2010 COMMUNITY REPORT OPPORTUNITIES REALIZED

2010 IMPACT HIGHLIGHTS

177 companies assisted with IW business assistance and/

or financial resources

81 companies received IW funding

452 jobs attributed to IW assistance

4,684 total employment at IW-supported companies

$4.6 mil invested by IW in technology companies

$775 mil revenues at IW-assisted companies

27 companies received IW seed investment

$193 mil follow-on funding raised by IW seed fund

companies

25 IW seed fund companies raised more than $1 million

in additional investment

73% of all venture deals in the Pittsburgh region went

to IW portfolio companies

$52,000 average annual salary at an IW‑supported company

74% IW companies that offered or planned to offer

their intern a job
 2010 COMMUNI TY REPORT

REALIZING OPPORTUNITIES
Entrepreneurs are optimists by nature. At Innovation Works, so are we. We believe our startup
technology companies have the power to change the economic landscape of Southwestern PA.
Last year, despite incredible odds caused by global economic pressures, our companies grew at
an amazing rate. By just about every metric, IW-supported companies saw gains in 2010 in jobs
created and retained, funding, revenue and other areas we track. In this year’s Community Report,
we present the far-reaching impact of the entrepreneurs we are privileged to support.

In 2010, Innovation Works provided funding to 81 companies and supplied business assistance to
a total of 177 regional, innovative companies. Though a challenging climate for our state budget
has meant a 42% decrease in IW’s core funding over the past three years, we were able to maintain
our high levels of resource support for entrepreneurs thanks to additional funds from foundations,
the federal government and other sources. Given the decrease in base level funding, Pennsylvania’s
dedicated financial support for startups in energy and clean technologies has been especially
important and allowed Innovation Works to invest $1.2 million in 11 energy-related companies in 2010.

As you read about the milestones our companies reached last year and the examples of our companies’
growth, you’ll see that 2010 was a year of opportunities realized. For example, our companies’
cumulative revenue was $775 million. Total follow-on capital raised in 2010 was a record
$193 million — a level that outpaced the nation’s year-over-year increase of both angel
and venture capital. And total employment at IW partner companies reached more than
4,600 employees with an average annual salary of $52,000.

What’s in store? Look for even greater investment and activity within our energy
portfolio in 2011. As part of the Energy Alliance of Greater Pittsburgh, we are working
to make more linkages occur between researchers, corporate partners, financing
opportunities and entrepreneurs. Also, we expect greater impact on university
technology commercialization as a result of our work with Carnegie Mellon as
part of the i6 Challenge (read more about it on page 6). And finally, our companies
are tackling some of the world’s greatest challenges: clean water, energy efficiency
and curing Alzheimer’s and other diseases. These companies and those creating
products for businesses and consumers are changing the way the world views our
region. Look for the outpouring of publicity generated by our companies as they
innovate, grow and realize their potential. We’re very proud to be part of their success.

Rich Lunak, CEO Ron Bianchini, Chairman

1
Towe r C a re
TowerCare Technologies started in 2003
by developing patient management software
for the hospice care industry. Before the team
wrote a single line of code, they put together
a focus group to understand what the industry
needed. They discovered that the non-profit
hospice industry really wanted help managing
donations and related activities.

From these insights, TowerCare developed

DonorPro, a software application that
helps all types of non-profits raise more
money, operate efficiently and communicate
effectively with donors. On average,
organizations using DonorPro see a
40 percent increase in staff productivity
and a 35 percent increase in annual
donations. The company now has more
than 500 non-profit clients worldwide.

Innovation Works’ initial $100,000 investment

funded a pilot study that allowed TowerCare
to validate its sales methodology. Over the
years, the company has received $600,000
in IW investment along with invaluable
business assistance from the Entrepreneurial
Services team. For example, when it was time
for TowerCare to raise their first round of
outside funding, an IW executive-in-residence
helped the CEO develop investor pitches
and business plans and introduced TowerCare
to a number of angel investors who participated
in the round.

