It was 1998, seven years after the Centers for Disease Control and Prevention first reported the outbreak of a mysterious illness that came to be known as AIDS. Kevin Kimberlin was holed up in the Columbia University library, scouring scientific journals, hoping to find a solution to the disease that was becoming an epidemic among gay men, intravenous drug users, women, children, the poor, and the dispossessed when he stumbled across an article celebrating the 40th anniversary of the field trials for the polio vaccine. Polio was the AIDS of the 1950s — a dreaded scourge that killed and paralyzed thousands — until it was essentially eradicated by the vaccine, which had been devised by Dr. Jonas Salk while working at the University of Pittsburgh’s Virus Research lab. “When I came across the story, I swear to God, Dr. Salk was smiling at me in the pictures,” Kimberlin says. “I called him up out of the blue at the Salk Institute.” He didn’t respond to that call, but “I kept on bugging him for two months.” Then, one day, I happened to be in the shower when the phone rang. I reached out of the shower stall, picked up the phone, and it was one of the most famous doctors in the world.” Dropping his voice an octave, Kimberlin mimics: “‘Hi, it’s Jonas Salk returning your phone call.’ I didn’t dare hang up the phone, even though my hair was full of shampoo. I got out of the shower and, shivering, made my pitch to this guy. I said I thought we should get together. I ended up two days later in his living room in California, looking out at the Pacific. We built a life-long friendship, which had a huge impact on me.”

Kimberlin isn’t a scientist. Nor is he a doctor. Nor is he a philanthropist. He’s a partner in the venture capital firm, Spencer Trask Ventures — a company that has over the past 17 years invested more than $700 million of seed capital in start-up firms that aim to make a difference. The partnership with Salk was one of his earliest forays into this “mission-based investing.” Salk, who died in 1995, was the sage of their venture to find a vaccine for HIV — Carlsbad, California-based Immune Response Corp. — and Kimberlin was the salesman. It would prove to be the beginning of Kimberlin’s well-known penchant for backing “obsessive missionaries” such as Salk, an inclination that would culminate in his new goal to harness the power of the Internet to power a world of solutions to the world’s problems. About two years ago, Kimberlin began steering his partners toward an emphasis on projects with a collaborative platform, or “crowdsourcing” in tech parlance. Crowdsourcing is a process that uses the web to channel the collective wisdom of strangers into meaningful business strategies.

Life has a way of coming full circle and no one knows this more than Kimberlin, who has come back to the industry that has made the firm what it is today: the Internet. It can be said that Silicon Valley would not be what it is today, if not for Kimberlin, who scored his biggest coup in 1997 when he co-founded Ciena Corporation, which commercialized the first wave division multiplexing (WDM) system that was a major catalyst to the Internet explosion. Kimberlin’s $1.6 million investment multiplied into $105 million after Ciena’s initial public offering. At the time, the $135 million deal made headlines as the largest IPO by a technology company in history; The Wall Street Journal called it “one of the biggest jackpots in the history of venture capital.” Since then, the firm, which is now based in Greenwich, Connecticut, has scored many home runs in the tech sector, even though many have been rather run-of-the-mill. In January, the firm sold Boston-based Health Dialog Services Corp., a disease treatment information company, to Britain’s Bupa Health Insurance Ltd. for $775 million, delivering a tidy 15-fold return on an eight-year investment. Then in February, the firm sold Stamford, Connecticut, data center software provider Aperture Technologies Inc. to St. Louis industrial equipment maker Emerson Electric Co. for $tk.

Yet the firm has been absent not only from the biggest deals to date among the next generation of Internet companies — MySpace, YouTube, and Facebook — but also from the biggest prospects for huge paydays down the road — social networking sites such as LinkedIn, Yelp, Twitter, and a host of similar Web 2.0 startups. Kimberlin didn’t see how these websites would directly contribute to the betterment of mankind. “What we’re doing as we move into 2009 is use more collaborative tools,” he says, “and a much larger, more global footprint to accomplish what’s been the DNA of Spencer Trask from the beginning.” He has always been inspired by the legacy of the firm’s namesake, the real Spencer Trask, an American venture capitalist who was known for being an early financial backer of inventor Thomas Edison and for rescuing the financially troubled New York Times in the 1890s.

