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The 50 smartest companies 2014.

IT MIGHT SOUND DIFFICULT TO DEFINE what makes a smart company, but you know one when you see it. When such a company commercializes a truly innovative technology, things happen: leadership in a market is bolstered or thrown up for grabs. Competitors have to refine or rethink their strategies.

This is what the editors of MIT Technology Review looked for as we assembled this list. We didn't count patents or PhDs; instead, we asked whether a company had made strides in the past year that will define its field. The biggest of these strides happened at Illumina, which is driving down the price of DNA sequencing to levels that will change the practice of medicine. We also found dramatic developments on the Web, in batteries, and even in agricultural technologies.

Familiar names such as Apple and Facebook aren't on this list because reputation doesn't matter. We're highlighting where important innovations are happening right now.

1

Illumina

See story on p. 28.

2

Tesla Motors

See story on p. 30.

3

Google

See story on p. 32.

4

Samsung

Maximizing the advantages of its vertical integration as it extends its lead in the smartphone market.

32 percent: Samsung's share of global smartphones sold

5

Salesforce.com

Its tools will be crucial in helping companies incorporate new data from the Internet of things.

2,150: number of business apps in Salesforce's online marketplace

6

Dropbox

Its business services are making cloud file storage more pervasive.

200 million: number of users

7

BMW

At the forefront of adding self-driving capabilities to cars.

2020: when BMW expects to begin selling cars that are autonomous on highways

8

Third Rock Ventures

9

Square

Not just giving merchants a way to collect payments on phones; now you can e-mail someone money.

$20 billion: estimated annual value of transactions processed by Square

10

Amazon

Raising expectations for what e-commerce can deliver.

12: the number of top online retailers whose sales would have to be combined to match Amazon's

11

Tencent

Building on its Twitter-like social-media service in China with electronic payment technologies.

$130 billion: Tencent's market capitalization

12

Snapchat

Meeting the need for online interactions that are ephemeral.

$3 billion: size of buyout offer from Facebook, which Snapchat rejected

13

Cree

See story on p. 36.

14

Box

Its online file storage service is becoming the basis for a wide range of applications that help people get work done.

1,000: number of third-party mobile apps that work with Box

15

BrightSource Energy

Fired up the world's largest solar thermal power plant, in California.

377 megawatts: the plant's production when fully operational

16

Wal-Mart Stores

Taking advantage of its retail heft as it rethinks payment and e-commerce technologies.

1 billion: Walmart.com page views in first five days of holiday season

17

General Electric

Its use of big data and sensors could help revive manufacturing.

$1.5 billion: announced investment in the "industrial Internet"

18

Qualcomm

Making breakthroughs in "neuromorphic" computing.

30 percent: 2013 revenue growth

19

Kaggle

Has helped many organizations crowdsource data analysis; now focusing on certain industries.

144,000: number of registrants for Kaggle data-analysis competitions

20

Second Sight

Makes an artificial retina for people with certain kinds of blindness.

74: number of blind people who have gotten the Argus II implant

21

SpaceX

Where would NASA be without it?

14: launches scheduled for this year--one more than it had from 2006 through 2013

22

Kickstarter

Keeping crowdfunding pure, it won't let donors get equity in startups.

$962 million: money pledged on the site for 55,000 projects

23

Hanergy Holding Group

Chinese energy company is snapping up advanced solar technologies at fire-sale prices.

$1.2 billion: onetime value of Miasole, a solar company that Hanergy bought for $30 million

24

Siemens

Its advances are bringing down the cost of offshore wind power.

13,100: number of its wind turbines installed worldwide

25

1366 Technologies

See story on p. 38.

26

Uber

Disrupting the taxi business.

69: number of cities worldwide in which people can use Uber's app to summon rides

27

Evernote

Its tools for managing information overload get ever more useful.

$45: cost of an annual subscription to Evernote Premium

28

Baidu

Chinese Web-search leader is expanding globally, heightening competition with Google.

8 miles: distance from Baidu's new Silicon Valley research lab to Google headquarters

29

Github

This site for sharing computer code is part productivity tool, part social network.

10.7 million: number of "repositories" of shared software on the site

30

Xiaomi

See story on p. 40.

31

Oculus VR

Its soon-to-be released virtual-reality headset should help the technology live up to its potential.

21: age of founder Palmer Luckey

32

Qihoo 360 Technology

Leading Chinese antivirus company, moving into Web search.

