PBT Consulting

CRAZY COSTUMES PET OWNERS HAVE THEIR PETS WEAR DURING HALLOWEEN

HOW ITALIAN DESIGNER MAURO PORCINI HAS TRANSFORMED 3M INTO A MORE EXCITING DESIGN-DRIVEN CONSUMER PRODUCTS COMPANY

Since arriving in Minnesota from Milan last year, Mauro and his wife, Elisa, can't help but stand out. | Photo by David Bowman

-

Meet the audace global design guru who has infused his elegante sensibility into a once-blando $27 billion American conglomerate.

1.  Mauro loves his pink lion. One Saturday afternoon last spring, he and his wife, Elisa, front-runners for the title of Minnesota's most glamorous Italian transplants, stumbled onto an eclectic sale in a parking lot on the outskirts of St. Paul. As soon as he saw the white stone statue of a regal lion, Mauro didn't hesitate forking over a few hundred bucks. He knew exactly what he wanted to do with it.  He says.  

"I painted it fluo [as in fluorescent] pink myself."  

And he put it in his front yard for all to see.

Mauro Porcini is the resident design guru at 3M, the materials-science conglomerate based in St. Paul. Throughout the company, he's simply known as Mauro--a renaissance man who's transcended his last name. Although most of his Midwestern colleagues pronounce it MORE-oh, it actually rhymes with WOW-whoa, which is also the typical reaction to the flamingo-colored sculpture that now resides across the street from the Oak Ridge Country Club. The club had been lion-free for 90 years until Mauro moved from Milan in 2010 to Hopkins, a Minneapolis suburb dotted with low-pitch ranch homes like his. "The neighbors stop and take pictures," he says, smiling as he gazes at his yard one night in June. In his mind, Mauro says, the beast roars,

"This house is owned by a designer, someone who likes to think in a different way!"

Mauro Porcini says.  

"Everything around you, every product, tells a story about you to the world."

He delights in the shock, both in the color and the juxtaposition, of a sculpture associated with ornate European castles or Italian piazzas transplanted to a straitlaced American suburb. The piece works, he says, because "it's completely out of context."

Like Mauro himself. The stylish and unapologetically passionate 36-year-old designer oozes European panache from every pore of his intensely bronze skin, yet he works at one of the most low-key, unassuming companies in corporate America. 3M has been a quiet innovator by design. Although its 85 R&D labs around the world earn more than 500 patents a year and are responsible for an astounding 75,000 products on the market in such fields as medical devices and consumer electronics, the $27 billion giant is still best known for creating ingenious but utilitarian items such as Post-it Notes, Scotch Tape, and Scotch-Brite Scrub Sponges.  Mauro says.

"One of the biggest problems we have as a company is understatement. We're trying to change that."

Mauro is about love--easily his favorite verb, as in "You have to love society and the people you design for"--not specs. He's here to trigger emotion, in customers, colleagues, and 3M partners. To be, as CEO George Buckley says, "an infectious agent" for design. No wonder Mauro's crazy about the statue. He's 3M's hot-pink lion.

2.  Mauro loves the first product he designed for 3M. When he joined the company in 2002, it had plenty of industrial designers but no one like the then 26-year-oldprodigio who had made his bones creating goods at Philips and with his own online design outfit. Antonio Pinna Berchet, 3M's head of corporate marketing in Milan, was eager to make its office wares stand out. The company was relying on functional excellence, but Italian consumers value aesthetics.  Berchet says.  

"We wanted to create more impulse buying with more attractive products.  His long-term goal was more institutional. My thinking was design would be part of research and development."

Mauro dresses up at 3M as if it were a Milanese runway. His wardrobe, he says, conveys "creativity and business savvy." | Photo by David Bowman

After just a few months at 3M, Mauro showed the brass that he was bilingual in more than one sense: He can talk business as well as design. (Six Sigma has never sounded so sexy as when Mauro riffs about his love for process.) He convinced the projector team in Austin to let him compete for a redesign that was already under way. He tapped his Milan network and brought in Pininfarina, the Italian firm renowned for its work with Ferrari and Maserati. Mauro's group made the overhead projector striking, with the sleek, inviting lines of a luxury car.  Merchet says.  