Its latest venture, however, has jumped right back into the fray of Internet-based entrepreneurship. InnoCentive, a website set up by pharmaceutical giant Eli Lilly and based in Andover, Massachusetts, aspires to be nothing less than a global marketplace of ideas that aims to help anyone and everyone solve problems with the help of more than 90,000 biologists, chemists, and other professionals from more than 175 countries. ”Solvers” compete to solve thorny technical challenges posted by ‘’seeker” companies. Each challenge has a detailed scientific description, a deadline, and an award, which can run as high as $100,000. Innocentive’s problems read a little like the ad listings on Craigslist.

•Ideas for increasing public transportation use to reduce greenhouse gases in Chicago. (Award: $5,000).

•The Seeker is looking for novel, easy, use-at-home means of getting various facial hairstyles. (Award: $15,000).

•EnterpriseWorks/VITA (EWV) is seeking design ideas for a low-cost rain water storage system that can be installed in households in developing countries. (Award: $15,000).

In other words, the firm has found a way to transform solutions — ideas — into commodities, and Kimberlin is cashing in. So far, more than 30 blue-chip companies, including Procter & Gamble, Boeing, and DuPont, have signed up for InnoCentive, which charges its clients annual fees of roughly $80,000 for access to a network of scientists that stretches from Cambridge to China. How lucrative the solutions have been isn’t public, since private companies don’t disclose revenues.

And Kimberlin would rather talk about InnoCentive’s partnership with the Rockefeller Foundation than money. It allows organizations that work on education and poverty to use the InnoCentive network for free. In November 2007, a non-profit organization from India posted a request on the website: Could someone help develop a solar-powered wireless router that would enhance communications with small rural towns that had limited electricity or Internet access? ASSET India Foundation — ASSET stands for Achieving Sustainable Social Equality through Technology — helps train the children of sex workers and girls rescued from human traffickers in technology trades, so they can escape the sex industry. ASSET believed that an affordable, easy-to-use router would allow teenagers in small centers outside urban centers to handle some of the work that is coming from technology companies and gain the skills to achieve greater career opportunities. Solutions poured into the website, 27 in all, but the winning one went to Zacary Brown, a 31-year-old software engineer from Texas, who was awarded $20,000 for his design. “We have been receiving ten to twelve requests per month from rural towns in India to establish computer centers. Our concern was that there were no businesses in these small towns to provide employment, but InnoCentive came to our rescue, allowing us to come up with a solution that would involve outsourcing work from the big cities to the small towns,” says Ray Umashanker, executive director of ASSET India. “Now you’ve got, for $100, the ability to give to a community that is so destitute they are selling their bodies to make ends meet, you can give them access to the world of the future,” Kimberlin says.

But the Innocentive investment represents more than just an expanded product line for Kimberlin — it’s an attempt to stretch the definition of venture capital. Spencer Trask Collaborative Venture Partners, a division of Spencer Trask, has partnered with Cambrian House, a Canadian company that is creating a place for people to do business online, to introduce VenCorps, a site that connects venture capitalists and other investors with would-be-entrepreneurs. Every 30 days, more or less, the best ideas are rewarded with $50,000 in exchange for a share of ownership. This new marketplace for venture capital is about talking “to a lot of smart people…always thinking and challenging one another. It’s a constant learning and restretching of your imagination,” Kimberlin says. “If you get in early, you can help shape the destiny of the business model and the business innovation, you can have an impact, so you’re leveraging your experience and wisdom, as well as your capital in a much more transparent way than any venture firm I know of and much more so than any hedge fund or the opaque investment vehicles that are causing a lot of problems on Wall Street now.”

The turmoil on Wall Street will make it difficult to judge the outcome of Kimberlin’s wager on his “collaborative” investments. It’s getting harder to raise money, and it’s harder for him to exit investments and the companies he has acquired. Nationally, venture capital investment declined 7 percent to $7.1 billion in the second quarter, compared to $7.7 billion in the second quarter of the previous year, according to the MoneyTree Report, an analysis on quarterly venture financing produced by PricewaterhouseCoopers and the NVCA. Prominent Silicon Valley venture capital firms Sequoia Capital and Benchmark Capital recently sounded the alarm, saying the economic downturn would be protracted. Venture capitalists are now slowing their investments. In the third quarter 2007, just 583 deals totaling $7.37 billion were done, down from 673 deals totaling $7.94 billion a year ago, according to research firm VentureSource. The U.S. IPO market has practically seized up, despite Grand Canyon Education Inc’s share offering on Nov. 21, which broke the longest IPO drought in the United States since 1974. The Arizona-based online university operator became the first company to manage to float shares in the United States since August, a 15-week period that saw 29 companies pull out of the IPO pipeline, according to Thomson Reuters data.