$12 billion: Qihoo's market capitalization

33

Monsanto

Continues to dominate development and sales of genetically modified crops.

$1.53 billion: R&D spending in 2013

34

Aquion Energy

Just finished a production line to make its low-cost battery for storing electricity off the grid.

$100 million+: capital raised

35

IBM

Its Watson system could deliver more answers from big data.

$1 billion: new investment IBM plans for Watson-related services

36

Jawbone Making fitness tracking technology mainstream.

28: countries where the Up fitness band is sold

37

Medtronic

Continues to shrink life-saving implantable medical devices.

2 grams: weight of the world's smallest pacemaker

38

Valve

A rising force in video games with its open-source console and online game distribution

65 million: number of people using Valve's game-distribution network

39

Genomics England

Will run the U.K.'s project to make UNA sequencing part of the country's health care system.

100,000: number of genomes the company hopes to sequence

40

D-Wave Systems

It's not clear whether it has invented quantum computers But its machines solve certain problems remarkably well.

30 minutes: time it took in one study for a conventional computer to solve a problem that D-Wave's machine handled in less

41

Siluria Technologies

See the story at right.

42

Kaiima Bio-Agritech

Developing a novel non-GMO way to breed crops with improved yields.

$65 million: investment raised in recent round

43

Datawind

Began as a prefect to spread cheap tablets to students in India; now selling devices everywhere

$38: price of its cheapest tablet

44

Freescale Semiconductor

Making tiny computers for the Internet of things.

2 square millimeters: size of a Freescale chip that has a processor, memory and other functions

45

Up worthy

See the story at right.

46

LG

Korean electronics giant's recant innovations include a smartphone with a flexible, curved screen.

30 percent: growth in LG's mobile phone business in 2013

47

Expect Labs

Its anticipatory software listens to your conversations so it can suggest relevant information

8: number of people who can participate in a conversation through the company's MindMeld app

48

AngelList

Influential service acts as a matchmaker for early-stage investors and startups.

$1 billion: amount startups have raised through the site

49

Arcadia Biosciences

Tests crops designed to use less fertilizer and water or tolerate more salt.

50 percent: amount of nitrogen fertilizer needed by Arcadia's rice, compared with conventional strains

50

Ripple Labs

See the story at right.

Illumina

After outflanking and outlasting competitors, it is on top of the genome-sequencing business--just as that market is about to soar in importance

(1) ALMOST 25 YEARS AFTER THE Human Genome Project launched, and a little over a decade after it reached its goal of reading all three billion base pairs in human DNA, genome sequencing for the masses is finally arriving. It will no longer be just a research tool; reading all of your DNA (rather than looking at just certain genes) will soon be cheap enough to be used regularly for pinpointing medical problems and identifying treatments. This will be an enormous business, and one company dominates it: Illumina. The San Diego-based company sells everything from sequencing machines that identify each nucleotide in DNA to software and services that analyze the data. In the coming age of genomic medicine, Illumina is poised to be what Intel was to the PC era--the dominant supplier of the fundamental technology.

Illumina already held 70 percent of the market for genome-sequencing machines when it made a landmark announcement in January: using 10 of its latest machines in parallel makes it feasible to read a person's genome for $1,000, long considered a crucial threshold for moving sequencing into clinical applications. Medical research stands to benefit as well. More researchers will have the ability to do large-scale studies that could lead to more precise understanding of diseases and help usher in truly personalized medicine.

Illumina was relentless in getting to this point. When CEO Jay Flatley joined the company in 1999, it was a 25-person startup that sold microarray chips, which were useful in examining specific spots on the genome for important variations. But while the market grew relatively fast, competition was tough. In 2003, for example, Illumina had $28 million in revenue and a net loss of $27 million. Making matters tougher, the potential for microarrays seemed limited once more comprehensive sequencing technology began to improve quickly. In 2006, when a company called 454 Life Sciences was months away from the first rapid readout of an individual human genome (that of DNA scientist James D. Watson), Flatley knew Illumina had to have a sequencing technology of its own, and he had a choice: build it or buy it. "We had an internal development program, but we were also looking at anyone in the market that already had a sequencing technology," he says now. Ultimately he settled on buying a company called Solexa.

Solexa took advantage of a novel way of sequencing, known as sequencing by synthesis, that was 100 times faster than other technologies and correspondingly cheaper, says Flatley. But it was a small business, with just $2.5 million in revenue in 2006. After Illumina provided the global distribution Solexa needed, "we built it into a $100 million business in one year," he says. "It was an inflection point for us. We began this super-rapid growth."

