Don Brunell's Montana upbringing in a small town near Butte, in a household where his father was both mayor and a union official and his family owned a small business, provided him a unique preparation to guide Washington's largest business advocacy organization.

 

He early came to understood business, politics and labor from the inside, allowing him to put himself in the shoes of those on the other side of issues. His first job, as a journalist, helped him develop the abilities to observe and communicate, and a stint in the early '70s as press aide to a Montana congressman added to his understanding of the inner workings of politics.

Don Brunell

 

His belief in roots and relationships comes naturally for a man who grew up in a house on the same block where his great grandparents and grandparents lived and where he and his brother went door to door collecting 75-cent monthly payments from customers of the family's Walkerville Garbage Service.

 

And the roots and the early job background were important assets for success in his role with the Association of Washington Business, helping chart the strategy for business in a state where Democrats always occupied the governor's mansion and usually controlled the legislature during his years at the helm.

 

I visited over coffee with Brunell to get his reflections on his 28-year career with AWB, which he joined as a vice president and head lobbyist in 1985 at a time when the organization was in disarray politically and at a low point in terms of support from businesses themselves. He was named president two years later.

 

He will move out of his office on December 20, the day after AWB closes for the Christmas holidays, he said, explaining "It would break me up to move out while all of those in the office, half of whom have been with me for more than 10 years, were looking on." And he learned this week that the board has decided to name the AWB building in his honor.

 

But he's been staying away from the office as much as possible in recent weeks to allow his successor, Kris Johnson, who joined AWB three years ago as vice president of operations after 15 years of leadership roles at various chambers of commerce, to settle into his new role, which was announced in early October.

 

As a member of his board from soon after he took the helm of AWB in 1987 through the 1990s, I watched him from the inside deal successfully with the often conflicting political pressures within the organization, composed mostly of small businesses but ultimately guided by the largest companies.

 

But he handled those struggles within the business community with the same deftness with which he dealt with politicians. His philosophy on conflicts? "I try not to second guess or comment on motives; rather just deal with the issues, realizing there are differences."

 

And as the most visible face of business in a usually Democrat-controlled political environment, Brunell frequently found himself in the cross hairs when one of the governors was riled over the business stance on a particular issue.

 

"Most of the times, the calls from the governors came at night after I was home," he recalled. "One night, Booth (Gardner) was furious and I can't remember what the issue was. Our youngest son was about 6 at the time and answered the phone.  Booth introduced himself and asked Dan if he could talk to me. Dan put the phone on the table and yelled:  'Dad, some guy names BOOF wants to talk to ya!'  By the time I got the phone, Booth was laughing so hard that he asked me to stop by in the morning to talk about whatever the issue was."  

 

Brunell had special praise for Gardner's successor, Mike Lowry, with whom he had a close relationship despite the fact that many in the business community, especially small business people, viewed Lowry as the hated enemy.

 

"Lowry would call me at home madder than a wet hen about something, particularly during the 1993 session, and some nights and I just held the phone out at the end of my arm until he had finished yelling at me." Brunell recalled with a chuckle.

 

"So after he blew off steam, I'd go up to his office and we'd look at one another and then we'd figure out what to do," he said, adding"Lowry could blow his stack at you one day and be smiling the next. He never personalized anything, and if he said something, you could bank on it, and if he changed his mind, he'd tell you he had changed his mind."

 

"All of the governors are different, but they wouldcall and we always had the ability to work through things," he said. "Sometimes we'd agree to disagree and move on.  We were always able to avoid personalizing differences."   

 

Brunell, intended to be a teacher but after graduating from the University of Montana, he joined the Army Special Forces, then wound up in journalism as a reporter, first for the Montana Standard in Butte then the Daily Missoulian.

 

Thus he never made it into teaching ranks himself, but is proud that five of his six children are teachers, "and their spouses are teachers."

 

And education has remained a key involvement for Brunell. In addition to spending a week each summer as a teacher at BusinessWeek, AWB's signature summer business-education program for high school students, Brunell was instrumental in bringing the program to Poland three years ago. And each year he has personally been involved with the high school students there.

 

And with he and his wife, Jeri, who also grew up in Montana's legendary mining country, having 14 grandchildren, he's kept kids as an important focus, in addition to education.

 

He brought AWB together with unions, trial attorneys, doctors and defense attorneys in 1995 to organize Kids' Chance, a scholarship program for spouses and children of workers permanently disable or killed on the job and has served as the organization's treasurer since its founding, with a $220,000 seed grant from Walmart.

 

And 25 years ago, AWB launched the Holiday Kids' Tree Project, with a massive tree placed in the Capitol Rotunda each Christmas season where donations are taken to help needy families in rural Washington through firefighters and emergency responders "who have the best knowledge of those in need in their areas."

 

I asked Brunell for his thoughts on the political scene he leaves behind. He's optimistic about the future at the state level, suggesting he sees more movement toward the political center, "which is where you have to govern from."

 

"But Washington, DC, is real troubling for me," he added. "I was a congressional aide during Watergate, but still things got done and the parties could work together on important issues. They knew each other and spent time together."

 

"Today, everything back there is centered on fundraising. It never stops.  It is way too partisan and there is way too much money spent by wealthy groups stumping for causes," he added. "If you run for office today, count on being dragged through the mud and disgraced.  Politics has always been a contact sport, but there has to be a set of rules of civility.  

 

"Also the American people are tired of being manipulated and lied to," he concluded. 

Jon E. Eliassen, who has epitomized the phrase "entrepreneurial encore" since his first "retirement" a decade ago, may actually be moving closer to real retirement, at the age of 66, as he steps down from the role of president and CEO of Red Lion Hotels Corp.

  

In one respect, his retirement from the helm of the Spokane-based hotel company ends a dual role that made him the last of a vanishing CEO breed, those who chair the board of one publicly traded company while serving as CEO of another.

Jon Eliassen

 

Thus while Eliassen is leaving the top-executive post at Red Lion, which he has held since January, 2010, he will remain as chair of the board of Itron Inc., the $2.2 billion global energy-management and technology company based in Liberty Lake, east of Spokane.

  

Eliassen's retirement, announced last week, took effect Monday and he will leave the Red Lion board at the end of September.

 

His focus on a strategy of converting Red Lion from a hotel company that owned buildings into one that relied on franchising properties has been largely successful as half of the company's 52 hotels in 10 western states and British Columbia are now franchises and lesser owned hotels have been sold.

 

But the past year has been a difficult one for Eliassen and his board as efforts to find a suitor for the company proved unsuccessful and criticisms from two investor groups, who together own about 33 percent of the company created and long controlled by the Barbieri family, mounted. Donald Barbieri, CEO of Red Lion during its growth and expansion years before he turned over the reins in 2006 while remaining as board chair, retired from the board last December.

 

Four new board members were added last year, including James P. Evans, former head of Best Western International, who will serve as interim president and CEO while the board searches for a permanent new leader.

 

But if the role at Red Lion brought its likely frustrations, the board-chair post at Itron, which he helped birth as a start-up subsidiary of the old Washington Water Power Co., now Avista Corp., in the later half of the 1980s, has brought offsetting satisfactions.

 

In a column I did on Eliassen when he assumed his role at Red Lion, he made clear that he didn't want to be credited with being responsible for Itron's successful growth from its early days as a remote meter-reading business. Others, however, would say he clearly played a dramatic role in Itron's growth as the CFO at WWP-Avista for 16 years.

 

But he conceded he's had fun watching what he referred to as "a great run" for Itron into its role as a world leader in providing electricity, heat, water and gas metering devices.

 

Eliassen's first "retirement" came in 2003 when he departed his role as CFO and senior vice president at Avista, capping a 33-year career with the investor-owned utility. But he quickly­ was coaxed into taking over the Spokane Area Economic Development Council as its CEO.

 

He remained as CEO of the Spokane EDC until 2007 when he helped put together a merger of the EDC with the Spokane Chamber of Commerce to create Greater Spokane Inc.

 

That retirement lasted for a couple of years until 2010 when the Red Lion board, on which he had served since his retirement from Avista, picked him to be president and CEO at a time of transition and challenge for the hotel company.

 

When I asked him this week what lies ahead, he said "I'm not planning to do anything beyond being involved as a director or in an advisory role."

 

But the board work extends beyond Itron, since he is a board member of ITLifeline, a privately held business continuity anddisaster-recovery company down the road from Itron in Libetry Lake. And he is the principal of Terrapin Capital Group, LLC.

And while he says he remains "engaged with trends and the continued evolution of energy and water."

And because of what Spokane venture capitalist Tom Simpson has described as "an unselfish desire to fuel economic growth in Spokane," none would surprised if Eliassen were to find a future

summons too interesting to pass up.

 

As to the dual role in which he was the last of what I described as "a vanishing CEO breed," until a year ago he had shared that unique role with Bill Ayer, president and CEO of Alaska Air Group as well as being board chairman at Puget Sound Energy. But Ayer retired from Alaska in early 2012.

 

The reason he's likely the last of a breed is because of the growing aversion of boards to having their CEOs involved in a significant way with the business of another company, with those schooled in board activity noting that directors are increasingly saying, basically, "we want our CEO to be focused on our company."

William (Bill) Pettit, president and COO of Merrill Gardens since he helped launch the company 20 years ago, has kept the family owned business at the leading edge of growth and change in the senior-living industry. Now he has put together a deal that he figures will position the company for growth under new leadership for the next 20 years.

 

Pettit, once a rising young star in banking before forsaking that industry to help the R.D. Merrill Co. strategize diversifying from its timber-industry roots, last week announced the deal by which Merrill Gardens will sell more than half of its properties for $183 million to provide for major investments in the future.

Bill Pettit

 

Seattle-based Merrill Gardens is selling its equity stake in 38 senior-living projects for $173 million to Health Care REIT, with which Merrill Gardens had put together an $817 million partnership three years ago that Pettit described, at the time, as "the leading edge of a trend" for senior-living companies. Proof of the accuracy of his prediction came as other senior-living companies soon followed the model of te REIT-relationship.

