This post first appeared on Blogging Innovation as Helping Others Go Vertical on 3/7/2010

Keen Mobility is a story of innovation, invention and entrepreneurship. Innovation is often focused on inventions and new products, but innovation is also a new way of thinking about conventional wisdom.  Jeffrey Phillips wrote an insightful post “Innovation, Invention and Entrepreneurs”, defining innovation as “a new idea that is put into valuable or profitable action.”  What is so wonderful about the Keen Mobility story is how Vail Blackwell Horton and Jerry Carleton combined innovation, invention and entrepreneurship to deliver value for a large, under served population and create a profitable, growing business.

Keen Mobility was founded by Vail Blackwell Horton and Jerry Carleton. Vail and Jerry were college roommates at the University of Portland (UP). Vail, born without legs, had been using artificial legs to walk but the crutches he needed to use with the artificial legs were destroying his shoulders. He wanted to find a better way to keep walking – for him, and for others. Vail went in search of a way to fulfill this mission.

Vail brought an idea for a new type of crutch – one with shock absorbing technology – to a group of engineering students at UP. He suggested the engineers try to build a working prototype for their senior project. They agreed, and the student engineers went to work. The concept worked! The engineering students successfully built a working prototype, and Vail and Jerry realized their concept could fly. They set off to start a company to build a product that would help Vail stay vertically mobile, and help others do so as well.

Full of enthusiasm, Jerry and Vail looked at each other across the table of their rented student digs in North Portland, asking what all entrepreneurs ask at this point, “What now?” They had zero idea how to launch a company and needed expertise and funding. Financing is tough at the best of times, but this was in 2001, in the midst of the dot com and telecom bust.

Jerry and Vail called the UP Center for Entrepreneurship. They also set up every meeting, coffee and lunch they could with people they could learn from. By approaching people for mentorship, not funding, they built relationships for the long haul. The company wasn’t bankable at this time, but many of these early contacts later became investors.

The UP Center for Entrepreneurship encouraged the team to enter UP’s Entrepreneurs Challenge and other business competitions. By April 2002 they had won the $10,000 first prize in the UP competition and third place in Portland Business Journal’s business plan competition, winning $35,000 in cash and services. UP sent them to more competitions around the U.S. where they consistently finished in the top three.

The team also looked for other sources of funding. They wrote a successful proposal to UP to fund their trade show booth and travel costs.  They contacted the National Collegiate Inventors and Innovators Alliance (NCIIA). With support from the Lemelson Foundation, NCIIA awards approximately 2 million dollars in grants annually to college students or recent graduates of member institutions.  Keen was awarded a $10,000 NCIIA grant funding prototype development and provisional patent filing costs.

A great partnership, Vail focused on creating the product and the vision for company while Jerry continued fundraising efforts. The VC environment continued to be difficult. Jerry “took every meeting he could get”.  Innovation continued. They partnered with universities where student engineering teams would apply to NCIIA to prototype Keen’s new product ideas. Frugality reigned supreme. In one example, now part of the company’s lore, Jerry opened the company bank account at US Bank because of their “Five Star Service Guarantee” that said if you waited in line for more than five minutes, they credited $5 to your account.  Jerry made sure to pick the longest line in the bank every time.

The business plan competitions were great for press, as was their compelling mission to keep Vail and others vertically mobile.  Jerry recalls, “We were never in crisis capital mode, we had options.” When they went out to raise their first preferred round, they “couldn’t stomach” the VC terms, so they turned to angel investors. Jerry was on the road, once meeting in six different states in 48 hours. Jerry had the mindset, “every person was a potential investor, or knew a potential investor.” Jerry hit the mark – the company’s first preferred round was oversubscribed.

Innovation also comes from understanding your market. One of Keen Mobility’s best selling products lines today, Tru-Relief^™ foam, started as an important addition to their shock absorbing crutch.  When looking for a solution for shock absorbing underarm foam, they discovered a superb foam that could also relieve pressure points. Pressure sores can cause severe discomfort to wheelchair users and can be life threatening.

A crutch with shock absorbing technology was the company inspiration but ultimately represented only a small market. The team realized they needed a full suite of “world-class products focused on safety, mobility, and comfort for the disabled, elderly and injured.” They now focused their efforts on building out their product line.

The team went on to close their Series B preferred, again oversubscribed, with about half coming from Series A investors, and half new investors. In 2005, Keen added their first institutional investor, Crobern Management Partnership, after the Series B close. Jerry describes Crobern as “a venture firm with an angel attitude”. Crobern’s focus in health care, and their ability to provide value beyond the dollars, has been a great fit with Keen. Jerry points to their early years as an important training ground. “The training we received in the lean years gave us such a respect for the money we raised.” Needing only half of the first tranche, the company gained credibility with their new investor when they bought CD’s with the extra money.

Keen Mobility today has “over $2.5 million in annual sales, 25 different product lines, more than $1.7 million in capital, and 12 employees. Keen Mobility has also been recognized by the Oregon Entrepreneurs Forum as one of the three most successful growth-stage companies in the state, ranked number 30 on the 100 Fastest Growing Private Companies List, and was placed on the Governor’s Honor Role for Employers of People with Disabilities.” Keen Mobility has been named in 2008 and in 2009 to Inc.‘s annual ranking of the fastest-growing private companies in America and to the Portland Business Journal’s Oregon 100 Fastest Growing Private Companies list three consecutive years. Vail and Jerry were both named to the “Top Forty Under Forty” list by the Portland Business Journal.