The deal also turned out to be a turning point for Illumina's competitors, which quickly fell behind technologically. Roche, which bought 454 Life Sciences in 2007, announced last October that it would shutter the company and phase out its sequencers. Complete Genomics, another competitor, cut jobs and began looking for a buyer in 2012; last year the Chinese company BGI-Shenzhen bought it, although Illumina made a failed bid for it as well.

The Solexa deal was far from the last time that Flatley transformed Illumina by buying the technology he thought it needed. Another pivotal point came last year, when the company bought Verinata Health, maker of a noninvasive prenatal sequencing test to identify fetal abnormalities. That gave Illumina a service that consumers can buy (through their doctors), in a market that could be worth billions of dollars in revenue.

Since 2005 Illumina has spent more than $1.2 billion on acquisitions. But it would be a mistake to dismiss the company as just a deep pocket. Illumina has a knack for improving the technology of companies it buys, says Doug Schenkel, managing director for medical technology equity research at Cowen and Company. When Illumina bought Solexa's sequencing technology, Schenkel says, it was considered inflexible and was thought likely to hit a "ceiling"--after which it could probably not be improved further--within three years. "Illumina took that technology and, with innovation and investment, has made it flexible enough to not only dominate existing markets but open up multiple new opportunities," he adds. "Even today--six years later--the ceiling is still at least three years away."

Illumina's soup-to-nuts strategy--of providing fundamental sequencing technologies as well as services that mine genomic insights--appears to be a winner as genomic information begins to touch the practice of medicine and enter everyday life. Illumina already has an iPad app that lets you review your genome if it has been analyzed. "One of the biggest challenges now is increasing the clinical knowledge of what the genome means," Flatley says. "It's one thing to say, 'Here's the genetic variation: It's another to say, 'Here's what the variation means." Demand for that understanding will only increase as millions of people get sequenced. "We want to be at the apex of that effort," he says. --Eilene Zimmerman

Genomic Economics

The cost of sequencing has plunged because of technologies that read DNA optically and finish the job in hours rather than days.

COST PER GENOME

1998

Illumina is founded to build on gene analysis technology from Tufts University

1999

Hires Jay Flatley as CEO

2000

Has an initial public offering

2001

Begins selling genotyping services to researchers

2006

Acquires Solexa, maker of machines that sequence genomes

2009

Announces a service that will sequence an individual's genome for $48,000

2013

Acquires Verinata Health, which sells prenatal sequencing tests to identify fetal abnormalities

2014

Begins selling machines that can sequence genomes for around $1,000 each

Tesla Motors

(2) Car companies have struggled to sell electric cars. Tesla Motors is the exception. Last year, the first full year of sales for its Model S luxury sedan, Tesla sold more than twice as many cars as either Nissan or GM did when they introduced their battery-powered vehicles, the Leaf and the Volt. Tesla did this even though it's a startup with no dealer network, selling a car that's more than twice as expensive as the electric cars from the major automakers.

It's easy to be dazzled by the car's style or features like its 17-inch touch screen. But the innovation goes much deeper than that. MIT Technology RevieWs senior editor for energy, Kevin Bullis, asked JB Straubel, Tesla's cofounder and chief technical officer, to help identify the engineering advances behind Tesla's success.

Other electric-car startups--such as Fisker Automotive--have failed. And even established automakers have struggled to sell their battery-powered cars. What makes you different? Part of it is that Tesla designs its own batteries, motors, electronics, and software controls. It's not very glamorous, and not even always customer facing, but in the end that's what makes the car work and what makes it different from other electric ears, and makes it compete effectively against gasoline cars.

An example?

Our superchargers allow us to charge the Model S more than twice as fast as other cars. To do that kind of charging, everything has to be working in perfect synchrony. The cooling system; the electronics that are talking to the charger; the connection to the grid. That whole thing has to work as a system flawlessly. If we outsourced the charger, or outsourced those other pieces, we couldn't innovate as quickly. We couldn't roll out things anywhere near as fast.

You made an early decision to switch from analog to digital controllers for the electric motor, which allows you to control the motor with software. How important was that decision?

Even we didn't understand, in the early days, how much flexibility and agility that would give us.

There was a lot of hand-wringing, and it was a difficult decision to make the leap from the old pathway over to the new and really bet everything on it. But that decision set us up to put software in control of all of the key vehicle functions, and we are now unique in our ability to change those things remotely.