“With our sales methodology

validated using the first
investment from Innovation
Works, we’ve experienced
continuous growth. We still
use the IW team as a
sounding board for many
business decisions.”
Donna Myers, President & CEO

2
 ENTREPRENEURIAL SERVICES 2010 COMMUNI TY REPORT

Business Mentoring From Concept to High Growth

When Innovation Works first engages with a company,
the entity is typically at the prototype stage and has
roughly four people working on the team. It’s a rare
entrepreneur or startup team that has or can afford the
range of expertise needed for success.
Innovation Works fills in these gaps with internal
experts and outside advisors who help entrepreneurs
commercialize their technology, enter the market
successfully and grow. The IW Entrepreneurial Services
team is made up of experts who have walked in the
shoes of our entrepreneurs and is comprised of former
entrepreneurs, investors and executives responsible
for product and business development, marketing,
operations and human resources. They augment their
own expertise with trusted mentors from the community
and elsewhere who offer additional insight, contacts
and guidance to our startups.
Talent is a Company’s Greatest Asset
Attracting and retaining the best technologists,
executives and team members is essential to moving
a startup forward. Companies need a staffing structure
and human resources plan that fit their immediate
needs and lay the foundation for anticipated growth.
IW’s Strategic Human Resources program helps find
the right talent for our companies at the right time.
Our in-house HR strategist also provides coaching and
a broad array of strategic services to help companies
drive higher performance from their employees.
The program has placed more than 100 key hires in
more than 40 technology companies in critical positions
such as VP of sales, Chief Financial Officer, specialized
technical positions and more.
IW also provides grant funding to employ interns
at early-stage technology companies and small
manufacturers in the region. Interns provide business
assistance, engineering talent or other technical
support. In 2010, IW placed 62 interns from 22 colleges
at 47 regional startups and small manufacturers.
The match is beneficial for both the companies and
the interns; 74 percent of companies in 2010 had
already hired or planned to offer their intern full-time
employment.

Prope l IT
Commercial truck manufacturers spend hundreds of millions
of dollars annually wringing an extra half a percent of fuel
efficiency from their engines. But once a driver gets behind
the wheel, driving behavior can influence fuel efficiency
by 35 percent or more. Propel IT is addressing this with
technology that tracks driver habits and provides incentives
for those that promote fuel efficiency.

Propel IT has received investment and EIR mentorship from IW.

They also took advantage of IW’s Human Resources capabilities
through which they found their Chief Technology Officer, a critical
team member with a background in diesel engine optimization.

According to CEO Anthony Lacenere, one of the company’s pilot

customers saved $500,000 in fuel costs in a single quarter thanks to
Propel IT’s innovative technology. And with results like that, the company
is roaring into high gear.

3
 FUNDING FOR STARTUPS

Attracting Capital to the Region

National trends in venture investment in 2010 point
sharply to the need for Innovation Works’ seed
capital. Though there was a general rise nationally
in venture investments, the only stage of
development to show a decline was in seed-stage
investing. Less than eight percent of the nation’s IW SEED FUND INVESTMENTS BY TECH SECTOR
venture dollars went to this earliest stage of
enterprise in 2010.
25% Information
The low level of private investment in startups Technology
nationwide is the reason why Innovation Works’ Life Sciences
seed fund is so critical. Where private sector
Advanced
investment is scarce at the seed-stage, Innovation 1 1%
Electronics
Works made 27 investments in 2010. On average, 53% Advanced
these portfolio companies are still two years away 07% Materials
from receiving venture capital. Robotics
04%

Once Innovation Works makes an investment in a new

portfolio company and works with the company’s
The Innovation Works portfolio mirrors the technology sector
leadership as an active mentor and advocate, IW
strengths of the region’s universities, corporate community and
companies beat the odds at gaining follow-on overall talent pool.
funding from private funding sources. Even
in the tough economic conditions of 2010, 25 of
our portfolio companies raised more than $1 million 2010 FOLLOW-ON FUNDING FOR IW SEED
in additional funding. Overall, the IW portfolio FUND COMPANIES

companies raised $193 million in follow-on financing Venture Capital $ 42,172,000

in 2010, a significant increase over the previous year. Angel $ 64,672,485
Corporate $ 98,2 1 0,000
The IW portfolio is a magnet for outside capital.
Federal $ 10,668,21 1
Since the IW seed fund began in 1999, the portfolio
Commercial Lender $ 4,1 75,000
companies have attracted more than $1 billion in State and Other Economic Development $ 2,639,542
follow-on funding. In fact, IW’s portfolio companies Total $ 222,537,238
are so attractive to venture capitalists that 73% of all
2010 was a banner year for follow-on funding for the IW portfolio.
venture capital investment in Southwestern PA tech
Our seed fund companies raised more follow-on capital from
companies over the past three years went to private investors than ever before.
companies initially seeded by Innovation Works.