"Always our projectors have been very industrial and very standard.  This was absolutely new."

Mauro says.

"You wanted to touch it." 

Click Image To Enlarge

What got the attention of pragmatists throughout 3M was the bottom line: Sales doubled. The S10 Multimedia Projector showed what design could do for business.

3.  Mauro loves watches. He wears his passion and creativity on his sleeve. Literally. The crazier the watch the better. He has about 30 in current rotation. He'll wear the silver Philippe Starck with a hole in the middle to work, then change into the white Calvin Klein model with a tiny, almost invisible clock face for dinner.

Mauro Porcini says.  

"In Milan, you breathe design. I'm trying to bring some of that here."

Click Image To Enlarge

Creating emotion around a purchase is not an abstract concept for Mauro: This is how he shops for watches. At his team's holiday party in the Uptown district of Minneapolis last year, he fell hard for a colleague's iPod Nano watch, designed by Scott Wilson. When Mauro realized there was an Apple store nearby, he led the group on a shopping excursion, where he bought two.  He says with a laugh.

"I can buy five [watches] in one week. They grab my stomach."

He has plenty of love to go around. The man owns 65 pairs of shoes.  Elisa says.  

"I married a monster." 

4.  Mauro loves the Little Tape Man.  "Isn't he great?" he says, cradling an anthropomorphic tape dispenser in the palm of his hand. Dressed in a white Gucci jacket, black V-neck T-shirt, and black pants, Mauro stands in a 3M conference room surrounded by dozens of his team's creations. Safety goggles sporty enough to wear on Milan's fashionable boulevards. Ankle braces with a clever lace-up system. An air purifier that could be mistaken for a pricey vase. Mauro says.

"But the Tape Man is my mascot."

In 2004, 3M executives in Europe asked him to focus on rejuvenating tape dispensers. The novelty of the 1961 invention of transparent Scotch Magic Tape had long since worn off.  Mauro says.  

"The idea was a product that could almost be animated, living on your high-tech desk.  Like a companion."

He brought in Stefano Giovannoni, the Milanese designer who had transmogrified Alessi's kitchen utensils into artful objects worthy of display. Giovannoni's Omino Scotch Tape Dispenser (omino is Italia+n for "little man") is a figure crawling on his stomach. The tape emerges from his head and attaches to his upraised foot. The charming dispenser appeared in design books and exhibits.But it never crawled its way into stores. It even found a home on the desk of Buckley, the CEO, who says,

"It shows how design can differentiate a simple roll of tape.  People here were thinking, Oh, we love it, but is there a market big enough for this? The company was not ready for it."

From Masking Tape To Mauro

A sampling of 3M's hits, past and present

Click Image To Enlarge

In the early years, despite the blessing of top management, who gave Mauro the mandate to build a design center in Milan, he often met resistance in the labs. He recalls this without a trace of bitterness. 3M is a 99-year-old bastion of proud left-brain thinkers whose highly rational and technology-driven approach has served it well.  He says.

"My biggest roadblock was the lab directors who were in charge of creating new products.  Here arrives this young guy from Italy, from the periphery of the 3M empire, and he's telling us how to do innovation?'"

Mark Sorlien, a technical director and 30-year employee, whose plain blue button-down shirt and earnest demeanor evoke a high-school science teacher, was one of the skeptics.  He says with his eyes wide with bewilderment.  

"At first we thought, What is this guy talking about? Mauro talked about 'what does that mop on the shelf say to the customer when she shops?'

I'm thinking, It's a mop; how much water comes out?"

Although never commercialized, the Little Tape Man, along with other early designs, ultimately succeeded.  Mauro says of the rejections. 

"They helped to shake the system.  They showed the direction we needed to go."

The failures helped pave the way for a crop of playful items, including a high-heel tape dispenser, Elisa's favorite, and an apple Post-it dispenser used by Buckley.  He says.