You're referring to wireless updates. Last year two Model Ss caught fire after drivers ran over objects in the road. Tesla sent out a software patch that raised the height at which the cars travel on the highway. There have been no car fires since.

I'm totally convinced that the entire industry will go in this [wireless] direction. It's only a matter of time.

JB Straubel, 38

CTO, Tesla Motors

Palo, Alto, California

You made an early decision to use small batteries, similar to the kind used in laptops, that cost less per kilowatt-hour of storage than the cells other automakers use. But whereas other automakers might have a few hundred battery cells in a pack, you have to use 10,000.

Other car companies think that large-format cells must be the way to go. But they're more expensive and have worse performance. People think of thousands of cells and say, "I don't know how to do that, and I don't want to think about that" It is a challenging problem. It's harder to engineer a system to do it, but engineering is a one-time difficulty.

We started with a commodity [laptop] cell because we had 50 people and we couldn't do anything else. But that plan has evolved. We're now to the point that we're working extremely closely with the cell manufacturers in designing customized cells with customized chemistry for cars.

You've used lower-cost cells, but because you chose to give your cars a 250-mile range, compared with less than 100 miles for most of your competitors' cars, your cars are still expensive--people are paying $70,000 to over $100,000 per car.

People think the battery accounts for most of the cost of an electric car, but that's not the case at all. For the Roadster [Tesla's first car], the battery was already down below half the cost. Now we're down to a quarter of the cost in most cases. We're on track to getting to costs that will allow us to make a $35,000 car [the cost of the GM Volt] with a greater-than-200-mile range. It doesn't require some mythical invention. All the pieces are fundamentally there.

Google

The company has struggled to move beyond advertising. Has it finally found the missing piece?

(3) WHEN IT COMES TO developing software, few companies can match Google's prowess. It doesn't just have the most popular search engine. Chrome is the most widely used Internet browser. Gmail, Calendar, Spreadsheets, Docs, and Presentations are legitimate alternatives to Microsoft Office. Picasa, Google's free photo management software, might be as good as anything from Apple. Android dominates the phone and tablet landscape. Google Maps is becoming the best navigation program on any device.

And yet by one important measure, Google hasn't been innovative enough. The vast majority of its revenue comes from ads--the ones in search results and the ones that Google pushes out to thousands of websites. These were amazing innovations when Google developed them back in 2001 and 2002. But Google's many efforts to develop additional ways to make money haven't gone very far.

Perhaps Google's most public failures have been in consumer electronics. Do you remember Google TV? The Nexus One? The Nexus Q? If you do, it's probably not because you bought one. Google acquired Motorola Mobility for $12.4 billion in 2012 in an effort to finally build products that consumers wanted to buy. But Motorola's market share fell on Google's watch; the deal soured so fast that Google is now selling off most of Motorola to Lenovo. In the end Google will have spent about $3 billion to get a chunk of Motorola patents.

Google's problem is straightforward: its culture is rooted in building software, giving it away, and improving it over time--all with little in the way of advertising or marketing. Selling stuff requires the opposite--persuading customers that the product for sale is finished and perfect in every way.

So why can't Google just accept the market's judgment of its strengths and weaknesses and stop wasting shareholders' money trying to expand the revenue base? Because even though there is every indication that Google's advertising business will keep growing for years to come, nothing guarantees that it will dominate forever. Something could come along and do to search ads what search ads did to TV and newspaper ads.

That is why Google still hopes to compete with the likes of Apple in consumer electronics. And it's not too late, especially with Google's $3.2 billion purchase of Nest Labs in January.

Of course, acquisitions are rarely magic bullets, as Google can attest. And look at the business Nest is in: it makes home thermostats and smoke alarms, which, to be kind, have been on the trailing edge of innovation. But that's what makes this purchase interesting. Nest has transformed these moribund categories with clever products that learn their users' preferences and feel like things you would buy in an Apple store, which in fact is one of the places they are sold. Even though Nest's thermostat costs $250, market analysts estimate that consumers have been buying more than 50,000 units a month.

What really made the Nest deal attractive, however, was the people. Nest's CEO and cofounder is Tony Fadell, the former Apple executive who was critical in that company's rebirth. He helped build and design the iPod, and then he helped conceive and build the iPhone. Fadell and cofounder Matt Rogers, who was also one of the early iPhone engineers, have hired roughly 100 of Apple's top engineers and marketers, according to public profile data on LinkedIn. They made Nest one of the largest repositories of ex-Appleites in Silicon Valley.

