cannot be done better, cheaper, and more safely by an unmanned aircraft.  These men did not need to be in that plane.

The crazy thing about it is that the Forest Service/BLM incident commanders are some of the few people in North America that can actually tell the FAA to go pound sand.  They get to put up a TFR (Temporary Flight Restriction) over their fire and they control all air traffic in the TFR.  Wildfire response crews do not do any night operations because it is considered too dangerous for them to fly at night.  Still, the powers that be have not allowed unmanned aircraft to play a substantial role in firefighting despite successful demonstrations in 2008.

My most sincere condolences to the families of these men.   They are exactly the kind of people that we need more of in society–people that will take risks to protect us all.  We–as a country and a society–are literally killing these people with our failure to embrace unmanned and robotic technologies.  I don’t want to be unsympathetic to the difficulties of change in government organizations and the good work that I’m sure the employees at Forest Service and BLM are doing, but when we’re making widows and orphans with our crappy policy, we all need to step up to the plate to take action to change it.

If I were the U.S. Congress I would:

1)   Call in the FAA, Forest Service, and BLM and tear them all a new one for their foot dragging on unmanned aircraft.

2)  Mandate the conversion of the whole tanker and most of the fire reconnaissance fleet to unmanned aircraft within 5 years.

3)  Direct the Forest Service and BLM to provide unmanned aircraft support at night in the TFRs to incident commanders this fire season.

4)  Give the BLM and the Forest Service some money to do this.  One of the main problems with wildfire firefighting is that there is a negligible advance procurement budget, but a nearly unlimited budget for reimbursement of labor to fight fires.  This is not a good deal for the country, spend a little bit in advance and lets save lives and money next fire season and every season thereafter.