4
 2010 COMMUNI TY REPORT

Kn op p B i o s ci e n ce s
Knopp Biosciences licensed a molecule discovered at the University of Virginia
in the hopes of finding a new treatment for ALS, also known as Lou Gehrig’s “In the early phases of
disease, a universally fatal neurodegenerative disease that affects more than our development, we
25,000 people in the U.S. Innovation Works provided crucial early stage
development funding to help Knopp get its work to a point that would interest
had compelling science
other investors. IW also assisted Knopp in developing its investor pitch and but very little data
operational plan, which helped them raise approximately $20 million in venture demonstrating that our
capital to develop manufacturing methods and, later, another $20 million to
fund the drug’s Phase 1 and Phase 2 trials.
compound might be
effective in treating
The encouraging results of these trials caught the attention of Biogen Idec,
a top-five global biotech company. In August 2010, Knopp and Biogen signed ALS. A well-timed and
an exclusive, worldwide license agreement worth $345 million that includes thoroughly reviewed
funding of Phase 3 development, regulatory approval and commercialization,
investment by Innovation
and equity. The licensing agreement was one of the largest pharmaceutical
deals in the country in 2010. Works played a vital
Knopp now has a staff of 16 and is increasing its investment in research for
role in providing the
other treatments for ALS as well as for other neurodegenerative diseases. resources we needed to
This continued growth is creating more jobs in the Pittsburgh region, drawing
reduce risk and advance
attention to Pittsburgh as a biopharmaceutical center and affirming the value
of state-supported biotech investments through our technology.”
organizations like Innovation Works. Tom Petzinger,
Executive Vice President,
Business Development & Public Affairs

5
 CONCEPT-STAGE SUPPORT

Turning Ideas into Viable Companies

It takes capital and a lot of specialized resources to move an innovation
out of a university or other research setting and into a viable startup.

For concept-stage technologies and entrepreneurial startups coming out

of universities, IW’s University Innovation Grant (UIG) program helps turn
these technologies into viable companies. The UIG Fund provides grants
of up to $25,000 to universities to answer fundamental questions regarding
the commercial potential of promising research, including market research,
business case validation, intellectual property freedom-to-operate analyses
and validation of technical feasibility through prototype development and
applied research activities. Innovation Works also provides similar grant
support to concept-stage companies so a determination about market
potential can be made.

For concept-stage and startup companies in software, web, mobile and

entertainment technologies, IW offers funding and services through its
AlphaLab accelerator. AlphaLab holds two 20-week sessions per year, with
up to six companies participating in each session. During the 20 weeks,
companies receive $25,000 in seed investment and are provided with office
space, education sessions, hands‑on business guidance and connections
to the entrepreneurial and investor community. The cycles culminate with ALPHALAB: ONE OF THE
a Demo Day where companies launch their products to a standing-room NATION’S TOP ACCELERATORS
audience of investors and other stakeholders. Over three years of operation, AlphaLab
has attracted more than 500 applications
In 2010, a partnership between IW and Carnegie Mellon University was from entrepreneurs in 35 states and
seven countries interested in starting
one of six winners of the inaugural i6 Challenge held by the U.S. Economic
their businesses in Pittsburgh.
Development Administration. The i6 Challenge awarded funding to six The program has helped mostly first-
teams around the country with the most innovative ideas to drive technology time entrepreneurs launch 33 new
companies, trained more than 100
commercialization and entrepreneurship. IW’s winning submission focuses
entrepreneurs, hosted scores of events
on creating an Agile Innovation System to accelerate the commercialization that have attracted more than 1,000
of technologies being developed within the region’s universities and small participants and helped more than half
of its graduates raise follow-on funding.
businesses. The Agile Innovation System integrates the technological
A diverse group, half of AlphaLab
strengths of CMU with the company-creation expertise of IW. By combining companies are founded by women and/
these strengths into a regional company development system, IW and or minorities.

CMU are creating best-practices for deriving regional economic benefit

from federally-funded research.