Indeed, buying Nest could be Google cofounder Larry Page's most important deal since he became CEO in 2011. Motorola didn't bring much expertise in design or marketing, whereas Fadell spent a decade working for Steve Jobs, giving him insights he used to turn Nest into an overnight success. Now he reports to Page, and Google might finally produce a new kind of innovation.--Fred Vogelstein

The Long Search Google's quest for new or improved technologies has cost more than $50 billion of its cash over the last nine years.

Notable Acquisitions Beyond Ads

Motorola Mobility Mobile phones, '12

Lost more than $1 billion as part of Google

BufferBox Package-pickup kiosks, '12

Part of a push into online commerce

Makani Power Airborne wind turbines, '13

Deal came amid other green-tech investments

Boston Dynamics Walking robots, '13

One of the eight robotics companies bought last year

Nest Labs Home automation, '14

Brings aboard former Apple engineers

Third Rock Ventures

These VCs don't wait for biotech startups to come to them. They create companies themselves.

(8) THE PATH TO GREATNESS IN biotechnology runs through a vale of tears. Mark Levin wants to remember that.

So once every few months the 40-person staff of Levin's venture capital firm, Third Rock Ventures, gathers silently to listen. Their speaker last September was Peter Frates, a 29-year-old former captain of the Boston College baseball team. In a voice slurred by spreading paralysis, Frates recalled how his doctors told him, "You have amyotrophic lateral sclerosis" and then sent him home. There was nothing to do.

Inventing a treatment for ALS is immensely challenging. Most drugs fail. Even so, Third Rock intends to try. Since 2006, Levin and cofounders Kevin Starr and Bob Tepper have backed 32 companies that have 25 products in human trials. Its newest venture, Voyager Therapeutics, is typically ambitious: it will have $45 million to try to develop a gene therapy for nervous-system disorders such as ALS. Levin himself will be the CEO.

"The big difference is they go in on their own, and they go in big," says Amber Salzman, a biotech executive whose son was born with adrenoleukodystrophy. That heartbreaking inherited disease is now in the sights of Bluebird Bio, a gene therapy company that went public last June--one of three IPOs for Third Rock startups last year.

Levin grew up in St. Louis, son of a small-time entrepreneur who sold shoes. He bought a doughnut shop and worked in process engineering at Miller Brewing before making a name as a dealmaker in California's early biotech scene. "That was a crazy time, when anything was possible," he says.

A similar spirit pervades Third Rock's warren of offices in a Boston brownstone. A gumball machine at the entrance declares it an entrepreneurial space. Slogans on the wall say "Do the right thing" and "Make them raving fans." Levin, immensely rich from companies he's sold, comes to the office in outrageous jewelry and neon sneakers.

Third Rock has a unique approach to sizing up emerging technologies. The firm cultivates a long to-do list of ideas, like one for "personalized vaccines" and one for a "molecular stethoscope." It then spends three or four years studying the science and the markets, and seducing the world's leading experts to sign on.

"Some people can spot what is going to be extraordinary in five or 10 years, says Gregory Verdine, a chemistry professor who was lured out of a tenured position at Harvard to run another Third Rock company, Warp Drive Bio. "And then there are those who can imagine it and actually build it."

Verdine puts Levin in the category of great leaders, citing his ability to attract the best people to his causes. He is "an extraordinarily empathetic person," Verdine says, "who wants to leave his mark on biotech." --Antonio Regalado

Mark Levin, 63

Partner, Third Rock Ventures

Boston

"We're always listening to the experts, watching them, hearing them talk about the genetics, the biology, or what's happening in chemistry. You can just feel it if we are on the edge of something. It's a visceral experience."--Mark Levin

Capital raised by Third Rock

$1.3 billion

Companies it has funded

32

Typical investment per company

$30 million

Time it generally takes for companies to bring a new drug to market

10-15 years

Percentage of U.S. biotech companies with one year of cash left

33

Cree

By making a cheaper LED lightbulb, the newcomer to the industry hopes to dominate the market for energy-efficient lighting alternatives.

(13) Opportunity: Driven in part by new government regulations on energy efficiency, LED lighting is increasingly replacing both incandescent and fluorescent lighting in everything from desk lamps to streetlights. LED lighting, which uses semiconductors to produce the illumination, offers various benefits: it's more energy efficient, a bulb lasts many years, and it's dimmable. What's more, thanks to advances in the technology over the last decade, LEDs produce light of reasonably good quality. But many consumers and businesses have been reluctant to switch over to the new technology. That's partly because initial products were ungainly and because LED lights are more expensive than incandescent bulbs, a technology that dates back to Thomas Edison.