"It's a dispenser, for goodness sakes, but there's no reason why it shouldn't be beautiful."

These creative designs have sold well. As Joe Harlan, executive vice president of 3M's $3.8 billion consumer and office business that bankrolls most of Mauro's work, says,

"Once you start adding value, resistance goes away."

5.  Mauro loves his house. From the lawn ornaments to its interior, Mauro's home embodies his design sensibility.  Robyn Waters, the former Target design chief and a recent dinner guest says. 

"You walk in and your jaw drops."

Mauro tore down the kitchen, living room, and den walls, transforming a predictable ranch-style floor plan into an open, modern, and whimsical space. Everywhere you look, he has added seemingly incongruous elements that meld together: a Frank Gehry cardboard chair; a Madonna and Child painting by his father, an architect; a spotted goat pelt (from Elisa's days as a designer at Gucci); a delicate glassblown bird on a shelf tilted at a precarious angle. The coup de grace, though, may be the master bathroom, with a two-seater Jacuzzi that fills from a spout in the ceiling. He turns on the water, marveling at the long, thin column of liquid.  He says.  

"Don't you just love that?" 

Twice a week or so, Mauro and his wife have guests over for dinner, just as they did in Milan--3M'ers, local designers, or out-of-town friends passing through. One night in June, he opens the door, having changed from his office attire into a definitely NSFW open-collared white shirt unbuttoned halfway down his chest. Before you know it, you're sipping prosecco with Grand Marnier and pureed pear and noshing on Elisa's exquisite appetizer spread of bruschetta caprese, Pizza Margherita, and Italian chicken salad. For dinner: wild mushroom agnolotti with a porcini (of course) cream sauce, topped with Parmigiano-Reggiano. Mauro says, breaking out the Barolo he brought from Milan in his suitcase.

"I starve when Elisa is not in town." 

This fall, he will throw open the doors to 3M's new design center in St. Paul. Much like his home, it is meant to entice.  He says.  

"People will see this intriguing space and want to visit."

A couple of years ago, in an effort to further integrate design at 3M, Mauro proposed building the company's design hub at headquarters--and moving from Milan to the U.S. to run it.  He says.  

"In Milan, you breathe design.  I'm trying to bring some of that here."

As he walked through the unfinished space last summer, wearing pink pants, pink socks, and a black custom-tailored Italian jacket, Mauro could already see the center humming with designers. A river of fuchsia winding along the carpet from the entrance will usher people into offices that will look dramatically different from the muted colors and tall cubicles that pervade the 3M campus. He says matter-of-factly.  

"The project rooms will have grass."

Artificial grass. Lawn furniture. And the floor by the kitchen area will be white tiles. Mauro loves white (see his iPhone, his watch, the bleached wood floors in his house). He has sent the tiles back four times already because they weren't right. That sort of perfectionism would normally cause ripples, but he has enough goodwill banked to get away with it.

And his influence is growing. He's the head of global strategic design in the consumer and office unit, but his work extends to other divisions. Buckley says 3M is spending five times more on design than five years ago. And Mauro's 50-member group is becoming more global, adding designers in China and Japan. Brazil is next.

6.  Mauro loves 3M's new touch-screen technology. He didn't design it, but he's helping to promote it. 3M has 46 core technologies--adhesives to abrasives, films to finishes--which it uses to seed products across various industries. A lot of the materials go inside other companies' offerings. (In fact, the average cell phone can contain a dozen 3M components: materials that brighten the screen, seal against water, help bond metal and plastic parts, and provide shock absorption.)  Mauro says.

 

 "For a designer, 3M is like a candy store." 

From top to bottom: The new design center at 3M headquarters; imagining uses for a new touch-screen tech; 3M's Hoop Light; his Philippe Starck watch; his renovated home.

But much of this technology is invisible to the eye, which begs the question, Where does design fit in?  Mauro says.

"We're helping our customers envision the innovation."