6
“It seemed like the Sho e f itr
timing of educational Matt Wilkinson, Breck Fresen and Nick End were college athletes who all knew
the pain of poor-fitting footwear. While they often found better prices for shoes
presentations at
online than in local stores, they were always suspect of ordering them because
AlphaLab correlated of the lack of standardization of sizes and fits. And they weren’t the only ones: in
exactly to the process 2008, one in three pairs of shoes purchased online were returned, costing retailers
over $600 million in lost sales. From this financial pain came the idea for Shoefitr,
we were going through.
an application that shows how a shoe will fit using 3D scanning technology to
These sessions really compare the internal dimensions of shoes.
helped our company.” The IW AlphaLab program saw the promise of the application and Shoefitr received
Nick End, Co-Founder a work space, $25,000 in investment capital and a host of educational and advisory
sessions with seasoned entrepreneurs. Since AlphaLab, Shoefitr has garnered
additional IW investment and is gaining traction with customers. Online retailers
using Shoefitr’s technology have reduced returns by 20 percent. The startup world
has taken notice. Shoefitr won the This Week in Startups international pitch
competition, has been featured on Time.com and has been called “the company
Amazon must buy immediately” by the Startup Foundry.

7
Ric ha rd s oO
n PCo
POoRTUN
l i ng ITIE S R E ALI Z ED
Pa c ka ge s
Dave Richardson’s employees
affectionately call him “YesterDave” —
he needs everything done yesterday.
His company is growing, and he’s doing
everything he can to keep up. Started in
2002 with two employees, Richardson
Cooling supplies radiator solutions
to an ever-growing list of off-highway
diesel applications.

A recent growing pain for the company

has been the length of time it takes to
run performance testing at specialized
laboratories in Germany. A $50,000
Innovation Works Innovation Adoption
Grant helped Richardson work with
experts at Penn State University. With
the help of IW and a wind tunnel expert
at Penn State, Richardson was able to
design and install a custom wind tunnel
with which they could test on-site the
improved efficiency of new systems.
The funding support, introduction
to world-class experts and project
management assistance have helped
the company save time and money.

Richardson also benefited from IW’s

program to place and fund summer
interns. Intern Jon O’Bloc so impressed
the company that he’s now a full-time
employee.

“We can now do things

in-house that we couldn’t
do before, do them quickly
and at a fraction of the
cost. We’re developing a
world-class testing lab that
wouldn’t have happened
without IW’s support.”
Brian Meier, Engineering Manager

8
 OP P O RTUN ITIEPARTNERSHIPS
S R E ALI Z ED 2010 COMMUNI TY REPORT

Partners Amplify Support for Entrepreneurs

Innovation Works’ funding and business services are Our region is benefiting from this high level of activity
critical additions to the toolbox for startups, but it and a maturing entrepreneurial ecosystem. More serial
takes more resources to nurture companies’ early entrepreneurs are starting a second or third company
growth than any one organization can provide alone. and bringing their previous investors and advisors along
Fortunately, there are many partners in Southwestern with them. And frequently, these veterans are mentoring
PA that assist companies’ development. The research new entrepreneurs in AlphaLab and portfolio companies
universities have redoubled their efforts to create more as well as sharing best practices with one another at
spin-outs. The National Energy Technology Laboratory IW’s CEO Summit events.
is more assertive than ever at commercializing
breakthrough innovations. Economic development
leaders throughout the region are collaborating to
develop a skilled workforce and connect existing
businesses with startups. Angel investors have stepped
up their activity significantly. And grassroots
organizations are creating new opportunities for
networking and skill building.

Re Gea r L i fe S ci e nce s
Jeff Swoveland and Maria Fattore Gill founded ReGear Life Sciences in 2006 after
purchasing some U.S. Navy technology they knew had the makings of a medical-grade
therapeutic heating device. Unfortunately, they didn’t have the capital to commercialize
it. An initial investment from Innovation Works, as well as IW’s entrepreneurial services,
helped ReGear get its product and the company off the ground.

Today, ReGear offers a full line of thermotherapy devices that can be used to
combat a variety of ailments, and the company has many large, national accounts
that are using ReGear products throughout their entire health systems. They expect
a 10-fold growth in revenues this year.