Innovation: Cree started out as a supplier of components to other LED makers. Two years ago, however, unsatisfied with the quality of LED-based bulbs made by those established manufacturers, engineers at Cree resolved to design and make their own. Last year, Cree released a consumer product with the familiar shape and light quality of an old-style filament bulb, priced at under $14 for the equivalent of a 60-watt bulb; LED bulbs had been selling for more than twice that just a few years earlier. The company has begun selling its bulbs at Home Depot.

Cree's LED bulb competes directly with ones from lighting giants such as General Electric, Philips, and Osram Sylvania. But Cree now sells about $500 million worth of LED lighting annually and has nearly 10 percent of the market in North America, according to the Carnotensis Consultancy.

Inside each bulb is the source of Cree's technology advantage: a series of LEDs, each about half the size of a typical pencil eraser. Cree makes them on silicon carbide wafers, allowing the company to produce more light from an LED chip than competitors that use sapphire substrates. But price, ultimately, is what drives consumers. And Cree predicts it will be able to match traditional lighting on price in the not-very-distant future. --Martin LaMonica

1366 Technologies

The company has managed the nearly impossible for a solar startup over the last few years: it is still in business.

(25) THE FIRST THING TO KNOW about 1366 Technologies is that it has survived. Over the last three years, a long list of solar-power manufacturers have gone out of business, including BP Solar and startups Abound Solar and Solyndra. Not only has 1366 managed to remain afloat through this period, but it has prospered, in a deliberate and methodical way.

Last year the company opened a demonstration-scale factory to produce silicon wafers, a critical component in the most common type of solar cells. If all goes well, early next year it will break ground on a much larger factory financed in part by a federal loan guarantee it secured in June 2011, a few months before Solyndra infamously went bankrupt.

CEO Frank van Mierlo is confident that the failures of solar manufacturing are yesterday's story. He beams with pride as he shows a visitor around the company's factory in suburban Boston. Although it's modest compared with a commercial plant, the many pieces of equipment underscore the investment required to make solar cells.

One room, though, is strictly off-limits to outsiders. In it are two custom-built furnaces that produce thin six-inch-square wafers directly from molten silicon. The final wafers are identical to those made in today's conventional solar factories, where they are cut from ingots. But 1366's machines simplify the traditional manufacturing process into one step, slashing costs by more than half. That's important, since silicon wafers account for about 40 percent of the cost of today's solar panels, and manufacturers are hungry for even tiny cost reductions.

The heart of the technology is a dishwasher-size machine that freezes the molten silicon into wafers. Chief technology officer Emanuel Sachs, a former professor at MIT, demonstrated the concept with a bath of liquid tin. He then adapted the technology to small silicon wafers, and finally to wafers of industry-standard size. The company's machine now turns out more than 1,000 wafers a day.

Sachs also invented the technology behind Evergreen Solar, which went bankrupt in August 2011. Unlike Evergreen, though, 1366 chose to supply components for solar panels to other manufacturers, rather than trying to sell completed panels itself. This reduced the business risk of getting a new technology accepted and made it less expensive to scale up the manufacturing process.

By the end of next year, 1366 intends to have 50 machines at its planned $100 million factory, producing enough wafers for 250 megawatts of solar power. By then, analysts estimate, the market for solar will be gigawatts bigger than it is today. And the prospects for solar power could be brightening.--Martin LaMonica

Xiaomi

This Chinese startup could outmaneuver big companies in the coming smartphone boom in developing countries.

(30)

STEVE JOBS JOLTED the mobile-phone business by introducing a device that everyone had to copy. Now his unabashed admirer Jun Lei is shaking up the enormous Chinese market with smartphones that cost much less than comparable devices.

Lei is founder and CEO of Xiaomi, which is just four years old but already one of the top six smartphone vendors in China. It entered the business in 2010 by releasing a custom Android operating system, known as MIUI (pronounced "me UI"), whose interface looked a lot like the iPhone's. It was hugely popular among enthusiasts who love to modify a phone's functions. A year later, Xiaomi began selling a series of phones that had high-end specs but sold for roughly half of what rival devices were going for in China.

