Date: Jan 02, 2005 Author: Rebecca James Source: Company Data
Syracuse University chemist Phil Borer runs a tiny biotechnology company. If it takes off, it could create 200 jobs.
If it's really successful, OrthoSystems might be bought by a bigger company - enriching its investors, including SU. In that case, it might leave Central New York, along with all those jobs.
It's happened before. New Methods Research Inc., another SU startup that employed Borer and 35 other people in the 1980s, was sold to a French company with out-of-town locations. Those jobs, though not Borer, left town, too.
The fate of New Methods is just one of many answers to this question: How can the brain power generated by thousands of researchers at Central New York colleges and universities create more local jobs?
A report issued last year by the Metropolitan Development Association of Syracuse and Central New York identified the region's universities as a primary engine for transforming the economy. It criticized the universities for lagging behind their peers across the nation in starting companies and licensing technology to existing or start-up companies. The report urged them to focus on that goal.
Central New York's universities are decidedly more entrepreneurial than they were even a year or two ago, thanks not only to the MDA push, but to encouragement from the state and university administrators and trustees.
Still, the reality of geography in the high-tech business world creates real limits, say those familiar with transferring university technology to spin-off businesses. Few start-ups will begin and remain strictly home-grown efforts. The money to grow them is often elsewhere, as are the business executives and sometimes even the work force that can take an idea and turn it into a successful private enterprise.
Here's part of the reason why: Faculty members typically define community not by region but by the network of scholars in their particular field, whether it's particle physics or French poetry.
"Very often, it's 'What is the most interesting idea?' that counts, not whether the collaborator is in Central New York or Eastern Europe," said Stephen Philip Johnson, Cornell University's assistant vice president for government and community relations.
When faculty members do start companies, they can look like this: Cornell plant pathology professor Gary Harman co-founded a company, Biomarinex, with roots in three countries. It blends ideas and technology from Harman's work and that of his colleagues in Italy and Canada, while drawing on raw materials from Newfoundland.
Biomarinex makes use of enzyme discoveries patented by Cornell from Harman's work at the Cornell-run New York State Agricultural Experiment Station in Geneva. The enzymes take an extract from shrimp shells to make a substance used to rebuild tissues and make wounds heal faster.
Biomarinex is getting its start with money from the Canadian government and New York state, while waiting to see if a grant from Italy comes through. It will definitely have at least a small research facility in Geneva, but a production facility that would generate more than 20 jobs could be in Geneva, Italy or Canada, Harman said.
Or Biomarinex might contract with other companies to do that work, if that's most cost-effective, he said.
"These are all just facts of life that are very much in play," Harman said. "It makes it very difficult to project job numbers."
Start-up companies may open their doors in Syracuse or Ithaca, but if they are looking to become successful, they need cash. And that can take them out of the area.
Nanofluidics Inc., a biotech firm that has new techniques for doing DNA analysis and other work with biological samples, was founded in Ithaca in 2001. It's now in the San Francisco Bay area.
"Nanofluidics was invested in by two of the biggest names in venture funding, which are both out in the Bay area," said John Brenner, senior technology manager for Cornell's Center for Technology, Enterprise and Commercialization. "The (investment) topped well over $10 million since March, which is 10 million reasons to bring them to California."
Investors prefer to keep an eye on their investments, and most major venture capital funds are located around San Francisco, Boston or elsewhere along the coasts, Brenner said.
Greg Baxter, a former Cornell molecular biology researcher, said he loved Ithaca, so when he began to start a business, he tried to do it there. But finding a short-term lease for lab space and people willing to relocate to Ithaca made that too challenging.
Then Baxter teamed up with a California-based company willing to invest in his venture and help it raise millions of dollars. The new company, Hurel Corp., is expected to launch next year, and would then join several other firms based on Cornell research that help fuel the California economy.
"The reality is," Baxter said, "once you raise money, you're going to be located where that money is."
For another tale of jobs created and lost, there is the story of TextWise and Solutions-United, both of which develop strategies for getting useful information from large databases.
Elizabeth Liddy, a professor in SU's School of Information Studies, found venture capital for her start-up, TextWise, from a Rochester firm, Manning and Napier.
TextWise stayed in Syracuse and grew from one employee to 50 between 1994 and 1999, Liddy said. But Liddy said she grew frustrated sharing creative control with the venture capital company, so she left in 1999. TextWise employs fewer people today, she said, although she could not say how many. TextWise declined comment.
Some former TextWise employees started Solutions-United in 2000, but by the end of 2001, that company was bought by a San Diego firm, Be-Bee Inc. and moved to California.
Liddy now does similar work through the Center for Natural Language Processing at SU, where she gets contracts from business and government to employ 23 people.