For 3M's ultrathin, flexible, and transparent touch-screen technology, which can respond to multiple simultaneous touches, his team and the R&D lab imagined several potential applications. A curved video-game player. A touch-screen bracelet. A washing machine with touch-screen controls on the glass door. The designers then produced a video that 3M shares with consumer-electronics manufacturers as part of what Lee Fain, the project's design manager, calls "design provocation."

Designers, Mauro says, are good storytellers. At 3M, they're charged with telling the story of a product not only to consumers but, increasingly, to the companies it supplies as well. He says.  

"In consumer electronics, you use design or you die. In a company like this, it's less obvious that design is needed, but it is."

7.  Mauro loves his Breakfast at Tiffany's poster. The iconic image of Audrey Hepburn in a sleeveless black dress, long black gloves, and strands of pearls hangs on the wall overlooking his desk. Pure elegance, perhaps Mauro's second-favorite word.  He says.  

"Whenever I interview someone, I ask, What's your definition of elegance?" 

Mauro defines elegance as consisting of simplicity and balance--"like jazz," he says--concepts he expounds on continually within 3M.  Berchet says.  

"He's started a sort of design school inside 3M.  He's teaching others the right approach."

Sorlien, the once-skeptical 3M technical director and mechanical engineer, is now "a coconspirator," Mauro says. Sorlien worked with the design team on a new filtered-water pitcher that takes up minimal space in the refrigerator yet has a nifty fast-flow filter, based on preexisting 3M technology. Sorlien says as a shorthand explanation for how he's not a designer. 

"I'm an Iowa guy."  

But he's undeniably proud of how, well, elegant the pitcher is.  He says, admiring the superslim profile--and the fact that it holds more water than the previous rounder version. 

"If you'd have given me 10 years, I'd never have come up with this.  What Mauro and his designers helped us with is form plus function."

8.  Mauro loves the Hoop Light. A couple of years ago, he was part of a three-day brainstorm looking at 3M's lighting technology in hopes of creating a business that could target a higher-end market of architects and interior designers. The Hoop Light that emerged from the new business is unlike anything previously created by 3M. At 9 feet in diameter, the fixture looks like the base of a chandelier minus the fancy lights. Inside the slender band are LEDs and reflective films and filters that spread the light out, creating an even glow. The piece can also change colors, altering the mood of a room. Suspended from thin cables, it floats like a halo.

Click Image To Enlarge

The Hoop Light, along with a slew of other chic creations, is getting the company noticed in design circles as never before. Last spring, 3M participated in the Milan Furniture Fair, the largest furniture trade show in the world, a coming-out party that Mauro had anticipated for years. Working with local designers, his team put together a showcase that married 3M engineering and its emerging design focus. A flexible adhesive mat dotted with lights can be attached to walls or sculpted into a curving wall of light. The Sunlight Delivery System collects natural light from the roof and distributes it to windowless areas of a building through a sort of plumbing network. The exhibit offered a captivating experience in lieu of a straightforward sales pitch.  Matthieu Aquino, the design manager in Milan who spent a year preparing for the fair says.

Click Image To Enlarge

"We didn't go into much detail about the technology. It was very different for 3M."

 Mauro Porcini says.  

"Whenever I interview someone, I ask, What's your definition of elegance?"

The new business, architectural markets, has one of Mauro's designers on board. He's involved in shaping products, marketing, and the business plan from the start. Another first at 3M--and the kind of integration that Mauro had envisioned early on and is eager to replicate.

9.  Mauro loves his bobblehead. It's a suave little doll, a mini-Mauro in a brown leather jacket, matching brown shoes, and a black shirt. Mauro displays it on his desk because it was a gift from a 3M leadership event last February. Each of the managers got one. To Mauro, the figure is another sign that he's become part of the leadership team and that 3M's blue-button-down brigade accepts him.  Waters, the ex-Target exec says. 

"Mauro's making it okay to talk about and be passionate about love, soul, and the customer experience, not just about technicalities and business plans, although he can talk about those too."