 

In essence, the Akron-based Health Care REIT is now buying out the 20 percent of the partnership that Merrill Gardens retained in the 2010 deal and is inking an agreement with Ermitus Senior Living, also Seattle based, to manage the portfolio.

 

Merrill Gardens will receive an additional $10 million from Emeritus as a management termination fee and will retain 26 communities and proceed with what's described by Tana Gall, whom Pettit lured to Merrill Gardens recently from LeisureCare, still another Seattle-based regional retirement-living company, as "big reinvestment plans."

 

Of those 26, the REIT will continue a relationship with 10, and another 10 are slated to come on line as new communities that will benefit from the "reinvestment" plans.

 

Part of the lure for Gall was assuming Pettit's title as Merrill Gardens' president, although the 64-year-old Pettit retains the title of president of R.D. Merrill Co.

 

Pettit went to work for the Merrill Family in 1992 after a series of banking successes that included becoming head of strategic planning for Seafirst Bank at age 31 in 1980 and becoming chief financial officer in 1985 at the age of 36 before joining problem-plagued E. F. Hutton in New York, only to see the 1987 crash "seal its fate."

 

So he returned to the Puget Sound area as president of Pacific First Financial and two years later helped guide its takeover.

 

He was invited to join the R.D. Merrill Co. to help what he deferentially refers to as "the family" as the third generation of the business founded in the 1890s by Richard Dwight Merrill as an environmentally friendly timber operation determine its future.

 

In the end, the Merrill family decided to have fourth-generation Charles Wright III, chairman since then, take over and chart the future.

 

Pettit recalls that Wright felt the timber heritage was important, but not the direction he wished to take with the company so, with Pettit's assistance, moved to diversify. In 1993, the company acquired its first independent and assisted living facility in Seattle and Pettit became president and COO of both the company and its senior-living business.

 

Over the following 17 years, leading up to the 2010 deal with Health Care REIT, Merrill Gardens grew to become one of the largest and most respected senior living companies in the country, operating 56 senior housing communities in 10 western and southern states. It won Family Business of the Year honors in Washington State four times.

 

"The performance of senior housing has provided one of the best real estate investments of the past decade," Pettit says, but adds that "in reality we never made much money on operations, pretty much a breakeven business model there."

 

But with last week's deal, he expects Merrill Gardens to have the opportunity, over the next 24 months, "to re-engineer and add new-technology tools to the process'' in a manner that will enhance efficiency and thus bring more bottomline profits, including for the new communities coming on line, and thus growth opportunities.

 

Pettit says he has no plans to retire soon, adding "I expect to be working for the family for another five or six years."

A first-ever national gathering of representatives from business schools around the country that have programs to help businesses in "under-served communities" gain a better chance to succeed and create jobs will take place in Seattle next month, the result of an unusual collaboration of a prominent business school and a global financial firm.

 

The July 10-12 Conference on Business Development in Under-Served Communities, which will draw leaders from 20 universities that have programs aimed at engaging students with businesses in low- and moderate-income communities, is the culmination of a 13-year vision of Michael Verchot, the man responsible for the event.

 

Phyllis Campbell

Verchot, director of the Business and Economic Development Center (BEDC) since its 1995 founding at University of Washington's Foster School of Business, hopes the conference will serve to dramatically expand the number of schools supporting programs for businesses in under-served communities.

 

In the two years since he first met with Phyllis Campbell, the respected Seattle-area banking leader who is vice chairman of the Northwest region for JPMorgan Chase, she and other executives of Chase have not only come to share the vision, but have enhanced, with time, counsel, and dollars, the opportunity for the vision to become reality.

 

Next month's gathering will also serve as the springboard for a fund-raising initiative, also supported by Campbell and Chase, to create an endowment for the BEDC to become a national center to guide collaboration and information sharing on "best practices" among business schools with such programs. 

Michael Verchot

 

While "under-served communities" might be assumed as synonymous with minority businesses, Verchot says that's not necessarily accurate, adding that urban under-served communities might usually be minority communities, but that non-urban areas might merely be economically challenged. He uses the example of some communities, like Forks, that have been impacted by timber-industry changes.

 

"By under-served we mean two things: communities where the median household income is 80 percent or less of the regional median household income, and racial,ethnic, gender communities where businesses under perform the national average," Verchot said.

Verchot, one of the earliest architects of academic emphasis on minority business programs, including an annual Minority Business Awards banquet that remains the only such statewide event in the nation, says that he has wanted, since 2000, to build such a national network to aid businesses in under-served communities.

 

The BEDC will soon to be renamed the Center for Consulting and Business Development and a $10 million fund-raising effort launched to advance Verchot's vision, a goal for which $2 million has already been raised.

 

The fact that it took a helping hand from some key players to bring about the conference and set the stage for the next step in Verchot's vision may be appropriate counterpoint for the assistance he hopes his center will help bring about for challenged businesses.

 

The first meeting with Campbell two years ago was arranged by Neil McReynolds, longtime Seattle business leader and a UW alum and founding co-chair of the BEDC, whom Verchot credits with "being instrumental in every stage of our development since our founding."

 

And Campbell, CEO of the Seattle Foundation and prior to that Washington president of U.S. Bank when she was tapped by JP Morgan Chase CEO Jamie Dimon to guide the bank's Northwest business, credits Cree Zischke, Chase executive for Global Philanthropy, whose region includes both Washington and Arizona, with being "instrumental in understanding the national scalability of the model."

 

Verchot and McReynolds wanted advice from Campbell on how to fashion an endowment to build upon the BEDC's work in Washington State.

 

"But we didn't have the horsepower, in terms of staff, nationwide relationships, vision for what this conference could lead to and funding, until we began working with Chase," Verchot said.

 

The funding Verchot refers to is a $600,000 grant to BEDC to put on the conference, through which Verchot and Chase hope to establish around the country academic centers that will work with small businesses in under-served communities. Support from Zischke and the bank has already helped launch centers on the BEDC model at Washington State University and at Arizona State University and University of Arizona.

 

"The endowment he was talking about raising for the center wasn't very much so Cree and I told him to raise the bar and think bigger," recalls Campbell, who explained that the $600,000 for the conference is a multiple-year commitment, part of $1.2 million that the Chase Foundation has put behind bringing about Verchot's vision of a national center.

 

 "Our philosophy is always aligned toward philanthropic pillars and one is how do we work with very small businesses, especially minority businesses, that we want to help ensure get a leg up," added Campbell.

 

Bill Bradford, who is a former dean of the school of business at UW, will provide a report at the conference on a study he was commissioned by the Kauffman Foundation to produce on what research has been done on minority business over the past decade.

 

"The goal was to find out what we know about programs that may have beneficially impacted minority owned business and determine whether we still have the same issues facing minority business that we did in the last century, or have we improved over the past 13 years," Bradford said.

 

Other unusual initiatives by BEDC are also making their way into programs of other schools, including the innovative Business Assistance Program that links student teams with Rotary Business Mentors and alumni advisors to work with local businesses, a program McReynolds spearheaded with Seattle Rotary as past president of the organization.

 

McReynolds, who also teaches at the business school, calls it "a win-win situation" that not only gives needed help to small businesses but "gives students fresh from the classroom great practical experience" helping small businesses deal with the callenges they face.

 

The BEDC has now involved other Rotary Clubs, with Bellevue Rotary working with students at Bellevue College and the Vancouver Rotary with WSU-Vancouver students.

 

Of the Minority Business Awards program, Verchot notes it's "a way of highlighting success and creating role models for other entrepreneurs and our students of color. These companies don't necessarily need help from us so we use them as examples for others to follow."

Brooks Sports is about to enter its second century on the crest of a growth wave that CEO Jim Weber has guided by turning the company from "an also-ran, price-point brand" to a leading performance premium brand in what he refers to as a unique "class to mass to class" repositioning.

 

Weber, who was brought in as CEO in 2001 to turn around a troubled athletic-shoe company, took Brooks from a $60 million company to a running-shoes-only business that did $400 million last year and is now positioned, as number one among shoes sold by specialty running shops. And it's typically in the top three shoes worn by runners in major races across the U.S. and Europe.

 

Jim Weber

The 53-year-old Weber, whose pre-Brooks background includes 12 years in consumer products with Pillsbury, Coleman and Sims Sports and a couple of years in investment banking, is now a finalist in

 

Brooks has been a shoe company from its founding in Philadelphia in 1914, first as a maker of bathing shoes but soon moving into athletic shoes that were worn by football and baseball players in the '20s and '30s.

 

It continued as a mostly off-the-radar family-owned athletic shoe company for decades, before sinking into bankruptcy in the late 1970s and being bought by a series of owners who moved its home office first to Grand Rapids, MI, then to Bothell, northeast of Seattle.

 

The company experienced a business uptick in the '90s when Norwegian entrepreneurs Kjell Rokke and Bjorn Gilstein owned the company and brought in local CEO Helen Rockey. But the company got into financial trouble after Rokke and Gilstein sold Brooks to an investment-banking firm and Weber, who had been on the board for two years, was coaxed into taking the Brooks reins.

 

Russell Corp, acquired Brooks in 2004 and two years later, Berkshire Hathaway acquired Russell, down in the bowels of whose holdings was Brooks, which has since acquired a higher visibility in the Warren Buffet business empire.

 

"In running, we've taken an inclusive celebrate-running image, a 'run happy umbrella' that really creates a focus for us as a fitness company," Weber said. "In 12 years we've gone from 1 percent of the running-shoes market to third place."

 

"And we've done by what I think is a unique class-to-mass-to-class transition," he noted. "Brooks was a class running shoe that then was positioned to be a price-point brand and now is repositioned as basically the highest-priced premium running shoe."

 

As evidence of that, he points, in a Nordstrom-like explanation, to the average prices of the three tops running shoes as of early this year. Brooks' average price was $100.30, Asics' $91.20 and Nike $70.50

 

According to Leisure Trends, Brooks is Number One in the specialty running shoe channel in this country, with a market share of 29 percent, and number three overall. Weber notes, "the company is usually number two behind Asics in terms of which shoes runners are wearing at the 20 races we perform around the world."