A growing startup, ReGear has a positive ripple effect on other small companies in
Southwestern Pennsylvania. ReGear collaborates with 35 to 40 people in more than
a dozen companies to help design, engineer, market, produce and distribute their “We bootstrapped by
products. These partnerships help ReGear remain flexible. And these small, regional working out of a garage.
businesses, including regulatory compliance advisors, industrial engineers and user
interface designers, help maintain a robust entrepreneurial and manufacturing
We wouldn’t have made
environment for other innovative companies in our region to create and produce it without funding from
new technologies. This collaborative approach has been working. ReGear is
IW to do the initial product
ramping up production and is expecting to hire more people by the end of the year.
Their biggest challenge is to keep up with demand while maintaining their standard
development work.”
of superb customer service. ReGear’s five-year goal is for their therapeutic heating Jeff Swoveland, President & CEO
products to be the standard of care in the industry.

9
“A bank wouldn’t make
a loan for R & D.
The funding from IW
has provided a bridge
between developing
our product and
commercializing it.”
Dave McAnally, President & CEO
10
A p p al ac hia n Lighting
When James Wassel, founder and Chief Science Officer of Appalachian Lighting,
tells visitors not to look directly into their new 1,000 watt equivalent LED lighting
system, he’s not kidding around. But with one look at the technology behind this
lighting system, visitors immediately know the future is bright for this Ellwood
City-based company. The company started with James, a garage tinkerer, who was
sure he could build a better light. His prototype designs were high-powered, ultra
energy-efficient lighting systems and better than anything available on the market.
Using his designs, James, along with partners Dave and Rob McAnally, sought
funding for the initial research and development.
Over the next 10 years the conversion to modern lighting technology in the U.S.
will be a $250 billion industry. Appalachian Lighting has developed the technology
to be a serious force in the industry. Innovation Works’ $300,000 investment
bought them the time they required to perfect their technology, which can offer
users 70 to 90 percent energy savings.
 ENERGY PROGRAMS 2010 COMMUNI TY REPORT

Growing Energy & Clean Tech Innovations

In 2009, Innovation Works was awarded an Alternative
Energy Development Program grant by the State of
Pennsylvania’s Department of Community and Economic
Development in order to catalyze the growth of the
energy sector startups in Southwestern Pennsylvania.
As part of this program, IW makes three kinds of
funding available:
• Translational research grants of up to $50,000 to help
commercialize the technology of university and
federal laboratory research
With the Allegheny Conference on Community
Development, IW co-founded the Energy Alliance of
Greater Pittsburgh to position the Southwestern PA,
Eastern OH and Northern WV regions as a global leader
in energy innovation, production and manufacturing.
The Alliance is a collaborative network of the region’s
world-class research institutions, nonprofits, Fortune 500
energy companies and innovative, high-growth
technology companies.

• Seed funding of up to $600,000 to help fill the gap

in private sector investment at the earliest stages
of enterprise development. Seed investment is
accompanied by intense business mentoring.

• Innovation Adoption Grants of up to $100,000 to

link small manufacturers with centers of excellence
that can help develop new products and/or improved
processes.

AllFa c i l i t i e s E n e rg y Gro up
State laws are requiring utilities to reduce energy usage among customers, and
Anita Brattina and Stephen Moritz, both veterans of the energy efficiency industry,
saw an opportunity to help energy consumers save. The two came together to form
AllFacilities Energy Group, an energy efficiency management company that focuses
on helping customers reduce their energy costs by 15 to 35 percent over a three-
year period.

All Facilities Energy Group knew their success lay in being able to create a platform
that could reach the largest number of customers as efficiently as possible. In order
to create that platform, however, the company needed the time, capital and
“IW gave us the runway
entrepreneurial resources required to get their company off the ground. Through
Innovation Works’ Energy Program, AllFacilities Energy Group received a $300,000 we needed to develop
investment and invaluable entrepreneurial services from the IW Executive-in- and test models. Now,
Residence program to help pinpoint key strategic issues and implement solutions.
we’re creating not just
With about a dozen employees, AllFacilities Energy Group is growing quickly,
jobs, but green jobs.”
despite starting in the middle of a recession. Now in two states, the company is
expanding and plans to add two new regional markets each year. Stephen Moritz, President

11
 COMPANY HIGHLIGHTS

2010 Success Stories

The success of Innovation Works is measured by the success
of the companies we support. Below are just a few of the
many achievements of our companies in 2010. We are
proud of their accomplishments which reflect our companies’
growing contributions to their industries, customers and
our region’s economy.