One reason the prices are so low is that Xiaomi (pronounced "zho-me") sells at or near cost and makes its money when customers pay for its cloud-based services, such as messaging and data backup. The company is also skillful at timing its sales. It presells a very limited number of devices, which invariably sell out, attracting more interest. By the time the later buyers get their devices, manufacturing costs have declined significantly for Xiaomi.

Lei has cultivated a Jobs-like image, all the way down to his personal wardrobe and product announcements. His fans call him "Leibs" (a combination of Lei and Jobs), though his detractors also use the term in mockery. Regardless, his company is getting itself in position to sell a big chunk of the billion Android phones expected to flood the developing world in the next few years as prices keep falling.--Xinyu Guan

Jun Lei, 44

Chairman and CEO, Xiaomi

Beijing, China

"Even a pig can fly if it sits in the right spot during a whirlwind."

--Jun Lei

64%

Growth in Xiaomi's smartphone sales in 2013

160%

Year of Xiaomi's founding

2010

Xiaomi's 2013 revenue

$5.2 billion

Valuation in Xiaomi's last round of funding

$10 billion

Siluria Technologies

If it can convert natural gas to transportation fuels and commodity chemicals, it could reduce our dependence on oil.

(41) Opportunity: Making gasoline from natural gas rather than oil could cut its cost in half. Such a technology could also help make plastics far cheaper. While oil costs around $100 a barrel, natural gas sells in the U.S. for the equivalent of about $20 a barrel and is likely to remain much cheaper than oil for some time: it is estimated to be between two and six times more abundant than oil, and technologies like hydrofracking have led to a surge of production from unconventional sources like the Marcellus Shale in the eastern United States. Equally important, natural gas is more evenly distributed around the world than petroleum. The United States has ample supplies thanks to shale deposits, but so do China, many parts of Europe and South America, Australia, and South Africa. Making gasoline and commodity chemicals from natural gas rather than petroleum could help free the rest of the world from the political and economic stranglehold of the large oil-exporting nations.

Innovation: The goal of Siluria, a Silicon Valley startup fueled with $63.5 million in venture funding, is both audacious and simple: create a process that efficiently uses natural gas, rather than petroleum, to make ethylene and gasoline. The challenge is the chemistry. It's possible to use catalysts to make these products out of methane (the main ingredient in natural gas), but an efficient industrial process has eluded chemical engineers for decades.

Siluria thinks it can succeed where others have failed, not because it understands the chemistry better but because it has ways to rapidly make and screen potential catalysts. The company built an automated system that can quickly synthesize hundreds of different catalysts at a time and then test how well they convert methane into ethylene.

It works by varying both what catalysts are made of and their microscopic structure. Making a catalyst in, say, the shape of a nanowire changes the way it interacts with methane, and this can transform a useless combination of elements into an effective one.

Siluria says the catalysts produced at its pilot plant in Menlo Park, California, have performed well enough to justify building two larger demonstration plants--one across San Francisco Bay in Hayward that will make gasoline, and one in Houston that will make ethylene. The company hopes to prove that the technology will work at a commercial scale and can be plugged into existing refineries and chemical plants.

Siluria can't tell you exactly how it's solved the problem that stymied chemists for decades--if indeed it has. Because of the nature of its throw-everything-at-the-wall approach, it doesn't know precisely how its new catalysts work. All it knows is that the process appears to.--Kevin Bullis

Making Oil Obsolete

The abundance of natural gas means it could be attractive to make fuels and chemicals out of methane rather than petroleum.

U.S. SHALE GAS
PRODUCTION

(billions of cubic
feet per day)

December 2013   32.7
January  2002    2.2

Note: Table made from pie chart.


Upworthy

(45) Upworthy is one of the fastest-growing websites ever, despite

producing only minimal original material. Instead, Upworthy highlights videos that people have posted online about gay marriage, health care reform, racial prejudice, gender equality, and other subjects that interest the site's liberal curators. The founders--Eli Pariser, who had led the left-wing political group MoveOn, and Peter Koechley, former managing editor of the satirical publication the Onion--started the site to help progressive-friendly content spread virally online, even if that means coopting some sensational tactics from sites that propagate videos of cute cats. They spoke to MIT Technology Reviews deputy editor, Brian Bergstein.

Were you surprised at how quickly Upworthy got this big?

Pariser: We were blown away. We honestly never would have dreamed that the site would be as big as it is.

Koechley: A lot of people thought it was unlikely that there were 50 or 60 or 70 million people out there who wanted to watch videos about meaningful social issues.