 

"Shoes matter for competitive runners and we're one of the two top shoes in races, behind Asics," he added.

 

Weber says that while the focus on running "makes us a niche player, it's a niche we think can bring us to a $1.5 billion company. We're on track to reach half a billion this year."

 

I asked Weber if it seems a bit unusual for the head of a $400 million, century-old company, even having grown the business by 700 percent over the past decade, to be considered an entrepreneur. He replied:"What is an entrepreneur? Someone who brings unique solutions to problems that no one else has solved for a company."

 

In fact, Weber's comment about entrepreneurs could apply to several of the finalists in this year's Northwest EoY event who either guide large companies or have been around for an extended time. Those include bank CEOs Mark Mason of HomeStreet and Greg Seibly of Sterling, both of whom guided major turnarounds of their institutions, Expedia head Dana Khosrowshaki and four of the directors of Madrona Venture Group, the 18-year-old Seattle-based venture capital firm.

 

: Tom Alberg, Paul Goodrich, Gerald Grinstein and William Ruckelshaus are the Madrona directors up for honoring with Grinstein and Ruckelshaus once having served as the leaders of major national public companies.

 

When I asked Dan smith, managing partner of the Seattle office of Ernst & Young, which is in its 26th year with the EoY event in the Northwest, what defines an entrepreneur, he said "You have to stand back with an open pair of eyes and ask who is really making a difference. Who is taking companies to that next level?"

 

 

"They may not be starting a business, but the turnaround is almost like starting a business and takes the same entrepreneurial skills," he said. 

After a frustrating failure to save Frontier Bank, veteran banker Patrick Fahey's relief at his successful turnaround of Seattle-based First Sound Bank has him focused on "having some fun now" running the newly healthy bank rather than retiring for the fourth time.

 

Fahey, whose career running banks began in 1981 when he was named president and chief operating officer of what was then Spokane-based Old National Bank, completed his 15-month-long turnaround effort at First Sound by paying back its TARP debt to the Fed last month.

Pat Fahey

 

Fahey had been a consultant to First Sound, after the Fed fouled up an infusion of capital that would have saved Everett-based Frontier Financial Corp. Then the First Sound board asked him in January 2012 to take over as CEO, the third time a bank board had tapped him to un-retire.

  

When he took over, First Sound was, as he describes it now, "one of the most troubled banks in the state," viewed by the Fed as "significantly undercapitalized." It was under a Fed cloud, required to raise at least $7 million as a condition of paying off its outstanding TARP shares and making a healthy exit from Fed oversight.

 

 

But as a result of Fahey's turnaround efforts, including quest for capital, the bank last month closed an offering that raised nearly $8 million, from which it paid the Treasury Department $3.7 million for its $7.4 million in outstanding Tarp shares, a 50 per cent discount. It thus extinguished all its warrants and unpaid dividends.

 

Fahey says the raise and satisfying the Fed with the TARP payback have turned First Sound into "one of the healthier banks in the state" and its funding infusion means its capital ratios will now exceed the regulatory definition of a "well-capitalized" bank.

 

 

So I asked Fahey the inevitable retirement question, having followed him since he left U.S. Bank in 1987 to launch Pacific Northwest Bank.

 

"Actually the fun begins now," he replied. "We've now literally tripled our legal lending limits so we can make larger loans. This gives us a cushion against shock waves in the economy and decreases the risk for the bank.

 

"Our new business won't necessarily come by upside in the economy, it will come by taking business from the larger banks and we'll do that by being more responsive to small businesses, who need an answer now, even if it's a 'no,'" Fahey said.

 

"But it will still be a great opportunity to participate in the recovery by providing financing to businesses that need to grow," he added.

 

The success with First Sound, although Fahey emphasizes the next step is profitability, is a welcome outcome for Fahey after the frustration of Frontier's seizure by the Fed and sale to Union Bank.

 

A board member at Frontier, he was asked in 2008 to assume the position of CEO at what was, at the time, the largest bank based in Washington (Washington Mutual having already been seized and tossed to Chase). He brought the turnaround effort to the point of a planned private-equity infusion of $430 million that had been committed, pending Federal Reserve approval.

 

But the Fed dithered and the private-equity people decided they could do better elsewhere and rescinded the offer, forcing the closure of Frontier and the acquisition a couple of days later by Union Bank in a regulatory-assisted transaction in 2010.

 

The Frontier experience didn't sit well with Fahey, who had built Pacific Northwest Bank into the largest commercial bank headquartered in the Northwest (that was a few years prior to WAMU's growth spiral up and its death spiral down.

 

He sold PNWB to Intrawest and went on the board of theOak Harbor-based bank, only to be summoned from the relative retirement of board work to take over as CEO and turn Intrawest around, which he did as he put the PNWB name on Intrawest and then guided it into an acquisition by Wells Fargo.

 

 

So what's the outlook now for lending, as Fahey sees it?

 

"I still think there is the possibility of a boom and bust cycle in apartment construction," he said. "I would think that banks doing that kind of lending would prudently tighten equity and secondary repayment source requirements. Just drive through Ballard."

 

And he remains a critic of the impact the regulatory environment is having on lending.

 

"The Dodd-Frank legislation and resultant regulation and bureaucracy make it very difficult for a small bank to risk making residential mortgage loans, and ultimately passes the cost of compliance with these regulations on to the consumer," Fahey said.

 

 

" Many of the regulations implementing Dodd-Frank have yet to be written despite thousands of pages that are already out," he added.

A legislative proposal that is the outgrowth of state and federal agencies targeting what they perceive as a growing abuse by business of misclassifying workers as independent contractors is stirring the concern of businesses who view the bill as an excessive reaction.

 

In fact, one Seattle-area attorney long involved in independent-contractor legal issues, says an attitude "inhospitable to the independent-contractor business model" has become evident at both the state and federal levels.

 

Employing independent contractors has long been an essential practice in some industries, as with newspapers' use of freelance writers or real estate firms and their independent agents. But the pressures on business during the economic downturn from which some are still just emerging has made the strategy of using independent contractors rather than hiring employees more common, and with that has come some abuse.

 

State and federal agencies, upset by what they view as millions in lost tax revenue, aided by labor leaders' targeting House Bill 1414 as one of their top priorities this legislative session, have tagged misclassification abuses as part of the "underground economy."

 

 

There are several things about the bill, titled "The Employee Fair Classification Act," that business views as a reach too far by those proponents. The first is that the bill would establish the premise that "an employer-employee relationship is presumed to exist" for anyone who performs service for pay." What follows is a series of exemptions to that blanket assumption.

 

Some besides business may find it a cause for concern that the measure would create a new provision making it a crime to retaliate against those who complain to authorities about a misclassification by the employer, with an assumption of guilt. The measure would make violations of the retaliation provision a gross misdemeanor and, in a Napoleonic-law twist, assume the business is guilty of the crime unless it can prove its innocence.

 

Kris Tefft

Kris Tefft, chief legal counsel for the Association of Washington Business, has led the effort to lobby lawmakers and alert businesses about the bill's problems. He says his priority in seeking to raise concerns about the bill "is to convince legislators that this is too much of a regulation step to impose on legitimate businesses."

 

The bill has made it out of one committee and has until Friday to be cleared by the finance committee for an eventual vote in the House, where passage would be likely since this bill is a top labor priority this session and the House is controlled by Democrats. A companion bill filed in the more moderate Senate has languished in committee so business is hoping that means the measure won't clear the Legislature this session.

 

In fact, Tefft's goal is to keep the measure from even reaching a vote in the House.

 

"While it is a top labor priority, it has drawn fire from a broad and deep coalition of various industry groups who are all working on keeping the bill from the House floor," he said. The goal is to "get legislators to go back to the drawing board in terms of addressing identifiable problems with the 'underground economy.'"

 

Nigel Aviles

Nigel Avilez, an attorney on Mercer Island who has been involved with the legal issues surrounding independent contractors since before it became a hot issue, suggests government has created "a climate that is intolerant of independent contract misclassifications."

 

 

The bill, despite its potential major impact on businesses, is only now starting to gain some visibility outside the legislative halls and raising the eyebrows of business owners as they learn of it..

 

None of the opponents of the measure deny that some businesses, particularly many whose fortunes have suffered a serious downturn in the recent financial turmoil, have become scofflaws, basically trying to be creative in worker relations, and thus creating a problem for legitimate businesses.

 

And that, according to Avilez, has created "an inflexibility" on the part of agencies toward working with businesses who have merely made a mistake in classification of independent contractors, rather than being guilty of cheating. "Some agencies feel people are cheating the system so they don't want to cut any slack for any business."

 

Avilez did a public-records request and searched the documents to conclude "there is an apparent coordination between the U.S. Department of Labor and state agencies."

 

"For example, between 2010 and 2012, public records show that the Washington Employment Security Department (ESD) audited close to 140 nail salons, and assessed substantial taxes in many of those," Avilez said. "The quantity of these audits was far and above most other industry audits, clearly suggesting that the nail industry was being targeted by ESD."

 

Five hair salons were found to owe taxes of more than $20,000, not including penalties, with three dozen hit with taxes of $5,000 or more, plus penalties.

 

 

As an indication of the historic role of independent contractors for some industries, Tefft noted that "a lot of industries are coming forward with bills that would exempt them from the provisions of the bill should it become law."

Because more small businesses get their insurance coverage through business associations in Washington than perhaps any other state, new eligibility standards for such groups because of the Affordable Care Act could cause major coverage disruptions.

 

At issue is the eventual determination by the U.S. Department of Labor next year on which of the so-called Association Health Plans (AHPs) meet federal requirements or must change, possibly dramatically, to be in compliance with ERISA, which protects the interests of participants in employee benefit plans.

 

The issue looms far larger for small businesses in this state than others because Washington law has recognized associations formed for the purpose of providing insurance, and treated them as "large" groups, providing better healthcare packages for member businesses. State law specifically states that small groups purchasing through associations are not small groups and are exempted from the small group community rating laws, which bring higher insurance costs.