In the consumer and business unit, says Harlan, design is the key to differentiating 3M's products, its packaging, and even its store displays in an increasingly crowded market: "The strategy is to get design throughout the organization, and Mauro's the guy."

For all the outward differences between Mauro and 3M (his dark gray Porsche pops in the sea of sedans in the parking lot), he focuses on the similarities. He says of his colleagues. 

"They're design thinkers.  We're just waking up something that was already here."

The designer's goal, as he explained to graduates at the University of Minnesota's College of Design last spring, is not customer satisfaction. That's a terribly low bar. You're just meeting someone's needs. If you're a designer who loves your customers, "you surprise," He said.

"You enter the sacred field of the magic, of the extraordinary, of the memorable."

For Mauro, that's amore.

COMMENTARY:  3M Company (NYSE: MMM), formerly known as the Minnesota Mining and Manufacturing Company, is an American multinational conglomerate corporation based in Maplewood, Minnesota. 

3M has nine sales offices in eight states and operates 74 manufacturing facilities in 27 states. Internationally, 3M has 148 sales offices. The Company operates 93 manufacturing and converting facilities in 32 countries outside the United States.

With over 80,000 employees, they produce more than 55,000 products, including: office products, home & leisure products, adhesives, abrasives, laminates, passive fire protection, dental products, electronic materials, architectural products, displays & graphics products, medical products, safety & security products, car care products (such as sun films, polish, wax, car shampoo, treatment for the exterior, interior and the under chassis rust protection), electronic circuits and optical films. 

3M has operations in more than 60 countries – 29 international companies with manufacturing operations, and 35 with laboratories. 3M products are available for purchase through distributors and retailers in more than 200 countries, and many 3M products are available online directly from the company.

I am totally amazed at the broad variety of products the 3M has created and distributes throughout the world.  These are products whose brand names  we are familiar with, but are not aware are produced by 3M.   

Courtesy of an article dated October 1, 2011 appearing in Fast Company 

THE STORY OF THE US NAVY'S SEAL TEAM 6 BODY ARMORED AND HIGH-TECH EQUIPPED DOGS THAT RAIDED OSAMA BIN LADEN'S FORTRESS

If you see this dog coming for you, run. Thanks to his extensive training--and customized body armor that can cost upwards of $30,000--he's bulletproof, can hear through concrete, and can record high-def video of missions, even in the dead of night.

Since the moment it was revealed that the "nation's most courageous dog" served alongside the 80 Navy SEALs who took out Osama bin Laden, America's fascination with war dogs has hit a fevered pitch. And while the heart-tugging photos of these four-legged heroes are worth a look, so is the high-tech gear that helps them do their job.

Last year, the military spent $86,000 on four tactical vests to outfit Navy Seal dogs. The SEALs hired Winnipeg, Canada-based contractor K9 Storm to gear up their four-legged, canine partners, which it has used in battle since World War I. K9 Storm’s flagship product is the $20,000-$30,000 Intruder, an upgradeable version of their doggie armor (you can check out the full catalogue here). The tactical body armor is wired with a collapsible video arm, two-way audio, and other attachable gadgets.

"Various special ops units use the vest, including those in current headlines," says Mike Herstik, a consultant with International K-9, who has trained dogs from Israeli bomb-sniffing units to the Navy SEALSs. "It is much more than just body armor."

The big idea behind the armor add-ons boils down to a simple one: the key to any healthy relationship is communication. Each dog is assigned one human handler. To operate efficiently in a tactical situation, they need to be connected.

So how much high-tech connectivity does a dog get for $30,000 anyway?

Using a high-def camera mounted on the dog's back, handlers can see what the dog sees, using handheld monitors. Jim Slater, who cofounded K9 Storm with his wife Glori, says footage is stable because the entire module is sewn into the vest. With unpredictable light conditions, like middle-of-the-night missions, the camera adjusts automatically to night vision. The lens is protected by impact-resistant shielding. And since we're talking about SEALs notorious for amphibious assaults, the system is waterproof.