>> Accipiter — awarded 2010 Defense Appropriations

Act contract for next generation scalable
communication system

>> ALung — named one of the “Top 10 new medical

technologies of 2010” by MedGadget

>> American Road Printing — executed Tour de France

‘Chalkbot’ project for Nike

>> Appalachian Lighting Systems — ranked No. 1 overall

by the U.S. Dept. of Energy as an industry leader
in three product categories

>> Ciespace — closed on $4 million financing round led

by ARCH Ventures

>> Civic Science — surpassed 50 million cataloged poll

This map shows companies in
Southwestern PA that received IW
funding in 2010. Innovation Works’
programming has a positive impact
on jobs, companies and the economic
climate of the entire IW service area.
The companies we assist range from
technology-based startups to small,
innovative manufacturers.
responses, launched InSight store platform
>> ClearCount — received FDA approval and a 2010 Good
Design Award for SmartWand DTX, closed on $5 million
investment
>> Cohera — received Frost & Sullivan’s “2010 North
American New Product Innovation of the Year Award”
for its surgical adhesives TissueGlu
>> DeepLocal — won the Grand Prix at the 2010 Cannes Lions
International Festival of Creativity

>> Knopp BioSciences — signed $345 million deal with

Biogen Idec, one of the nation’s largest pharmaceutical
deals in 2010

12
 2010 COMMUNI TY REPORT

>> ModCloth — named # 2 on Inc. 500 list of fastest growing

private companies in the U.S., closed on $19.8 million
round of venture capital

>> Penthera — signed a global licence with the world’s leading

handset manufacturer, which could achieve hundreds of
millions of units over the next five years

>> Plextronics — received $1.6 million Defense Appropriations

Act award for flexible electronic display technology

>> Shoefitr — won international web-based pitch contest of

This Week in Startups, voted “Most Likely to Be Acquired”
at Launch Conference

>> ShowClix — CEO Josh Dziabiak named to Inc’s “Top 30

Under 30” entrepreneurs, landed online ticketing
partnership with Groupon, signed contract with GreenTix
of Australia

>> SMaSH — became official mobile platform of the

Pittsburgh Steelers

>> Thermal Therapeutics — received FDA clearance, signed

commercial contract with UPMC and other top tier
hospitals

>> Thorley — sold more than 1,000 units per week within
20 weeks of launching their mamaRoo product, which
is distributed in eight countries

Deeploc al
According to Nathan Martin, CEO of Deeplocal, Innovation Works’ VP of
Entrepreneurial Services once observed that the most valuable thing
Deeplocal had created was its culture. And what is that? A mix of artistic
engineers and risk-taking do-it-yourselfers who just happened to win the
2010 Cannes Lions International Festival of Creativity. Whether it’s the
Chalkbot that took positive messages from social media users and
robotically wrote them on the Tour de France course or the Write the Future
campaign that lit up Johannesburg’s skyline at the World Cup, Deeplocal’s
innovative technologies bridge the physical and digital worlds to connect
consumers with some of the world’s top brands: Toyota, National
Geographic, Nike and The Gap. “I didn’t know how to run a company,” said
Martin. “I learned a lot from my IW advisors while commercializing our first
software product.”

13
Innovation Works is Southwestern Pennsylvania’s Ben Franklin Technology
Partner, an initiative of the PA Department of Community and Economic
Development (DCED), and is overseen by the Ben Franklin Technology
Development Authority. We thank the Commonwealth for its ongoing
financial support, as well as the U.S. Department of Commerce Economic
Development Administration, the U.S. Department of Energy, the U.S. Small
Business Administration, the Claude Worthington Benedum Foundation,
the Heinz Endowments, the Hillman Foundation and the Richard King Mellon
Foundation. The success of Innovation Works and our companies also relies
on the contribution of many individuals and organizations who invest their
time, expertise and capital in the region’s startup technology companies.

2000 Technology Drive

Suite 250
Pittsburgh, PA 15219–3109
P: 412.681.1520
This brochure was printed using earth-friendly soy-based ink and produced
F: 412.681.2625
on recycled paper with 30% post-consumer waste. www.innovationworks.org