 

 

 

The disruption he warns about would be that since AHPs represent a major portion of Washington's health insurance market, dramatic change could affect the vehicle by which thousands of small businesses obtain insurance coverage for their employees.

 

And because, as with many provisions of the national health care law, there's more uncertainty than certainly about the provisions, associations aren't sure what lies ahead. But they're pretty sure their futures won't be enhanced by the involvement of the State Insurance Commissioner.

 

And it's an issue that has only now begun to gain visibility as business associations like chambers of commerce and the Association of Washington Business, in essence the state's chamber of commerce, grapple with a decision by the Office of Insurance Commissioner (OIC) to get involved.

 

And the visibility ramped up a notch this week when a bill was filed in the State Senate that would basically say "leave the association health plans as they are."

 

The legislative bill would declare that "association health care plans meeting certain standards should be continued as a means of providing health care as the Affordable Care Act is implemented," with standards spelled out that would basically keep most associations in place.

Trade organizations, such as the Master Builders Association whose members are all involved in the home building industry in some manner, are not composed of so many and varied business types. In fact, the Master Builders recently gained OIC approval, with some changes in the members they admit.

 

 

 

Executives of the associations openly sing the praises of the benefits their plans bring to the healthcare costs of small businesses. As with Debra brown, President of Forterra Inc., the benefit services subsidiary of Association of Washington Business (AWB), who notes a recent national survey foundWashington is the second most affordable state in the nation for the very smallest firms, those with fewer than 10 employees.

 

"Washington ranks fifth most affordable in the nation for all small firms," says Brown, who.estimates that about 500,000 employees obtain their insurance coverage through association plans "The plans represent an important and valuable asset to a lot of employees."

 

But the association executives are understandably reluctant to openly attack the OIC involvement in the futures of their plans.

 

But not so others outside association ranks, like Free, or John Conniff, a Tacoma attorney and former deputy Washington state insurance commissioner, who says: "if an organization says 'we think we comply' and they're willing to undergo the ERISA evaluation, why should they have to convince the insurance commissioner?"

 

 

 

 

"We can't not say anything," says Carol Sureau, the OIC's deputy commissioner in charge of legal affairs. "We have to get the system ready for 2014 and we have been meeting with carriers and some associations trying to see whether they can qualify as 'an employer' under ERISA."

 

"While this determination belongs to DOL, we know that all our associations will not be able to obtain that agency's determination until after January 1, 1914, and we must move forward as the filings must be approved or disapproved by July 31," Sureau said.

 

Bill Baldwin, one of the more respected insurance executives in the state and now a principal with The Partners Group in Bellevue who is on operating committee of the Washington Health Benefits Exchange, suggests that "few" of the association plans meet the requirement of being ERISA compliant. "It's hard for an association to get approval because they represent so many kinds of businesses."

 

But he adds that "associations is all that has saved the healthcare market in this state," emphasizing the comment was his personal view and not his view as a member of the exchange board. "They should change the law to accept association plans."

 

 

AWB President Don Brunell admits that while there is still work to be done on affordability "we believe that without association plans, health care costs for employers in Washington state would be significantly higher. It's important that association plans continue to operate as they do today, or significant disruption and destabilization will occur."

Whether it was fate or serendipity that brought Elwood (Woody) Howse and Tom Cable into business together after a decade of crossing paths, the fact is that the firm they finally created became a major factor in the creation and growth of the technology, biotech and medical-device industries in the Pacific Northwest.

 

It was actually at the urging of their wives that Cable and Howse decided, in 1977, to leave the Seattle securities firm Foster & Marshall and launch Cable & Howse Ventures. But it took two years and almost 200 calls on potential investors before they raised the $9 million to fund the first limited partnership to launch the firm.

 

Tom Cable

The business quickly grew into the largest venture capital firm in the Northwest, eventually raising more than $160 million for five Cable & Howse funds that helped finance more than 100 companies, about two dozen of which they took public. More than half of those 100 were outside the Northwest.

 

Now they've been selected as 2013 laureates of the Puget Sound Business Hall of Fame. They, along with retired Alaska Air chairman and CEO Bill Ayer and Gary Oakland, who built Boeing Employees Credit Union into the nation's fourth largest, will be honored as this year's crop of laureates March 21 at the annual banquet put on by Junior Achievement and Puget Sound Business Journal.

 

Woody Howse

Cable and Howse first met and became friends at U.S. Navy nuclear submarine school at New London, CN, following which they parted to serve stints as officers aboard nuclear subs. Next they each wound up in graduate school at Stanford, where Howse got his undergraduate degree, although Cable had been gone a year when Howse arrived.

 

Finally, they took different routes to get from the Bay Area, where they both had jobs in the investment industry, to Seattle to join Foster & Marshall.

 

Cable & Howse was a different breed than VC firms of today in that the five partners in the firm acted as a private investment banking firm, working with early stage companies to help them find funding and then immersing themselves in the start-up companies.

 

Howse recalls that "in those days, no one knew how to put together a thorough business plan and business models, so we worked closely with the managements to get the plans pulled together to staff the companies, and to build selling presentations for investors."

 

"A large proportion of our companies were absolutely seed startups when we invested," Howse added. "Today virtually no local VC funds do seed investing. Individual angel investors, family and friends are the provider of that class of capital now."

 

Along the way, they also helped shape the software industry that was starting to emerge in the Northwest in the early '80s, putting up the money to allow the presidents of some small software companies to start the Washington Software Alliance, which became the industry's dominant trade organization.

 

I asked each of them what they viewed as their best investment, as well as their most interesting and most satisfying. Both agreed that Immunex Corp. was the answer to all three but Cable added that the company, one of the Northwest's earliest and most successful biotech companies, was also perhaps the most frustrating.

 

 

 

The frustration was that by then Cable & Howse, guided by a long-languishing share price as Immunex was impacted by a general investor turnoff on biotech through the middle 1990s, distributed all of its Immunex stock before the picture improvd dramatically.

 

The Immunex involvement was one of a number of investments Cable & Howse made in the medical arena where, as Howse put it, "we always felt the products were aimed at the betterment of mankind, which always made us feel like we were doing something of value."

 

Both, in what some might suggest are their "retirement" years, remain closely involved with medical-related companies. Cable's last board position is with Omeros, a Seattle-based clinical-stage biopharmaceutical company.

 

"I think Omeros will emerge, over the next few years, as the dominant biotech company in the Northwest," Cable offered.

 

Howse is still a member of four corporate boards, two of which he describes as "rank startups: Stella Therapeutics, focused on a technology targeting an orphan disease that is the worst of the brain tumors, and BeneSol, focused on an interesting technology concerning Vitamin D."

 

Both Cable and Howse also were in agreement when I asked them if they recalled their worst investment.

 

In what Howse refers to as "the low point of naivete for us as investors" and Cable recalls only as an investment "with no logical reason," they bought Inside Sports from Newsweek Magazine. Since the advertising staff at Inside Sports had sought a share of ownership, which they didn't get, all the ad people quit.

 

"We stopped funding after two months of having to print the magazine with no ad revenues coming in," says Howse. "We originally thought of it as a road to success but instead it was a black hole."

 

In 1996, after they proved unable to convince institutional investors of the viability of the Northwest as a place where sufficient new investment opportunities would emerge, Cable & Howse liquidated the partners with an IPO for Applied Microsystem and its distribution.

 

It's been 17 years since Cable & Howse closed its doors, but to this day the mark that Woody Howse and Tom Cable made on start-ups in the technology, biotech and medical-device industries remain as visible impacts on the region's economy.

As a new year brings new leadership at the Ewing Marion Kauffman Foundation, the long-rumored internal struggle over whether the focus of the nation's largest and most influential resource for entrepreneurs should be far flung or local may soon play out.

 

Thomas A. McDonnell, longtime Kauffman Foundation board member and chair since 2006, assumed the role of president and CEO as of January 1, filling the position left vacant since exactly a year ago when Carl Schramm was forced out. McDonnell hasn't indicated yet whether or not he will guide a change of focus.

 

But given the pre-eminent role the Kansas City-based foundation has played in fostering entrepreneurism, the issue of whether Kauffman's focus should be more local than broad-based could have implications for angel-investor groups and entrepreneurs in every region of the country.

 

However, there are some longtime entrepreneur supporters and investors who suggest that the emergence of other foundationsinvesting in entrepreneurial activity and of serial entrepreneurs now actively impacting entrepreneurship mean Kauffman could refocus without negative impact.

 

Despite the substantial amount of time since the departure of Schramm, the architect of Kauffman's dramatically expanded presence in entrepreneurial activity, there's been little national visibility or blogger discussions about the struggle over Kauffman direction or of the real story of Schramm's departure. Nor has there been a lot of discussion about what might lie ahead for the $1.8 billion foundation.

 

During his 10 years as president, Schramm turned the foundation's focus dramatically toward national focus, then a global presence, becoming the largest and most influential resource available to foster technology innovation through entrepreneurial startups.

 

Schramm was asked to leave, though the official announcement was that he had decided to resign to return to academia. Both his departure, and the sudden availability of McDonnell for the top role, may yet provide fodder for discussion.

 

McDonnell's sudden decision in September to retire at 2012 year-end as CEO of publicly traded DST Systems, and the fact that the company's board virtually that same day put a new CEO in place, could provide a new batch of rumors surrounding Kauffman leadership.

 

One Kauffman change that's certain to occur is its involvement with venture-capital and private-equity investing, given its own dramatic report last spring that spelled out the sad experience the foundation has had in its 20 years of such investments. The in-depth report, titled "We have met the enemy...and he is us," amounted to an analytical revisitation what it describes as its "large (almost $250 million) and (largely) underperforming VC portfolio" and a promise to make dramatic changes in such investing.

 

Because of the clout Kauffman has with academia, the angel-investment community and others with financial roles in start-up companies and entrepreneurism, there's a perhaps not illogical reluctance on the part of many in the industry to speak out about the Foundation's apparent internal struggle.

 

But the fact Schramm's departure was the outgrowth of the conflict over Kauffman direction is pointed up by a couple of comments in e-mails to me for this piece.