Kimberlin says he’s still bullish, reiterating that his investors — entrepreneurs such as Joe Henson, who was the former CEO of tech companies Prime Computer and LEGENT Corp., and Marv Woodall, the former president of Johnson & Johnson Interventional Systems — are flush with equity. In practice, Spencer Trask Ventures acts more like a neighborhood investment club. Investors, many of whom are from the tech industry, pool a sum of money, and the firm acts as strategy consultant to the start-up businesses, advising top executives on how they can overhaul their structures. “Other venture capital firms often come in, significantly dilute the other shareholdings, and take over the management team,” says Joe Farrelly, who is chief information officer of Interpublic Group, a marketing and advertising firm. Farrelly worked with Kimberlin on the February sale of Aperture. “Spencer Trask is a venture capital firm with a gentler approach.” That approach goes against the grain of how private equity has been usually viewed in the past decades, with leveraged-buyout firms like KKR gaining notoriety for dismantling companies for profit. In 1989, Henry Kravis made headlines for vying to buy RJR Nabisco, setting off a six-week bidding war that culminated in the mother of all leveraged buyouts. Spencer Trask’s style is to mentor the existing team and recruit complementary senior executives for the board, Farrelly explains. After reorganizing the company, Spencer Trask Ventures usually sells it.

The road to a kinder, gentler venture capitalism hasn’t been without potholes. It started as a love affair with biotech and has, after a few detours and crash-ups, morphed into a love affair with crowdsourcing. When Kimberlin was a graduate student studying for a Master’s in Business Administration at Harvard Business School, he was taken on the roadshow for biotech firm Genentech, which was then canvassing for investors for its IPO. That was an epiphany: Genentech introduced him to the vast potential of blending technology and health-care for new businesses. At that time, biotech was practically unheard of. The Wall Street community was fixated on the more traditional industries of oil and gas and real-estate. Then, a few years later, Kimberlin was reading about new cellular architecture, when he stumbled across an article about a man who was trying to build a cheap cellular system that would give people who did not have land lines a way to communicate. “That wasn’t what the Wall Street world was interested in,” Kimberlin says. He structured the first outside financing for Millicom, helping the company to form its joint venture with Racal Electronics, which evolved into Vodafone Group Plc, which is now the world’s largest mobile telecommunications company by market cap, with over 625 million customers worldwide. He poured money into even more tech firms such as Next Level Communications, which sells gear that lets telecom carriers offer voice, video, and high-speed data services over phone lines, and telecom company SmartServ Online.

The potholes appeared when investors found his methods less than transparent. In an August 7, 2000, article in The New York Post, investors complained that they were not offered a chance to cash in on the Ciena, Next Level, and SmartServ deals. Kimberlin told the Post his investments were personal investments in each of the three, and blamed the companies for not opening up for additional investment from his clients. Then in September 1998, Kimberlin lost a lawsuit he had brought against Ciena and its directors, alleging that he and other parties controlled by him had “been fraudulently denied the opportunity to purchase shares in CIENA in connection with a private offering in December 1995.” A federal district court found that Ciena did not violate any federal securities laws in the firm’s conduct. To add to Kimberlin’s difficulties, TheFunded.com — a Web site on which entrepreneurs rate venture capitalists and angel investors — slapped a failing grade on Spencer Trask, giving the firm a dismal 1.4 out of 5. It rated the company in terms of five categories: track record, operating competence, pitching efficiency, favorable deal terms, and execution assistance. In what might be considered the most difficult blow, Kimberlin fumbled on his venture with Salk. Immune Response Corporation (now renamed Orchestra Therapeutics, Inc.) spent years trying to avert bankruptcy before finally discontinuing its efforts to develop an HIV vaccine on July 2007.

For now, investors have little choice but to give Kimberlin the benefit of the doubt. After all, his gamble on biotech and telecommunications turned out to be prescient. “Smart money understands that big money and real impact are made on a long-term basis,” says Kimberlin. So maybe he’s right about “crowdsourcing,” and all he needs is time — and a solution to the crisis in the credit markets — to prove it. You have to admit it’s brilliant: figuring out how to sell ideas as commodities. It could be almost as big as a vaccine for AIDS.

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