Smart Policy for Innovative Regions
Grow your own
Entrepreneurship and business
development
Startups and Entrepreneurship
Con



High risk, high failure
per attempt
Can be resource
intensive
Lack collateral for
traditional finance
Pro



Sticky
Increasing returns to
scale
High payoff potential
Transforming Ideas Into New Companies
 New Companies are transformed through a five
stage transformation process to create a sustainable
company – Start-Up Life Cycle
Discovery
Idea
Development
Start-Up
Company
Early
Growth
Rapid
Growth
Each stage of the Start-Up Life Cycle represents the companies progression
of the business, management team, products (technology), markets, etc.
Increasing Costs / Effort
The Fore Systems Family Tree:
The Region’s Economic Future
Scalable
Networks
Carnegie
Mellon
FORE Systems /
Marconi Networks
1990 / 1999
Transarc /
IBM Pittsburgh
1989 / 1999
Opsware
Panasas
Spinnaker
1999
Sold
Closed
Missed
People
Tech
Both
Money
From 0 to 1500 jobs
in 12 years, but the
region missed out on
another 300+ jobs
that got away
Comanage
1998
Laurel
Networks
1999
Laminar
1999
Legend
Mediasite
1996
Lightera
Networks
OnFiber
Communications
AcceLight
InFinera
Corporation
WaveSmith
Networks
The Picture of Success: San Diego
1980 - 2000
Hybritech
GenProbe
1983
Immune
Response
1986
Cortex
1986
Gensia
1986
Clonetics
1985
IDEC
1985
PacRim
Bioscience
1985
Biovest
1986
Viagene
1987
Lipotech
1987
Ligand
1987
Corvas
1987
Amylin
1987
Genta
1988
Kimmel Cancer
Dura
1990
Institute
1990
Cypros
1992
Columbia
HCA
1990
Birndorf
Biotechnology
1990
Nanogen
1991
Forward
Ventures
1990
Genesys
1990
Sequana
1992
Partners
1993
DigiRad
1994
Vical
1987
Biosite
1988
Kingsbury
Urogen
1996
Pyxis
1987
Medmetric
1989
Novadex
1992
Chromagen
1994
Cytel
1987
Novatrix
1994
Chugal
Pharmaceuticals
1995
Combi-Chem
1994
Corixa
1994
Somatix
1992
Gryphen
1993
Cyphergen
1993
Applied
Genetics
1994
Triangle
Pharmaceuticals
1995
GenQuest
1995
First Dental Health
1995
60% of the jobs were created
by small firms
70,000
60,000
Small
firms that
become
big firms
are how
we get
sustained
growth
Total Jobs Created
50,000
40,000
30,000
Amount of Gain
1,000 + Jobs
250 to 999
50 to 249
10 to 49
Less than 10 Jobs
Large firms
added few jobs
20,000
10,000
0-50
50-250
250-1000
Initial Employment Size in 1998
1000 or more
Younger technology firms are the
region’s growth drivers
Technology Job Creation and Destruction, by Age of Firm, 1998-2002
8,000
6,000
4,000
2,000
0
-2,000
-4,000
-6,000
-8,000
Firms more than 40 years old
Firms less than 10 years old
Some Good News:
University-related technology spin-offs
3000
100
2,591
175 Spin-off Firms, 6000+ jobs
2500
89
90
80
70
2000
60
1500
50
1,276
1,088
40
1000
30
27
600
20
500
250
10
7
0
2
1950's
3
0
1960's
Total Jobs
1970's
Total Firms
1980's
1990's
These new technology companies form “Orbits” over time,
spinouts of existing companies are sustaining growth
IT
Orbits
Biotech “Orbits” have been heavily influenced by the universities,
we are just reaching the stage where companies create spinouts
Bio
Orbits
Regional Commercialization Initiatives
Discovery
Stage
Information
Technology
Life
Sciences
Manufacturing
Technology
Start-Up
Company
Stage
University Entrepreneurial Programs
PantherLabs, Limbach Center, & GSIA
University Research, Company Research,
& Entrepreneurs
Support
Services
Idea
Development
Stage
Idea Foundry
Innovation
Works
DCED
BFTDA
Life Sciences
Greenhouse
LaunchCyte
Idea Foundry
University
Technology
Transfer
Growth/Rapid
Growth Stage
Pittsburgh Tech Council, Catalyst Connection,
PRA, etc.
Digital
Greenhouse
Robotics
Foundry
Early
Growth
Stage
Pittsburgh Gateways
Venture
Capital
Small Business Development
Business Plans – Small Business
Development Centers (SBDCs)



University of Pittsburgh
Chrysler Center, Duquesne University
St. Vincent College
Marketing

Don Jones Center
Finance For Startups
Federal


SBIR – Small Business Innovation Research
SBICs – Small Business Investment
Companies
State


Opportunity Grants (PA)
Ben Franklin Partners – Innovation Works
Venture Capital
Only ¼ is from Local Capital
Locations of Firms Funding Pittsburgh Biotech Companies, 1982-2001
Middlesex-SomersetHunterdon, NJ
3%
Allentown-BethlehemEaston, PA
5%
Rochester, MN
3%
Bergen-Passaic, NJ
3%
Boston, MA-NH
14%
Chicago, IL
5%
San Francisco, CA
19%
Hartford, CT
3%
Little Rock-North Little Rock,
AR
3%
Minneapolis-St. Paul, MN-WI
3%
New York, NY
5%
Pittsburgh, PA
26%
Philadelphia, PA-NJ
8%
Venture Capital Flows
1996-2000 Venture Capital Flows IN and OUT of Pittsburgh
P ittsburgh
Other
CA
Location of Venture Recipients
TX
FL
MA
IN
VA
OUT
NJ
NC
NY
CO
CT
IL
OH
MD
A llento wn
Unkno wn
DC
-$150
Source: Venture Economics
-$100
-$50
$0
$50
$100
$150
$200
Am ount of Investm ent ($ Mil)
$250
$300
$350
$400
Business Finance Quiz
$21 Billion
Federal contracts &
procurement
$135 Billion
Federal R&D funds
$240 Billion
US business and
consumer spending
$9.9 Trillion
Venture capital
investment
Mentoring
Comprehensive