 

As a friend close to Schramm said in an e-mail, "it was always a fight between Carl's vision of becoming a global leader in entrepreneurship and being a mainstay in Kansas City."

 

Added an angel-investment leader who declined to have his name tied to the comment: "I can tell you that the divergence on direction is based on the interpretation of the donor's (Mr. Kauffman's) intent. After all, it was his money. Far be it for us to determine what is the best use of his money."

 

"I do believe Carl went too far afield and walked away from the original donor intent, including spending vast sums of money outside the U.S.," said retired Kansas City business leader Ritchie Slaughter said in a telephone interview.

 

Slaughter had worked for Kauffman, the owner of the Kansas City Royals major league baseball team who created the foundation in the mid-1960s, before his death in 1993. Slaughter left the board in 2003, a year after Schramm's arrival.

 

"He was very willing to have people come here (to Kansas City) from around the world but did not want to spend money outside the United States," Slaughter said. "It is Mr. Kauffman's money and needs be spent the way he wanted."

 

"The new guy is likely to have community pressure to give more focus to and have more board members from Kansas City, but he's been chairman of the board for six years so I'd be surprised if he's backing away from national involvement," Slaughter said. "Kauffman specifically wanted a national footprint in entrepreneurship and a local footprint in youth development."

 

Among those who suggest a Kauffman refocus would likely not be detrimental to entrepreneurial activity at this point is San Diego angel-investor Michael Elconin, a long-time leader in the five-county Southern California Tech Coast Angels.

 

"Kaufmann was instrumental, to say the least, in the formation and growth of the Angel Capital Association (ACA), enabling the dissemination of best practices, and promoting efforts to bridge the gap between university research and startups," said Elconin, past chair of the San Diego TCA chapter. "I would say that in all three of these areas, the institutions and momentum Kaufmann created will, to Kaufmann's credit, allow them to continue without further Kaufmann support."

 

Janis Machala, one of the founders of the Seattle women's angel-investor group Seraph Capital and now dean of continuing education at Bellevue College north campus, agreed.

 

"Kauffman has done so much and was working in entrepreneurship when no one was focusing on that area," she said.

 

"Now there are many foundations investing in entrepreneurship and many successful serial entrepreneurs now actively impacting the fabric of entrepreneurship and all this activity and money means that Kauffman can refocus to their roots and not lose all that was done," Machala added.

 

Susan Preston, also a founder of the Seraph angel group who then became a Kauffman Entrepreneur-in-Residence and most recently has guided California's CalCEF Clean Energy Angel Fund, isn't quite as certain.

 

"We will feel an impact on programs if the Foundation focuses solely on Kansas City," Preston said. "But I have faith and belief that new leadership will recognize Kauffman's instrumental role in advancing entrepreneurship on a national basis, where the programs created and grants made in a number of areas, including for women eptrepreneurs, have helped change the landscape for the good."

Most of the two dozen properties Seattle's Columbia Hospitality manages across five Western states are destinations well-recognized by hotel and resort guests, but less recognized is the brand of the fast-growing hospitality management and consulting company itself.

Now founder and CEO John Oppenheimer hopes a new retail-products unit that will market food items served at the iconic Salish Lodge will help bring broader exposure not just for the hotels and resorts themselves but also for the Columbia Hospitality brand.

 

John Oppenheimer

A number of food products served at the nearly century-old hotel perched on the bluff above Snoqualmie Falls east of Seattle went on sale last week at a holiday-season kiosk at downtown Seattle's Pacific Place. Columbia Hospitality manages Salish under a 20-year agreement with the Muckleshoot Indian Tribe, which bought the hotel five years ago for $42 million and 50 acres across the road for another $20 million.

 

"We're the first of our kind as a boutique hotel creating a product arm," said Sasha Nosecchi, whom Oppenheimer brought aboard in July with the title of Retail Innovations Director. The title indicates the extent of creative freedom he has given the former Starbucks and Chateau Ste. Michelle executive.

 

Oppemheimer says the products from Salish, which Columbia Hospitality manages under a 20-year agreement with the Muckleshoot Indian Tribe, which bought the hotel five years ago, range from biscuit powder to pancake mix, to the on-site-produced honey, to candles and tea.

 

"The products are all well known by those who have been guests at the lodge," says Nosecchi, who adds that another product is a honey ale produced for Salish in partnership with a local brewery.

 

"Everyone who has been there has a story about Salish," he adds. "Everyone has a memory of this place, and that's what the products are meant to take advantage of."

 

"Honey on biscuits, drizzled from on high, has been a tradition so we decided to begin making our own honey, with bees on site, with our own beekeeper," Oppenheimer says.

 

And the way Columbia Hospitality's other properties may be promoted to buyers of Salish food products is through special deals tied to the Salish items, like perhaps a special rate at Friday Harbor House in the San Juan Islands with the purchase.

 

"We think we can create great exposure for the hotels and resorts,"Oppenheimer said. "My hope is that someday people will say they want to stay at a Columbia Hospitality-managed property."

 

In fact, the company's strategy for building its brand includes a brochure in every guest room at Columbia Hospitality's various properties that list the collective properties. And the company has a newsletter that goes out regularly to its mailing list.

 

"Guests tell us they are beginning to visit the properties simply because they are Columbia Hospitality managed, which equates to luxury, incredible service, and distinct destinations," says Oppenheimer. "So yes, we are building a brand."

 

A more readily recognizable brand for the company would be only the latest innovation for the fast-growing hospitality management and consulting company that Oppenheimer founded in 1995 after his consulting company was hired by the Port of Seattle to manage its new Bell Harbor Conference Center.

 

The port had hired Oppenheimer's Columbia Resource Group (CRG), which had done events around the world, to provide consulting services on selecting a management firm for the new facility. But when the original management firm fell short of port expectations, Oppenheimer decided to bid on the management role itself.

 

How he eventually got the management contract for Bell Harbor with no experience managing such a facility was an example of Oppenheimer's bold business approach.

 

"Our bid was based on the premise that while we had no experience operating a conference center, no one understood the customer like we did and we said 'we'll make this the most customer friendly place that exists on the planet.'"

 

Columbia Hospitality was created out of CRG to operate Bell Harbor, which was able to pay its way from year one without the subsidy the port had assumed it would have to provide for a time.

 

A growing number of hotels and resorts, and other conference centers soon came Columbia Hospitality's way, including now two in Montana resort areas, one in Sonoma, CA., and the bulk in Washington, Oregon and Idaho. In addition, the company has a half dozen of what it calls "limited service hotels" that Columbia Hospitality operates, but not under its brand.

 

Oppenheimer explains those hotels come and go because our clients are principally banks who assume the hotel and retain us to manage it until it is sold.

 

Oppenheimer admits that at one point, when Salish Lodge was available, he thought about putting together an ownership group to buy it. But when it became clear the Muckleshoots intended to buy it outright, he opted instead for the long-term management agreement.

The federal JOBS Act aimed at opening the door for entrepreneurs to reach out to crowds of potential investors on the internet appears, ironically, to be hung up at the Securities and Exchange Commission (SEC) on the issue of tighter restrictions on entrepreneurs who seek more sophisticated investors.

 

In fact, angel-investor leaders are concerned that the SEC's deliberations may produce rules that make it harder for entrepreneurs to raise money from those wealthier individuals, referred to as "accredited" investors. 

 

Liz Marchi

The reason is that Congress decided that entrepreneurs would have to validate investor accreditation, rather than being able to take the word of investors that they were "accredited," as has been the case until now. But the lawmakers left it to the SEC to figure out how to impose rules for such "validation."

 

"I don't think anyone in Congress was thinking about the actual impact the change would have on accredited-investor rules," said Liz Marchi, whose Frontier Angel Fund, Montana's first angel fund, has become one of the nation's most successful angel-investor groups. "That's why I think you see basically nothing being done at the SEC."

 

The legislation, officially the Jumpstart Our Business Startups Act, was passed by Congress in April and was designed to be a job creator by making it easier for entrepreneurs to raise capital and thus launch companies and create jobs. The first part of the bill would ease raising start-up capital through "crowdfunding" on the Internet and the second part to eliminate the prohibition against advertising and soliciting traditional "accredited" investors.

 

The SEC was given until yearend to determine the rules that would govern operation of crowd-funding efforts. But the portion dealing with accredited investors called for the SEC to figure out by July 4 how to implement rules to eliminate the prohibition against general solicitation and advertising in securities offerings.

 

The regulatory body missed that deadline but SEC chairman Mary Shapiro told Congress the agency would have the rules in place by end of summer. That target has now become year end, and the betting is that it'll be sometime in the new year before the rules are put forth.

 

The Angel Capital Association and angel investors like Seattle's Dan Rosen, who are closely involved in following the SEC deliberations and seeking to influence them, are hoping to get final SEC rules simple enough that entrepreneurs "don't have to jump through enormous hoops to prove investor accreditation."

 

The phrase angel leaders are using to indicate what's needed for those entrepreneurs seeking accredited investors is "safe harbor," meaning a safeguard for entrepreneurs that they have actually done some due diligence on the investors.

 

Rosen, a leader of Seattle's Alliance of Angels, says "we've been working with the SEC to come up with a compromise that will ensure there is a safe harbor. But if they come out with a rule that is not acceptable, we will go back to Congress and seek changes there."

 

What's causing much of the teeth-gnashing for entrepreneurs and those like ACA and Rosen looking out for their interests is the apparent difficulty the SEC is having figuring out just what are the "reasonable steps," that will be required of entrepreneurs.

 

The irony of, in essence, tightening the screws on entrepreneurs seeking funds from qualified investors is that those entrepreneurs, rather than the ones seeking limited amounts of money from crowds of small investors, are the ones most likely to be job creators.

 

Bill Payne, viewed by many as the dean of angel investors and a member of Marchi's Kalispell-based Frontier Angels, is critical of how Congress packaged the JOBS Act.

 

"The legislation does not appear to have been well thought-out and seems to be our Congress simply finding something upon which they could agree," said Payne, who was Entrepreneur in Residence at the Kauffman Foundation and was named angel investor of the year in both the U.S. and New Zealand.