"I don't think I would do a company again," she said. "I like the advantages of being in the university. But my goal is still to keep the best brains here in Syracuse."
While outside investors may move a company during its early stages, the stakes can be pulled up later, too, as with New Methods Research Inc., the SU start-up. That company produced software that analyzed nuclear magnetic resonance to help decipher the chemical structure of substances.
NMRi was bought by a French company, then sold to a Utah company and combined with its St. Louis subsidiary.
Those sorts of sales can be bad news for local jobs, but universities that take an equity share in a company often are paid for the use of their technology only when the company is sold.
That doesn't have to mean that the local offices will be shut down.
Companies often consider it valuable to be close to a professor's lab, if he or she is still doing relevant research that could improve their products. Borer is now CEO of two companies. He's satisfied with his role as an entrepreneurial professor, nurturing start-ups, but he doesn't plan to abandon the academy for a full-time role.
"It will probably happen that the (start-up) companies will migrate away from Syracuse University and I will stay at the university," Borer said.
For Borer and SU, the next success might again mean turning over a company to others. Whether it remains in Syracuse is an open question. "I would like to see that happen, but that's something that when I no longer control it, it's out of my hands," Borer said.
The barbecue effect
There's no question it's easier to do business in Boston or the San Francisco area, say those involved with university-inspired start-ups.
"They have a certain amount of churn, and companies and individuals interested in technology transfer," said Mark Coburn, director of technology transfer at the University of Rochester. "The joke is that at MIT, at the director of technology transfer's office, there is a line of people at the door, waiting to get the next hot idea."
There's also the "barbecue effect." That's what Brenner said is missing in a college town like Ithaca compared to Silicon Valley.
"Around here, your neighbor is likely to be a staff member or another faculty member of the university," he said. "There, your neighbor may be a banker or a CEO. There is more cross-pollination hanging around the barbecue grill."
Then there is the question of where to find companies interested in the latest technological developments.
"We have such a variety of technologies that we can't expect Rochester companies to be able to absorb and license them," Coburn said. "We look around the country and around the world."
The University of Rochester expanded its technology office in 1999, before which it only had a director and a secretary, similar to SU's operation. Now it devotes a dozen people to its technology transfer office.
But Rochester is a giant in the tech transfer world. It ranked sixth in the nation with $42 million in licensing income in 2002. That huge payoff comes mainly from two big winners developed years earlier: a vaccine for bacterial meningitis and a technique for speeding up computer printer images, called the blue noise mask.
Licensing a technology - the arrangement where a company pays to use an innovation developed in academic labs - generates income for universities, and could lead to the development of new or expanded businesses down the road.
Cornell had 447 active licenses in 2003, of which all but 28 went to out-of-state companies.
The State University College of Environmental Science and Forestry in Syracuse had five licenses in 2003, three of which went to out-of-state companies. SU had licensed technologies to 17 companies in 2003 and 20 this year. Of those, nine went to Central New York companies.
New initiatives in CNY
But licensing technology is a passive model compared to some of the emerging ways that universities are considering to get companies started.
SUNY ESF is partnering with two local companies to start Source Sentinel, a corporation that is developing a system to detect toxins in a water supply. It has just five employees, but projects a potential of 400.
The college has never been part of such a corporation before, said ESF President Neil Murphy. Murphy came to ESF from the business world and has brought a new agenda, using his office to push commercial efforts, like helping faculty members come up with a business plan or find space for a company.
"That's new for us, no question about it," Murphy said.
Until recently, Clarkson University contracted with companies to do research, which sometimes led to more jobs at those companies, but rarely looked to start up its own companies or license its technology.
Now the university is helping to create a fund to provide seed money to new companies in the North Country. It would be affiliated with Clarkson and will ideally have at least $10 million at its disposal, said Tim Sugrue, dean of the school of business.
Clarkson is also licensing its technology to a young, high-tech Buffalo firm, NanoDynamics Inc., which wants to add an operation in Potsdam to be close to researchers there, said S.V. Babu, Clarkson's director of the Center for Advanced Materials. NanoDynamics has leased an office from Clarkson and expects to have two more people working there soon, in addition to the researcher it already shares with Clarkson, Babu said.
University research, by its nature, pushes the boundaries of knowledge. It isn't designed to make a product better but to dream up entirely new ways of approaching things, which could, down the road, lead to products, said Brenner, the Cornell technology manager.
"Companies are less speculative - they know what the market wants," he said. "No one is buying the products we have patents out for."
It can take generations before a new research advance - such as semi-conductors, which were invented in the World War II era - develops into an industry.
"Everybody wants us to save Central New York, but that's impossible," Brenner said. "We (universities) can't do it by ourselves, but we have to be part of the mix. If we don't start companies off of this speculative stuff, then there's no real progress."