In Abbottabad, the patented load-bearing harness would have enabled a Navy SEAL handler to rappel from the helicopter with his dog strapped to his body. Once in the compound, the dog could run ahead to scout as the handler issued commands through an integrated microphone and speaker in the armor. The proprietary speaker system enables handlers to relay commands at low levels to the dog. "Handlers need to see and hear how their dog is responding," said Slater. "In a tactical situation, every second counts." The encrypted signal from dog to handler penetrates fortified barriers like concrete, steel-fortified ships, and tunnels. That translates to standard operating ranges up to four football fields.

The armor itself protects against shots from 9mm and .45 magnum handguns. Slater is a veteran police dog trainer and built the first vest after a prison riot. He realized he wore full riot gear, while his K9 partner, Olaf, was basically naked. So he started making vests. The weave technology catches bullets or ice picks like a mitt wrapping around a baseball; knives and sharpened screw drivers wielded by prisoners require tighter weaves.

Keeping the armor strong, but light, is a priority. "Every gram counts for our clients. So we prefer advanced fibers and innovative textiles," said Slater. "The entire communication module is 20 ounces." The average armor weighs between three to seven pounds, depending on the size of the dog and the level of protection.

They’ve even gone stealth. A silent hardware system prevents any metal to metal contact--you won't hear any jangling or see any reflective give-aways. K9 took the average 150-gram V-ring and developed a 5-gram version made of a Kevlar, poly-propylene, and nylon fiber blend. "It’s actually stronger, rated to 2,500 pounds. Completely silent, and ultralight," said Slater.

Of course, these systems don't come cheap--and it's the dogs themselves that are the real investment. The Navy’s first Master Military Working Dog Trainer (a trainer of other dog trainers), Luis Reyes emailed from Afghanistan: "There are many products that help MWDs [military work dogs] and many are ‘cool’ but not necessary. No amount of money can replace the life of a canine that saves the precious lives of our troops in harm's way."

Although new tech is the buzz, what put K9 Storm on the map is dedication to customization. Its mainstay dog armor is the more-affordable $2,000-$3,000 base model. Each vest they make is custom sized for the dog. "The fit has to be perfect or it will flop around," said Slater. That hinders mobility, or worse, can cause injury.

Clients can measure dogs themselves, or Slater will fly out for dog fittings. They’ve done 15-pound West Highland Terriers--which look like playful white puffballs but were bred to scare badgers out of holes, and are helpful in drug raids with confined spaces like air ducts. On the other end are St. Bernards, which push 240 pounds.

K9's client list spans 15 countries, from China to Switzerland. Buyers include SWAT teams, police and corrections agencies, security firms, search and rescue units, and border patrols. Slater and 12 employees spent years developing a proprietary computer-assisted design program to translate measurements into accurate patterns, which are hand sewn. However, it's as much a tech company as it is an armor manufacturer.

The next phase of development includes plans for remote-delivery systems and enhanced accessory functionality. They describe a system that would help dogs transport medical supplies, walkie-talkies, or water into constricted areas like rubble. They're also planning new appendages like air-level quality meters for mines.

No word on mounting mini heat-seeking missiles just yet. So, for now, bad guys will only have to tussle with highly-trained fangs exerting 700 pounds of pressure per square inch.

COMMENTARY:  I thought that only our combat soldiers wore kevlar protective chest and body armor and the latest electronic gadgetry.  That's what I call a combat ready robo dog.  Got to protect these incredibly intelligent and brave animals who put their life on the line catching bad guys.  They are worth every bit of that $30,000.  I love them dogs, and every terrorist and and jihadist out there, beware punks--the U.S. Navy SEAL Robo Dogs are on your trail.   

Go U.S. Navy SEALS, SEAL Team 6 and the Robo Dogs!!  

If you enjoyed this post you will definitely enjoy my post dated March 8, 2011 titled,. "The Business of Counter-Terrorism And The Elite SEAL Team Six, The Secret Fighting Group That Got Osama Bin Laden."  