 

In fact, the JOBS Act brought the best example of bipartisan support evidenced by Congress in the past four years.

 

"Congress was motivated on this legislation because the lawmakers finally figured out that entrepreneurs are at the heart of this country's future and there were few tools by which Congress could feel like it was playing a role in the country's economic future," said Marchi.

 

Marchi's angel fund has been proving recently that angel investing can be profitable for the angels as well as important for jobs and the economy.

 

Two of the fund's investments, Coeur d'Alene-based Pacinian, a maker of wafer-thin keyboards, and Bozeman-based LigoCyte Pharmateuticals Inc., were acquired by major companies in the past few months. Frontier had substantial stakes in both and thus got substantial rewards.

 

Pacinian, which represented 10 percent of Frontier's total fund, was sold to Silicon Valley tech firm Synaptics this summer for an initial $15 million plus a substantial additional amount in the future based on various factors.

 

And a substantial bridge-round investment Frontier made about four years ago in LigoCyte Pharmateuticals Inc. paid off big last month with the announcement that Japan's Takeda Pharmaceuticals' wholly-owned U. S. subsidiary was buying the Montana vaccine maker. The agreement provided for an upfront payment of $60 million and "future contingent considerations" for LigoCyte, whose lead product, a vaccine to prevent norovirus gastroenteritis, is in clinical development.

 

Marchi declined to discuss specifics of Frontier's multiples from the two sales. But she noted that the two exits will have returned the original investment capital to her members, "and perhaps even some profit. So every one of our other 10 investments can produce profits."

As the California Clean Energy Angel Fund that she launched five years ago winds down, Susan Preston's analysis of the opportunity to create a second "cleantech" fund has guided her to conclude "the bloom is off the rose of clean-energy investing."

 

"We have done a great deal of analysis into raising a second fund, and unfortunately, market timing is quite bad," said Preston, the former Seattle attorney who formed the first-of-its-kind angel fund for seed and start-up stage clean energy companies in August of 2007 and became its general partner. "The public and private markets are down on clean energy and the venture model itself is being questioned."

Susan Preston CalCEF

Byron McCann, co-chairman of the Northwest Energy Angels, agrees with Preston's assessment to the extent that "there isn't the excitement in the market that there was. All the fervor and bluster have faded to the point where we do deals that make sense on their own."

 

But McCann, whose angel group focuses on young "cleantech" companies in the Pacific Northwest, disagrees to the extent that he says he has seen "a robust deal flow, increased membership and angels interested in the clean-tech space."

Byron McCann Energy Angels

In fact, his angel group, formed in 2006, had its best first half this year, by July investing more than $1 million in six companies, with the investments focused on energy efficiency, green-building technology and biomass power

 

Preston and McCann will be together on a panel Friday in Seattle at the Northwest Energy Angels Leadership Breakfast, where the topic of discussion will be Portland author Ron Pernick's new book, "Clean Tech Nation."

 

Pernick indicated his sense that "without a concerted energy policy, pieces of the energy puzzle may be in trouble," but added "states and cities are pushing for" clean-energy initiatives.

 

Pernick, Preston and McCann all agreed, in separate telephone conversations, that the erosion of venture-capital interest in clean-tech investments this year has brought challenges to the angel side of investing in the sector. Statistics indicate that venture funding in the clean-tech sector is off about 30 percent this year.

 

"Venture's turn off means venture funding no longer represents second-round financing for young companies, and IPOs are not likely, so that limits the exits and that limits the interest," Pernick said.

 

"Venture interest is down, but hasn't disappeared," said McCann. "A venture investment usually takes more money than investors anticipated and that's even more of a challenge in clean tech, which takes more money and more time, making it more complicated than what a lot of us are used to."

 

"So it's a challenge for angels, who have to decide what kind of a deal is this? Am I bridging to a venture round or is this an angel deal where we're going to grow the company," McCann said.

 

Preston, in her typically direct fashion, said "a lot of the cleantech companies were walking dead and VC's kept putting money into the walking dead. We all have these walking dead or zombies that we keep piling money into looking for some turnaround and instead the outcome is a turnoff."

 

Early this year, I had Preston keynote a gathering at the Coachella Valley Economic Partnership in Palm Desert and she was bullish about the sector and about the prospects for a new fund.

 

But what she found in the months that followed was the erosion of venture-capital interest and waning interest on the part of major institutional investors.

 

"All the individual investors wanted to do another fund and we had positive feedback from all the limited partners," Preston explained. "But the institutional investors were going to funds focused on later-stage investing and fewer were looking at cleantech."

 

I asked her if there was any cleantech area for which she was still bullish and she said "I see a lot of opportunity in energy efficiency," noting that one company in which her fund invested is Berkeley-based Alphabet Energy, which captures waste heat and turns it into energy.

 

Preston helped form the Seattle women's angel network, Seraph, in the late '90s and was a Kauffman Foundation entrepreneur in residence in Seattle. She was retained by the non-profit California Clean Energy Fund (CalCEF) six years ago to develop the model for a seed-stage clean energy fund.

 

She moved to the Bay Area to manage the $11 million boutique fund, in which the non-profit CalCEF was the key funding source, supported by a group of individual investors.

 

Preston, McCann and Pernick all agreed that the predictability that attracts investors requires a national energy policy.

 

"This country has a choice to make relating to energy and right now clean-energy has been villanized by partisan politics," said Pernick. "All energy industries from oil, coal and nuclear to renewable and clean require government support, both regulatory and financial."

 

McCann scored "the vaguery of energy policies" and Preston suggested that "what would really help is a clean-energy act," noting that "regulation is essential in our industry." But she added, "My hope of federal legislation is very low."

They're not a band of brothers because, while the Seattle area's three long-respected senior Irish bankers are friends, they are also competitors. But Dineen, Fahey and Patrick, all first named Patrick, are a breed of bankers who have always gauged success by how they did business, rather than how much business they did. As Scott Jarvis, director of the banking-oversight state Department of Financial Institutions, put it: "If we had more folks in the industry like them, we would have less to talk about when it comes to troubled institutions." Reflecting on what happened in their industry as real-estate lending activities began to unravel five years ago and climaxed with the crash that occurred four years ago next month, they collectively shake their heads. The three recall thinking, as they watched the sub-prime mortgage fiasco heating up from their respective vantage points, that "something was really wrong. All agree that, as the banking industry and the economy recover, they have concern that what Patrick Patrick points to as "the fatal inclination that you have to grow," coupled with greed, could lead to history repeating itself. Pat Fahey and Patrick, both now 70, were in retirement at that time after careers building successful banks and turning around troubled ones while Pat Dineen, 71, was a couple of years into the successful launch of Puget Sound Bank, where he was chairman, following his retirement as U.S. Bank's president for Washington. But those memories of retirement are now fading for both Fahey and Patrick as they are immersed in troubled-bank turnaround efforts, Patrick presiding as president and CEO over the comeback of Seattle Bank, where he has brought a $50 million local-investor capital infusion, and Fahey as CEO of First Sound Bank. Both Patrick and Fahey, called from retirement in 2008 as the crisis hit home, found frustration in their first comeback involvements. Patrick took the president/CEO role at deeply troubled Towne Bank in Mesa, AZ, and sank a lot of his own money into the project, only to find it was too far gone to save. And Fahey, then a board member of Frontier Bank in Everett, was pressed by its board as the bank's bad-loan portfolio swelled to oversee the effort to turn it around. But ineptitude (not his words) on the part of regulators scuttled what would have been a successful private-equity capital infusion. Fahey and Dineen were both key statewide executives of Spokane-based Old National Bank before it was acquired by U.S. Bank in the late 1980s. And after his retirement from U.S. Bank, Dineen was succeeded by still another Irishman, Ken Kirkpatrick, who had spent his entire career with the bank. Fahey and Dineen offered some surprisingly candid observations that the aggressive lending of Fannie Mae and Freddie Mac, and basically pressure from certain members of Congress on the two government-sponsored enterprises whose job it was to own or guarantee mortgage obligations, were key parts of the problem. "I think it's fair to say that political and Congressional pressure certainly 'encouraged' Fannie and Freddie to fuel the flood of unconscionable loans that were securitized and sold into the secondary markets, causing further fueling of the 'housing bubble,'" Fahey said. "I have seen video of President Bush and Senator McCain calling for a reigning-in of Fannie and Freddie, and then-Chairman Barney Frank of the House Committee on Financial Services rejecting that notion, asserting that they were doing a fine job," he added. Dineen's view from afar at the time was that "Fannie and Freddie spent an inordinate amount of time lobbying congress. They were in the big time themselves while common sense lenders like Wells Fargo and others trying to slow the growth of Fannie and Freddie, were thwarted by Congress and by the two financial entities who had no interest in slowing down." Patrick also suggested that the seizure of ill-fated Washington Mutual in September of 2008 and is fire sale to JPMorgan Chase were the result of the FDIC deciding to "make an example of someone." "Needless to say they (WAMU) had more than their share of problems and issues - but scapegoats were needed as the 'face' of the problems," Patrick added. " Unfortunately Lehman and WAMU had their photos taken for the necessary posters." Patrick has been doing turnarounds for almost 30 years, starting with Seattle-based Prudential Savings during the savings & Loan crisis of the early '80s, then Seattle's Metropolitan Savings in 1990. As far as concerns about "could it happen again," Patrick suggests that "not only could it happen again, but it's happening now in spades, with pricing again irrational in terms of institutions making term loans at rates that are inappropriate and too much is being lent against some projects, especially multi-family." "That market is almost out of control, from my perspective," Patrick adds. "One thing is for sure: de ja vu must be exciting for some." Fahey agrees, saying "the raging boom in apartment construction and lending may well be a looming problem." "Added to that is the burden of over-reactive legislation and regulation that will very likely stifle lending that could and should be done, as well as cause increased costs that will be passed on to borrowers and consumers of financial services," Fahey adds. "Aggressive banks are looking for growth opportunities and there is only so much real growth potential out there,"Dineen said. "Growing strictly by taking business from your competitors generally indicates that you are doing something a little more aggressive." "Bankers and lenders have short-term memories," Dineen chuckled.