Vail holds numerous honors, including his appointment to the Secretary of State Advisory Committee for Worldwide Disability Policy and was named an “Oregon Healthcare Hero” by Senator Gordon Smith on the floor of the US Senate.  Vail is also founder and chairman of Incight Foundation, dedicated to empowering people with disabilities through education, employment, networking and independence.

Jerry, who from year two was amazingly attending law school at night, was admitted to the Oregon Bar in 2007 and joined Bullivant Houser Bailey PC.  “Having a real life case study to immediately apply my classroom lessons was an incredible opportunity.” Jerry’s hard won lessons in founding and growing Keen Mobility inspired him to “pay that forward, taking companies into and through the trenches.” He continues to be part of Keen Mobility as a Director and Officer of the company.

Vail and Jerry’s story, the story of Keen Mobility, is a story of innovation, invention and entrepreneurship.  From Vail’s initial inspiration and invention, they used creativity, ingenuity, dedication and hard work to grow their company. What Vail and Jerry show us is that innovation is a mindset, that when confronted with challenges, new ideas can change the game.

I attended a panel discussion on Friday at the MIT Club of Northern California, Convergence, Community and Commerce (C3) program moderated by Sramana Mitra, strategy consultant and Forbes columnist, on the Art and Science of Bootstrapping. This topic is near and dear to my way of thinking about building a business.

The panel was marvelous, the kind of entrepreneurs that set the benchmark for others. They called themselves doers not managers, and ran very P&L orientated businesses. They didn’t build business plans with years and years of red ink baked in. While they recognized that some business models need that injection of rapid capital from a VC, this group charted their own course. Some called it freedom; others called it a different kind of control, the one you set for yourself. Each grew their business in a different way:

Have a Plan
Michelle Munson, President, CEO of Aspera Software, had a really good idea for a great technology, and the determination and discipline to stay the course. She and her co-founder knew their market and hit their sweet spot. In other words, they had a plan and stuck to it.

Follow your Skill
Paul Kocher, Founder, President and Chief Scientist, Cryptography Research, has great skills and I would say even better business acumen. He funded his business through consulting, learning about customer needs and market opportunities.

Be Opportunistic
Sridhar Vembu, CEO and Founder, Zoho, said he didn’t have a business plan, he just started. He stayed frugal and persistent.

Throw out the Plan
Beatrice Tarka, CEO, Mobissimo, and her co-founder were building an enterprise software application when their own internal application, built so Beatrice could find cheap tickets between France and the Silicon Valley, took off.

Sramana Mitra has captured their stories in her book series, Entrepreneur Journeys. Meanwhile, here are some takeaways from the panel discussion that every entrepreneur can take to heart, and to the bank:

Be stubborn, disciplined and obstinate
Be constantly learning
Build a team with complementary skills
It’s not about the money
Know your funding options
Remember serendipity and luck are also needed
Have a big vision and break it down into small, actionable steps.

And, of course,
Build the capability to execute.

If you have a great idea, but start your elevator pitch with “VC’s won’t fund this because…” have a look at the federal stimulus package. Here is a new funding source that is going to give our much loved and much maligned VCs some competition. Peruse a few VC firm websites and you will be quickly struck by the homogeneity of the VC world. And this world view is reflected in what deals they will fund.

Now here is a brand new big bucket of money – a really big bucket. This bucket has a long established if long winded funding process – the grant – that has a whole different point of view than the VC’s. Borrow your favorite biotech or academic friend who knows about grant writing and start digging for gold at www.recovery.gov

Thanks to the bullish panel at last night’s VLAB event “The New Stimulus Package: What Does it Mean for the Valley?” I have been tap dancing all morning. It’s great to hear a group of people with positive outlooks these days. And they are on to something.

Josh Becker of New Cycle Capital kicked off the discussion by putting the size of the stimulus package in context.  I am so used to seeing the “$B” by federal budget and bailout numbers that I hadn’t really internalized what level of impact a $737B Stimulus Package will have. Josh took one example, the difference between the DoE annual budget of $25B. two-thirds of which is spent on “nuclear”, leaving $8B for energy. Compare that number to the $16.8B allocation to Energy and Efficiency in the Stimulus Package – a 200% increase. Well, that got my attention.

The panel that followed Josh’s introduction was very articulate and passionate about how the stimulus is a new funding source for entrepreneurs, transformational in its sheer size and scope. Chris Wright of Critical Connections talked about the opportunity to apply Silicon Valley style “technical muscle” to address the public priorities outlined in the stimulus package.  DK Foster of Power Assure walked us through some of the nuts and bolts of a new world of what he called “B2G”. It’s clear everyone has to partner, if only to understand all the acronyms (EIN, DUNS, NAICS, FSC, PCS, CAGE, MPIN..).

Erik Stenehjem of Lawrence Livermore National Laboratory’s Industrial Partnerships Office would love to match one of LLNL’s technologies to an eager entrepreneur who wants to go after stimulus funding. David Katz of El Camino Hospital explained healthcare stimulus dollars are flowing to providers for Electronic Medical Records systems, so “money for the little guys” is hard. Providers have to adopt a certified EMR system by 2015 or risk penalties. My observation is that the providers will be spending those stimulus dollars and that will create opportunities for existing and new companies in the EMR space.

Josh was very upbeat in describing the seismic shift (my words) in the political landscape reflected in the stimulus package. No earmarks! Restraints on lobbyists! Transparency! Public good! I kept pinching myself, is this a movie? a dream?

So polish off that company idea you were really dreaming about before you had to massage it into the VC box. Really think about how it can play into the public good priorities of the stimulus package. Stay resilient through the long grant-finding-applying process, and apply for several. You will have a good shot at your dream.

Keep me posted! I’ll be here tap dancing.

P.S. Josh and DK’s presentations are available on VLAB’s site.