Courtesy of an article dated May 16, 2011 appearing in Fast Company

CHICO, A JAPANESE SPECIALTY SHOP FOR DOGS WHO LOVE MINIMALIST DESIGN

Chico, in Osaka, Japan, might be the world's first haute-design pet store conceived with the dog's experience in mind.

If you read our site regularly, you know there are two ways to our heart: modern design and furry animals. It’s only natural, then, that anything that combines the two makes us so giddy we could punch ourselves. Case in point: Chico, a shop in Japan for minimalist doggies.

The place is designed by Osaka-based Atelier Kuu, and what makes it great -- and different from most chichi pet stores out there -- is that it's conceived with the dog's, not just the owner's, experience in mind. (Oh, quit your groaning. So some of us think dogs deserve to be treated like people. So the $#%& what?)

The space is inspired by a dog house, hence the pitched-roof silhouette echoed every which way, whether over the main counter (above) or in the product displays (below).

A tunnel -- also shaped like a dog house -- travels from the store to an outdoor dog run, where Fido can romp around and drool shamelessly while his owners shop for important canine accoutrements.

 

Back-lighting and crisp white walls and warm wood floors give the store enough design cred to make the humans drool, too.

COMMENTARY:   Woof, woof!!

Courtesy of an article dated January 31, 2011 appearing in Fast Company Design

 

AVALON VENTURES BETS THE FUTURE ON THE $23 BILLION+ PET HEALTH CARE MARKET

Avalon Ventures prides itself on making successful bets in diverse areas that other investors overlook.

Avalon’s tech team made an early-stage investment in Zynga Game Network Inc. two years before the social-gaming Gold Rush of 2010 began.

And several years ago, the firm’s biotechnology and life sciences team backed companies working on treatments for “orphan diseases,” an area that received little attention at the time but which is now a high priority for companies like GlaxoSmithKline PLC and Pfizer Inc.

Now Avalon is gearing up for another move into uncharted waters: investing in the business of keeping dogs and cats healthy.

Managing Director Jay Lichter calls it “a new paradigm,” and one that will pay off.

“I recently asked a room full of people, ‘How many of you have spent a thousand dollars or more on your pet’s health in the past year?’ At least half the people raised their hands,” Lichter said. “Currently, there’s no one else in this space doing investing. There is quite a large number of opportunities out there.”

The following table offers a breakdown of the sales of the U.S. pet industry for 2009 and the estimated breakdown for 201

		Category	2009 Actual	2010                                                                             EST
Food	$17.56	$18.28
SupplOTC Meds	$10.41	$11.01
Vet Care	$12.04	$12.79
Live Animal Purch	$2.21	$2.21
Grooming & Boarding	$3.36	$3.45

 Totals:               $45.5          $47.7

U.S. Pet Industry Expenditure since 1994⁹

Estimated Expenditure U.S. Pet Industry Next Five Years

Consumer Spending on Veterinary Services (In Billions)

Avalon has already found one. The firm earlier this month backed Aratana Inc. - which is working on pharmaceuticals for dogs and cats – alongside MPM Capital in a $20 million funding round.

Aratana, which has not yet disclosed what types of diseases it will target, aims to license human medicines for use in pets, a less daunting project than taking a drug company from the idea stage to Phase II trials.  Lichter said the approval process for such therapeutics is shorter, as the medicines in question will have already passed certain regulatory hurdles. Additionally, the Food and Drug Administration has less stringent standards for pet medications than it does for human treatments.

“I don’t start from the ‘Eureka!’ idea,” Lichter said. “I’m going to start from a human product that’s late in development. I license it. It makes economic sense. I’m looking for compounds that are currently in human development, and have shown efficacy in at least two species.”

In biotech investing, VCs are used to spending eight years and tens of millions of dollars to get from an idea to Phase II testing. By contrast, an animal health product should take three years and about $5 million, Lichter said.

For later-stage biotech companies, the landscape is approximately 20 large, public pharma and device companies circling around 2,000 start-ups, Lichter said. Animal health is more like 12 large companies being served by five or six start-ups, he said.