Richard Sontgerath is hoping to parlay his years as a developer specializing in older and historic buildings into a sprawling non-profit health and wellness facility on Vashon Island that he thinks could become a national model for smaller communities. But first he needs $40 million. Sontgerath has the background, enthusiasm and the vision to bring about K2COMMONS, which he touts as a multi-faceted community center that would occupy the 160,000-square-foot facility that was once the K2 ski-manufacturing plant. What he needs is "a $1 million baby" to provide the rest of the $2 million necessary to fund the two-year runway he figures will be required to raise the total of $40 million to make the project a reality. The "reality" of Sontgerath's dream would be "a Wellness Center, including many of the activities that increase wellness in a community," in the old facility that the ski manufacturer abandoned five years ago to move its operations off the island. Sontgerath, 62, and his then-partner Truman O'Brien (now a member of the 501C3 board) originally had a purchase-and-sale agreement with the K2 owners when they began putting their K2COMMONS plan together about five years ago as a for-profit entity. But that agreement expired almost four years ago and they've operated in the facility since then without an agreement. Songerath is hopeful he can convince the firm to donate the building and its18-acre site, which K2 has been unable to sell or lease, to what has become a non-profit ownership that will operate in much the manner of a public development authority. Who will want to put money into the project? Sontgerath is convinced that "social investors" will be attracted and suggests "if you look at the list of foundations, as in the PSBJ Book of Lists, there may be only one or two of the top 25 who would not be candidates for a pitch." "K2COMMONS will raise the quality of life for an entire community and the list of foundation descriptions, you see health, wellness, community building, at-risk youth, families, nonprofits, arts and environment over and over," he adds. Two of Sontgerath's board members have put up part of the initial $1 million. At first, the plan drew a mix of support and opposition from residents of Vashon, an island about the size of Manhattan that's reachable only by boat, a 22-minute ferry ride from Seattle. Some of the island's 10,000 residents viewed Sontgerath's dream as a benefit in terms of possible job creation while others feared it would take jobs away from Vashon's business district. But converting the ownership from private to non-profit reduced many of the community concerns, Sontgerath says. Plus K2 had the property rezoned from manufacturing to community business. Sontgerath believes that K2COMMONS can be a national model for community centers in many towns around the country where manufacturing buildings have been left abandoned as jobs and companies disappeared. And because of the considerations about a "model" that could be implemented elsewhere, Sontgerath says the project will utilize state-of-the-art energy and water systems to achieve a 'zero impact' community center. Sontgerath, president of Heritage Group Ltd., a real estate development firm which specializes in older- and historic-property restorations and urban revitalization and affordable housing projects, has the right background for the project. Since 1980, his firm has guided three major Seattle renovation projects in the Pioneer Square area, as well as doing conversion of historic buildings in Omaha, NE, and Des Moines, IA, into affordable housing As Sontgerath leans over the drawings where details of the vision take shape, he points to a possible 20-room boutique hotel (called oHTEL), a k2 museum, a suite of one-person offices, bowling center and café, a winery, business incubator, daycare center staffed by senior volunteers, tennis courts, conference center and a healthcare facility. Opting for the conservative side, he projects that the center would provide "at least 70 good-paying jobs" on the island, for which the loss of K2 and the loss of Seattle's Best Coffee roasting operations, closed after SBC's purchase by Starbucks, have been economic blows in recent years. He figures another 70 jobs would be created over the two years of construction and build-out. Other than the retail businesses in Vashon's town center, the island is home to more than a dozen small family farms, praised in a New York Times article earlier this year as "the kind that in most places were swallowed up by big agribusiness decades ago." The Times article called Vashon "a rural throwback," just fine to the many prominent residents, particularly artists, who make their homes there. But most residents need jobs. Sontgerath says design architect for K2COMMONS will be Bohlin Cywinski Jackson at the direction of Peter Bohlin, 2010 AIA Gold Medalist. He describes it as "a collaboration really of the original Architect, along with Peter Bohlin, and students from the UW School of the Built Environment." The detailed financials that Sontgerath has put together would create a modest enough square-foot cost that he says "we can create a rent-revenue ratio that basically guarantees success for any tenant." Meanwhile, K2COMMONS would provide "between $500,000 to $1,000,000 per year to be reinvested back into the community."

Although he grew up in a household in which his newspaper-editor father kept the focus on current and past events, Christopher Kent has built a career looking ahead at events that could happen. He's a futurist, meaning he peers sometimes decades into tomorrow to advise clients on things that might occur and how they could possibly affect the outcome of those events. Kent, 42, who was born in Olympia and spent some of his early years in Yakima where his father was the editor of the daily newspaper for a time, is one of a group of seven friends who formed the Washington, DC based Foresight Alliance in 2009 after being downsized at about the same time a year earlier. They are among an estimated 100 or so professional futurists around the Beltway and about 2,000 to 4,000 around the world. Because when people find out he is a futurist they usually want to ask about a specific event or outcome, like who'll win the presidential election in November or what the market will do next week, Kent is quick to make it clear that he doesn't predict the future. "While we don't predict the future," says Kent, a graduate of Marquette University who did graduate studies in Toronto. "We help clients understand the range of futures they face and what they can do to achieve the most beneficial and successful future." But sometimes clients may not want to look into the future, as when he had a client in the housing business near the beginning of the economic crisis. "We said we need to talk about the housing bubble and they told us they didn't want to have that in any discussion or planning." "Some clients are just superstitious that if they talk about something, it might happen, so they don't want to discuss it," Kent says. "So if we know there's something the client doesn't want to deal with, we try to find ways to circle back to the topic." "For too many people, the future is the next quarter," says Kent, "but we try to force our clients to look out five to 10 years and present them with four or five alternative scenarios. That forces you to look past the trees to the forest." Kent says that when people learn he is a futurist, they usually want to know the outcome of something specific, like an election. Adding "that's not what the future is; there is no single outcome to foresee." An example of how far ahead Kent and his cohorts can be called upon to explore the possible futures was the Food 2040 in-depth look at the future of agriculture, food and consumers in East Asia, using Japan's emerging economy as an indicator for emerging economies. He sent me an e-mail a few weeks ago to see if I was interested in that recent Foresight Alliance project, which stirred my curiosity because of possible implications for the agriculture industry and economy of this country. Food 2040 was described as "an in-depth look at the future of agriculture, food, and consumers in East Asia, using Japan's mature economy as an indicator for the emerging economies of East Asia, especially China." Results of Foresight Alliance's year-long study under the sponsorship of the U.S. Grains Council were presented to the Japan Business Foundation, offering what Kent emphasized were insights "not meant as predictions, but rather as plausible futures. They were designed to help stakeholders uncover new opportunities for food and agriculture." Although the findings related to and were presented in Japan, they offered some interesting information of potential value to agricultural interests and consumer businesses in this country. Two I found particularly interesting. One, under the heading "Whatever China Wants," suggested that by 2040, Chinese preferences will heavily shape the global food and agriculture market. The other, headlined "Asia Without Kitchens," could well have relevance to this country as well. The report suggested that in 2040 "more than 70 percent of food expenditures in Japan could be for food prepared outside the home." "Consumers will rely on trusted brands, stores, and food-service outlets for most of their food, a majority of which will be processed or pre-prepared," the report noted. "This trend will spread across other parts of urban East Asia as well, especially the cities in China, Taiwan, and South Korea." Kent, who presented key parts of the report, emphasized the trend will be toward pre-prepared foods, not fast food. "It will be fast on convenience, not fast preparation." I was also interested in whether their look at the food future took into account the apparently growing global backlash on genetic alteration of food, but Kent said their research shows that, in a number of countries, the concern is diminishing. "Our research is showing that the case is starting to be made that none of the doom and gloom collapse of genetically modified (GM) foods has come about, and the next generation of GM crops is starting to have traits that are beneficial to consumers." As a one-time political writer and ever-since political watcher, I couldn't help but go back to politics and possibly spur him to predict the outcome of this year's elections. "Who might win the White House in November is not our thing," he replied. "But the political feeling and will of the country reflected in a election are our thing in looking at the future because who controls the country is important long term."