Idea Foundry
Launchcyte
Innovation Works
Targeted


Don Jones Center
Duquesne / Chrysler SBDC
Networking
General


Chamber or Tech Council
Business association
Industry focused

IT Network
Professional Focused


CEO or CFO network, HR Assoc.
TEC
Innovation Works
A Pennsylvania Ben Franklin Partner
Max of $100,000 for prototype and
proof of concept (x3)
Max of $300,000 for market entry
Equity investments up to $500,000
Disburse $1.5M per quarter
Quarterly cycle, 60-90 day turn-around
Smart Policy for Innovative Regions
Collaborating Partners
The GO KIZ acts as the collaborative forum for
technology-based economic development in
Pittsburgh
Research
and
Development
Entrepreneurial
Assistance
Business Climate and
Economic Development
Support
Pittsburgh Digital Greenhouse
Growing a Chip Design Cluster in the region
Expect to create 1500 design jobs in 3 years
Partnership with


Universites, Local Development Organizations
Cable Design, Cisco, Compunetix, Oki, Sony,
Intelligent Micro Design (IMD), Neo Linear, Inc.,
Sima Products Corporation, Steel River Systems,
Videon Central Inc, Vocollect Inc.
Pittsburgh Life Sciences
Greenhouse
Focus on the four pillars




Drug Discovery Tools and Targets
Therapeutic Strategies for Neurological and
Psychological Disorders
Tissue / Organ Engineering
Medical Devices and Diagnostics
Programs cover ALL needs: Capital, Space,
Business Expertise, Networking and Technical
Assistance
LaunchCyte
Our bet: $5.7 million of private risk capital on local biotech
We start companies from scratch
•
•
•
•
•
•
•
Technology review (>100 annually)
Application development (refocus)
I.P. strategy (create monopoly)
Seed funding ($150K-$500K)
Licensing (equity up-front)
Business development (early deals)
Executive recruiting (top local talent)
Our model: Taking the biggest, earliest risk
Life. Science. Business
©2004 Idea Foundry
24
Biotech Convergence
IT joining a new wave of Biotech
Leverages Region’s Life Sciences R&D
Center for Biomedical Informatics
(University of Pittsburgh)
Pittsburgh Tissue Engineering Initiative
BioVenture / Life Sciences Greenhouse
Intelligent Operating Room
Suite of state-of-art technologies to assist
surgeons



surgical robots for minimally invasive procedures
voice-controlled ancillary equipment to decrease
personnel & time
integrated at and in clinical trials at UPMC
Presbyterian Hospital
Pearl - The Nurse Robot
Indoor mobile robot for
elderly



functions as assistant,
guardian, companion,
and monitor
personality
collaborative project of
Carnegie Mellon and Pitt
Example university spin-off
CASurgica, Inc.
commercializing the HipNav™
surgical guidance system
developed at CMU & UPMC
Shadyside Hospital
Example large, established
company
builds robotic
pharmaceutical
distribution
systems and
related equipment
for tracking and
dispensing
medications
Where Does the University
Fit?
Quality & quantity of
inputs, producers,
resources
Innovation
Push
Innovation
Pull
Assets
Depth & breadth in a
supply or value chain
Firms are market, growth
and innovation oriented
(Economic)
Diversity
There is sufficient
local demand or
sensitivity to external
demand
Note: Based on Porter’s Cluster Diamond
University Factors
Strong base of R&D
Scale is required
Breadth of involvement

Address the range of
needs
Regional alignment

Transfer to nowhere
High
Active Industry
Involvement
Regional Benefit

Active Regional
Engagement
Active
Tech Transfer
Low
Size does matter
Annual R&D Spending and Start Ups
$1,000,000,000
$900,000,000
Johns
Hopkins
University
$800,000,000
R&D Spending
$700,000,000
$600,000,000
$500,000,000
$400,000,000
Massachusetts
Institute of
Technology
$300,000,000
$200,000,000
$100,000,000
$-
5.0
10.0
15.0
Number of Start Ups
20.0
25.0
What’s good for the goose…
Industrial R&D
Licensing income
Technology transfer


Structure
Staffing
Technology Transfer Options
Source: Gary Matkin, “Spinning off in the U.S.”, OECD Workshop on Researchbased Spin-offs, 8 December 1999
Getting the most out of “U”
How many bets can you make, and how big
Not immune to the product cycle & market
Beware of false assets
What leverage does the university provide



University provides the capacity to transform
Requires broad involvement & alignment
Stop the leaks and fill the gaps
Regional Impact Scorecard
University
Least
Critical
R&D Base
Regional Focus
Support for
Innovation
Effective
Basic Services
State
Economic
Diversity
Talent Pool
Market
Oriented
Innovative
Variety
Cluster
High
Regional
Impact
Focused Strategy
Most
Critical
Breadth of
Involvement
Regional
Alignment
Region