Risky? Probably. “But if I don’t take big chances, as a venture capitalist how am I any different than a large corporation?” Lichter said.

“As a fund, we’ve always been in areas before other people. That’s what makes us money. We’ve always been one step ahead.”

COMMENTARY:   I have considerable experience in the U.S. pet industry, and the numbers are very impressive.  U.S. pet veterinary and OTC medicines are a $22 billion to $23 billion industry. I can understand Avalon Ventures interest in the pet health care.  Here are some interesting U.S. pet ownership and demographics:

• In 2006, nearly half of pet owners, or 49.7%, considered their pets to be family members.
• There are more than 72 million pet dogs in the U.S. and nearly 82 million pet cats.
• The average veterinary expenditure per household for all pets was $366 in 2006.
• Among horse-owning households, 61.1% had at least one visit to the veterinarian in 2006, an increase of 11.9% from 2001.

U.S. Pet Market

According to market researcher Packaged Facts, the U.S. pet market grew to $53 billion in 2009 (this is higher than Pet Franchise Industry) and overall sales are expected to continue to increase over the next few years.

“U.S. Pet Market Outlook 2010-2011: Tapping into Post-Recession Pet Parent Spending” projects U.S. pet market retail sales and trends overall and for four core categories: veterinary services, pet food, nonfood pet supplies and nonmedical pet services. The report found that sales of all pet products and services rose 5 percent in 2009 to $53 billion, with sales of veterinary services increasing the most to $18.40 billion. Moreover, pent-up pet owner demand for products and services that both enhance pet health and pamper animalcompanions will begin to kick in during 2010, according to the report.

“The pet market has fared well overall despite the recession, and Packaged Facts attributes this performance to a number of factors that will also be integral to its even better performance in 2010 and 2011,” said Don Montuori, publisher of Packaged Facts. “Chief among these factors is the human-animal bond, which is an excellent insulator against recessionary cutbacks, and the ‘pet parent’ sentiment has never been higher.”

Packaged Facts projects total retail sales to increase to $55.78 billion in 2010 and to $59.28 billion in 2011, and to continue to rise to $72 billion by 2014. Still, the report noted that most economists predict a slow recovery.

“As a consequence, no pet market participant can afford to sit back during 2010 or to ignorerecessionary effects on consumer shopping patterns that could linger for years,” the report stated.

• According to the 2007-2008 National Pet Owners Survey, 63% of U.S. households own a pet, which equates to 71.1 millions homes
• As of 2006, 77% of dog owners and 52% of cat owners gave their pets medications or drugs, up from 50% and 32% in 2000, respectively
• Estimated 2008 Sales within the U.S. Market. For 2008, it estimated that $43.4 billion will be spent on our pets in the U.S. (see breakdown below):

  	Food	$16.9 billion
  	Vet Care	$10.9 billion
  	Supplies/OTC Medicine	$10.3 billion
  	Live animal purchases	$2.1 billion
  	Pet Services: grooming & boarding	$3.2 billion

• Actual Sales within the U.S. Market in 2007. In 2007, $41.2 billion was spent on our pets in the U.S. (see breakdown below):

  	Food	$16.2 billion
  	Vet Care	$10.1 billion
  	Supplies/OTC Medicine	$9.8 billion
  	Live animal purchases	$2.1 billion
  	Pet Services: grooming & boarding	$3.0 billion

Pet Insurance Snapshot

• In the U.S. alone, over 10.0 billion dollars were spent on pet medications in 2007. – NPR, Morning Edition. 
• Total worldwide sales of animal medicines was $19.2 billion in 2008, up 7.2 percent over sales the previous year – British research firm Vetnosis Ltd.

Avalon Venture's experience in bioscience certainly qualifies them to pursue a strategy of acquiring therapeutic medicines in stage II trials, that could be adapted for use in pets, is a good strategy.

Courte4sy of an article dated January 24, 2011 appearing in The Wall Street Journal's Venture Capital Dispatch