David Giuliani, the Seattle-area entrepreneur who launched two companies that became new-innovation success stories, has co-founded a statewide business organization named Washington Business Alliance that he hopes can help bring a new innovation to the way government makes decisions. It might be said that Giuliani, who launched and built Optiva and Clarisonic into hugely successful companies that revolutionized teeth cleaning and skin cleansing, has set his sights on building a business organization that would cleanse government of the need for ideology in its decision-making. Basically, his Washington Business Alliance is focused on bringing "a reasoned, collaborative approach to public policy that transcends partisan politics." Optiva, of course, was the maker of SoniCare, the first electronic toothbrush. After Giuliani guided Optiva into the hands of Philips Electronics, he created Pacific Bioscience Laboratories and produced the first electronic skin-cleansing device, Clarisonic, and sold it last fall to cosmetics giant L'Oréal USA. Giuliani stayed on as Clarisonic CEO, though he made clear in an interview that he will be stepping down from that role this fall to devote full-time attention to the task of chairing Washington Business Alliance, which he co-founded last year with Howard Behar. Behar's credentials are about as impressive as Giuliani's. He spent the last 21 years with Starbucks, which included serving as President of North America and as founding president of Starbucks International. Giuliani says the organization, which is seeking business members rather than individuals and has a dues structure ranging from $500 to $15,000 per year, is "committed to developing effective solutions that are not constrained by political expediency or ideology, with an emphasis on data-based solutions for long-term results." That phrase, "not constrained by political expediency or ideology," is a stop-and-reread phrase because what has struck me about the organization, and the leadership composed of successful entrepreneurs, is that it is truly seeking to look past the political to arrive at solutions in a process beyond the ideological spectrum. It seems to me that for business people who wish to depart from the process of having to first vet ideas by placing them on the ideological spectrum before we can discuss them, that focus alone merits a conversation and moves the organization's goal from the Quixotic to the possible. And Giuliani and Behar have attracted other business leaders to their leadership ranks, including Norm Levy, who has served as corporate strategy counsel for almost three decades to companies like Starbucks, Boeing and John Fluke Manufacturing, and long-time Boeing executive Debbie Gavin. With a background as financial vice president of several Boeing units, Gavin will be the association's treasurer. "The idea isn't for business to disengage from government, but to engage differently," says Roz Solomon, who was plucked from the legal consulting business with a background that includes having been an administrative law judge for Washington State, to be executive director of the organization. "Our goal is to ferret out those things that government is doing well and reinforce them," Solomon adds. "There are a lot of parts of government that are intractable, but there are also a lot that aren't." Giuliani, 66, who was Ernst & Young's manufacturing Entrepreneur of the Year nationally in 1997, explains "we're focusing on a non-political methodology, seeking to attract business people who realize that solutions to problems don't necessarily happen through political means." I asked Giuliani and Solomon during an interview whether seeking members for a non-political organization at a time of the political intensity of an election year was really a good decision. "It's important to use the political cycle as an opportunity," Giuliani replied. "There are a lot of people who are writing checks for candidates and asking themselves 'should I really be writing this check? Then why is it so dissatisfying?'" "The election process tends to intensify the frustration people feel about politics, causing many to wonder - what can I do to fix it?" Giuliani added. "There are likely to be a lot opportunities for post-election messaging for Washington Business Alliance that will resonate with the voters." And while the focus of the new organization is the state races for now, Giuliani notes that there's what he describes as "a national movement to create this type of organization in other states," which in the future could lead to initiatives relating to influence on decision making at the national level. Giuliani says his group has already had a lot of interaction with the Oregon Business Association, a group, similar in focus that has been in existence for several years. "There are a lot of people dissatisfied with what they view as a dysfunctional, polarized system," Solomon added. "It's people left with those sorts of questions about politics that we want to engage for the future."

Dave Smith's"aha moment" about the unmet need for big-men's clothing came at a Microsoft shareholders meeting at Safeco Field a few years ago when all attendees were given embroidered shirts to mark the occasion. But there wasn't one that would fit Microsoft CEO Steve Ballmer's 3X size, Smith recalls, adding "It wasn't pretty."

 

Smith, who at the time worked for a company that provided promotional products for firms, including Microsoft, recalls that "we always had trouble finding 2X and larger products for customers."

 

Thus was born an idea for Smith, but it couldn't come to fruition until he met Doug Hill, who was making a presentation to Smith's boss at Staples Promotion and Smith recalls thinking: "this guy's a born salesman."

 

Conversations soon guided them, about four years ago, to go into the clothing business, where they both had long experience, and discussions led them to agree "big and tall (which they refer to as B and T) was wide open so we just started with it."

 

After a false start with a big-and-tall retail outlet in Seattle's Georgetown neighborhood, they launched Bentley BT, a Seattle-based online start-up that promotes its Bentley Performance Underwear with the tagline "we can CYA up to 8X."

 

Bentley BT is an 18-month-old company specializing in the design, production, and distribution of fashion underwear for big and tall consumers, a market they contend is ignored by most retailers who don't want big and talls "jamming into their dressing rooms or crowding up their aisles. So it's a big deal to these guys to be treated as something special."

 

It wasn't on a lark or for a laugh that they decided underwear would be the first product for Bentley BT, according to Hill, but rather on the basis of some market research that showed "underwear is a big problem for the big guy."

 

As for the general clothing market among big and talls, Smith says: "All you have to do is look at the statistics showing that over the past 20 years, people in the U.S. and other countries are getting bigger and taller to understand why we view this niche market as opportunity. And it's one with enormous growth and profit potential."

 

The domestic big-and-tall men's apparel business is estimated to be $16-$18 billion, and growing, with them men's underwear portion of that market estimated at more than $4.5 billion.

 

"Our target is to capture one-half of one percent of that market, which would be $24 million in sales," says Smith.

 

"We really think that we make the world's greatest underwear for our consumer so the next step would be to go right into t-shirts," Smith says. "Once we've developed trust on the part of this audience, we can do all kinds of clothing."

 

Hill started as a clothing salesman, moved to regional sales for a women's sportswear line and eventually joined what was then Seattle-based Brittania Jeans as Midwest region manager. When ex-Britannia execs started Generra Sportswear, he joined them in Los Angeles to start their West Coast Women's Division.

 

Smith and Hill first produced warmups "in very large sizes" for basketball players who were NIKE athletes and when other big-and-tall guys saw the warmups, "we were urged to offer them to a broader market," Smith recalls. "So we decided there was a niche play in providing fashion to that consumer audience."

 

In the short time they've been in business, they have distribution in about 30 specialty stores and their product has been featured on Amazon.com in the big-and-tall category. Plus Smith says they are in initial conversations with major retailers.

 

But they emphasize the importance of web sales by noting that 50 percent of all big-and-tall business is conducted on line and, says Hill, "50 percent of that is women buying for men."

 

Their average online transaction is for about $150, "so we have good margins," says Smith, who adds that "a lot of people who discover our site are afraid we won't be there next time so they order up to a dozen items."

 

And Smith, who has a 34-inch waist and says Hill has a 32 waist, emphasizes that whatever the size, from 32 to 70, "the price for the underwear is the same."

 

At this point Bentley BT is in its start-up phase, although they're already booking orders in the hundreds online.

 

Their underwear is made in China, but Smith says "we have the fabric and the sourcing to do them in Los Angeles."

 

While they'd like to zero in on athletes, they've already begun to target firemen, ," says Smith, recalling they once met a group of firemen in Chicago sitting in the summer heat as a lightning storm was going on and "once we told them we make underwear that could really help them in high heat situations, they were hooked."

"Our next offering will be to the troops," he adds. "My son was a spec ops medic and he knows firsthand what bad underwear can do when you are in the field."

 

As far as exit strategy, Smith says their marketing is aimed at "the disenfranchised customer, retailing's forgotten guy. Some company is going to say 'let's fold these guys into our operation.'"

John Buller and H. Stuart Elway, long-time players in the old top-down process of decision-making in Seattle and Washington State, are embarked on separate initiatives whose basic message is that things won't work that way in the future.

 

Both hope to spark new forms of civic engagement aimed at broader inclusion in charting the region's next chapter, but that "broader inclusion" may come in fits and starts, and face challenges before broad acceptance.

 

Buller, a business and civic leader for the past 30 years, summarizes it as "The Seattle Way has to be replaced by a recognition that social media has made the world flat rather than top-down so we have to make discussions about our future much more broad-based."

Or as Elway puts it, :the whole social media thing has the potential to bring us full circle to the original way Democracy got started."

But both would agree that bringing social media integrally into decision making in a manner that doesn't permit a few strident bloggers or vested-interest Internet sites to drown out the crowd ironically requires some strategy and structure.

 

Elway, whose Elway Research Inc. with its interactive polling and opinion-tracking has been a key initiator in helping shape business, policy and governmental decisions since 1975, is seeking to attract interest in what he refers to as "The Next Northwest," though his focus has really become "The Next Washington."

Buller, a member of the board of the Washington Athletic Club and the incoming chair of Seattle Seafair, is one of the Next 50 Ambassadors, a group of civic leaders seeking to promote a series of events to celebrate the 50th anniversary of the six-month run of the Seattle World's Fair.

 

But he's carried the idea into an appeal to dramatically embrace social media to gather an array of visions for the region's future, not merely input from established groups.

While Buller is focused specifically on Seattle 50 years hence and Elway's focus is geographically broader, they are both seeking to not just stir interest in discussing the future but in igniting a desire for broad-based involvement in shaping that future.

 

And both agree that social media is the factor that will negate reliance on the old top-down way of making decisions and that, in a sense, a matured social media can represent a return to the way Democracy itself was born - with all having an equal voice in the decisions.

 

Buller is a Nebraska native who came to the University of Washington in 1965 to play basketball, but injuries and illness shortened his career after he led the freshman team in scoring. He wound up as a graduate-assistant coach while he got his MBA.

 

Among his leadership positions, Buller served as senior vice president of marketing at The Bon Marche/Macy's, vice president of alumni relations at UW, head of the local organizing committee for the 1995 NCAA Final Four and CEO at Tully's Coffee.

 

Elway launched his company soon after getting his doctorate in communications from the University of Washington in 1975. His Elway Poll is the only independent, non-partisan, on-going analysis of public opinion trends in Washington state and the Northwest.

 

Buller and Elway have appeared in recent months before various town-hall and organization meetings to tout the need for the region to focus on mapping a plan for the future, each focusing on his ideas for defining the future. But both concede there hasn't been a rush to seize the initiatives they are offering.

 

Both lament the current state of discourse and suggest that the absence of broad involvement in the conversation is a key reason.

 

"We're having this great debate about the role of government and it's being conducted in the most partisan atmosphere imaginable," notes Elway, most of whose research and focus has been on policy matters and government.

 

What he is seeking to achieve with his "Next Northwest" is having a "systematic, statewide conversation about changing expectations for government and institution." Social media would ideally have a large role in those conversations.

 

Buller is even more forceful. "Journalism has turned into spinism. People tend to find the medium that supports their version of the world and they don't need to talk to anyone who disagrees."

 

"We aren't really discussing Seattle's next 50 years," Buller says, suggesting that current debate about the proposed new arena and its possible impact on the Port of Seattle's future are perfect examples of sound-bite decision-making for the near-term without extending to "long-term, do we want to be a global city or a regional city."

 

Buller, has created both a concept document and creative brief to help guide groups, formal or online, wishing to initiate discussions on "The Next 50 - Changing the Way Seattle Looks at the Future."

 

Buller's and Elway's shared vision of the need for a vision, or visions, merits broader attention, particularly in the social-media arena that they understand will be vital to any meaningful discussion.

 

That attention has thus far proved elusive. Or as Elway quipped ruefully, "I can't find the financial support to carry this out so I guess I'll have to win the Powerball to complete it."