Describe Upworthy's system for making things go viral.

Pariser: There are hundreds of millions, if not billions, of videos posted every month, and our curators are looking for the several hundred that are very meaningful about some important topic and very, very compelling. We have various tools that our curators use, but ultimately it comes down to human judgment and their ability to find videos or charts or graphics that just blow them away.

Then they write headlines that have become an Upworthy signature. Your headlines are filled with superlatives--"the biggest," "the worst," "the most horrifying"--and tell readers that clicking the link will change their lives.

Pariser: Generally [the curators] write 25 or so headlines and then pick four to try out. And then sometimes they'll take a couple rounds of that. We think of it kind of like a comedian playing Duluth before you go to New York, working out the material and what people are laughing at.

Koechley: Headlines are a way to get somebody to watch a seven-minute video about depression or a 12-minute video about climate change. If you said "This is a 12-minute video about climate change," you just know that people won't click through. But if you actually bring out the stuff that speaks to their curiosity and their interest, you can connect people with ideas that they really love and enjoy.

You'll have to vary the tone if you want to keep standing out, though. Upworthy-style headlines are everywhere on the Web now.

Koechley: Totally. The number of new directions and formats and ideas that we're testing every day are legion.

Peter Koechley, 33

co-CEO, Upworthy

New York

Eli Pariser, 33

co-CEO, Upworthy

New York

There have been hardly any ads on the site. How will you make money?

Pariser: We've mostly been focused on building our community so far. We're testing a number of revenue options now, and we're liking the underwriting model, where a foundation or similar group funds our editorial work in a specific topic.

Given that Eli wrote a book called The Filter Bubble, which decries how the Internet often limits people to information they agree with, it's disappointing that Upworthy repeatedly covers the same topics and doesn't seem to challenge liberal assumptions. You guys are playing it safe.

Koechley: I think the first problem we were trying to solve is: how can we go from people spending zero minutes a day thinking about important societal issues to spending 10 minutes, or 20 minutes, or five minutes? That said, one of the things we're planning for this year is we're choosing topics that we haven't gone all that deeply into. So we have a partnership with the Gates Foundation to go a lot deeper on global health and poverty.

We've now built a platform that is going to allow us to take on lot of really interesting [opportunities]. Challenging the audience to think in different ways or challenging their currently held beliefs is certainly one of those that we think is interesting.

Ripple Labs

A startup invented its own digital currency for exchanging money across borders.

(50) IT'S A MONEYMAKING SCHEME a child might suggest: get rich by inventing a new form of money. All the same, Chris Larsen, CEO and founder of Ripple Labs, is getting other people to play along with him. And they aren't just Silicon Valley investors. People are using Ripple's digital cash to exchange traditional paper currencies.

Ripple's currency is modeled on the digital cash Bitcoin, which has boomed and sometimes busted in value over recent years (see chart on page 18), and both use similar cryptography to prevent fraud. But while Bitcoin is designed to be used like regular currency to buy things, Ripple's cash, known as XRP, is intended to make many foreign exchange transfers faster and less expensive.

Traditionally, a person who has Burmese kyats, for example, and needs to send money to someone in U.S. dollars has had to wait days for the transaction to clear, incurring sizable fees in the process. That's because international money transfer systems rely on centralized, decades-old systems to verify that payments are valid. But banks--or new, low-cost startup services--could use Ripple's technology to sidestep those systems. They would convert the payer's kyats into XRPs and then use the Ripple protocol to automatically find a partner willing to convert those XRPs into dollars, completing the deal almost instantly. A financial company might choose to hold a stash of XRPs of its own to make such transfers easier.

Larsen hopes this technology will stimulate international commerce and make it cheaper for expatriates to send money back to their families in poor countries. (The World Bank estimates that in 2012, almost 12 percent of the $60 billion in such remittances to African countries was swallowed by transaction fees.) Indeed, Ripple reports that transfers from Europe to China already make up a significant portion of the roughly $20 million processed using its technology every month.

The algorithms underlying Ripple's technology dictate that there will be no more than 100 billion XRPs to go around. Though the company is giving away many of them to get the system off the ground, it has allocated one-fourth of the hoard to itself and is relying on the XRP'S increasing value as its only source of income. Between the freebies and the ones Ripple has sold to companies and investors who believe the currency will gain value, there are 7.5 billion XRPs in circulation. That's enough to make Ripple Labs' cash flow positive--and to show that inventing and selling your own currency really can work.--Tom Simonite
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