Despite Odds, Cities Race to Bet on Biotech (NYT)

Here's a sobering news piece for our yet-to-be biotech industry. Bottomline: PR cannot and should NOT compete in this field. Money already programmed for this purpose (if any) would be better used in creating sustainable local industries to help PR replace some of the most expensive imports and maybe some day begin exporting.

Despite Odds, Cities Race to Bet on Biotech

By SHAILA DEWAN

KANNAPOLIS, N.C. — Where a textile mill once drove the economy of this blue-collar town northeast of Charlotte, an imposing neoclassical complex is rising, filled with fine art, Italian marble and multimillion-dollar laboratory equipment. Three buildings, one topped by a giant dome, form the beginnings of what has been nicknamed the Biopolis, a research campus dedicated to biotechnology.

At $500 million and counting, the Biopolis, officially called the North Carolina Research Campus, is a product of a national race to attract the biotechnology industry, a current grail of economic development.

Cities like Shreveport, La., and Huntsville, Ala., are also gambling millions in taxpayer dollars on if-we-build-it-they-will-come research parks and wet laboratories, which hold the promise of low-pollution workplaces and high salaries.

At a recent global biotech convention in Atlanta, 27 states, including Hawaii and Oklahoma, paid as much as $100,000 each to entice companies on the exhibition floor. All this for a highly risky industry that has turned a profit only one year in the past four decades.

Skeptics cite two major problems with the race for biotech. First, the industry is highly concentrated in established epicenters like Boston, San Diego and San Francisco, which offer not just scientific talent but also executives who know how to steer drugs through the arduous approval process.

“Most of these states probably don’t stand much of a chance to develop a viable biotech industry,” said Gary P. Pisano, a Harvard Business School professor and the author of “Science Business: The Promise, the Reality and the Future of Biotech.”

“You can always get a few top people,” Mr. Pisano said, “but you need a lot of critical mass.”

Second, biotech is a relatively tiny industry with a lengthy product-development process, and even in its largest clusters offers only a fraction of the jobs of traditional manufacturing. In the United States, only 43 biotechnology companies employ more than 1,000 people, according to BioAbility, a consulting firm in the Research Triangle Park in North Carolina.

There is no guarantee that if a blockbuster drug materialized, it would be manufactured and marketed in the same place it was developed and tested.

Joseph Cortright, an economist who has studied biotechnology clusters, gave the example of a promising anti-leukemia compound developed at Oregon Health Sciences University in Portland, where Mr. Cortright is based. “The economic impact in the Portland area is zero because the rights to manufacture and market this drug were owned already by Novartis,” Mr. Cortright said.

But the race continues.

The state of Florida and Palm Beach County used $510 million as bait for a research institute that will employ 545 people (and, officials project, spur the creation of 46,000 more jobs over 15 years). New York City has invested more than $45 million in bioscience infrastructure, and Kentucky matches federal research grants dollar for dollar.

Cities like Shreveport, where public and private money have built the InterTech Science Park, remain steadfastly optimistic, though a biotechnology manufacturing center at the park was occupied for only six months in 2001 before the tenant went under.

The building remains an asset, said Dennis Lower, the park director. The private sector’s willingness to invest in it helped persuade the state to invest $15 million in a second building. “Right now we have four companies that are interested in that building,” Mr. Lower said. “Three times in the last three years we have almost had a tenant in that building.”

Some economic development officials say the value of a biotech cluster cannot be calculated in dollars alone.

Larry Pelton, president of the Economic Development Council of St. Lucie County, Fla., said the millions that the state spent attracting the Scripps Research Institute to Palm Beach County started a chain reaction that brought a branch of the Torrey Pines Institute for Molecular Studies to Port St. Lucie.

The institute received state and local incentives worth $32 million, plus a building and land. That helped St. Lucie County, which has grown quickly and needed more hospital beds, persuade Martin Memorial Health Systems to build a 300-bed hospital, Mr. Pelton said.

The county’s research institutes have also enhanced science and math education and spurred creation of a charter school, he said.

To build a viable biotech cluster, some areas have expanded the traditional definition of the industry beyond genetics to biofuels, agriculture, medical devices — even bioterrorism research.

A good strategy capitalizes on a city’s existing strength, said Patrick Kelly, the vice president of state government relations for the Biotechnology Industry Organization, whether it is the presence of the Centers for Disease Control and Prevention in Atlanta, a highly educated work force in Huntsville, or experience running clinical trials in the Research Triangle.

In Kannapolis, the focus is on food and nutrition, not because of any expertise, but because of David H. Murdock, the health-obsessed billionaire who first envisioned the Biopolis.

To attract seven of the state’s universities, including Duke and the University of North Carolina, Mr. Murdock, a real estate developer and owner of the Dole Food Company, persuaded the state to invest almost $30 million a year in rent and operating expenses. Local officials approved the sale of $168 million in bonds to pay for infrastructure improvements around the 350-acre campus — up considerably from an original estimate of $7 million, said John D. Day, the Cabarrus County manager.

Mr. Murdock says he has spent half a billion so far on buildings, recruiting scientists, and equipment that includes the most powerful nuclear magnetic resonance spectrometer in the United States, which can help to study molecules.

Though the buildings are still half-empty and construction is slower than anticipated, the campus has attracted senior scientists like Mary Ann Lila, who left the University of Illinois to head the Plants for Human Health Institute, a North Carolina State University effort. Dr. Lila says she has had inquiries from scientists worldwide.

But some critics say the Biopolis is largely a real estate venture that can only increase the value of hundreds of additional acres Mr. Murdock owns in the area.

“It’s a single large developer, with substantial deep pockets, with a very specific agenda that doesn’t necessarily align with the interests of the state,” said Doug Baker, the chief executive officer of Kryosphere, a Research Triangle company that stores biological specimens.

Mr. Baker, whose company is considering expanding to Kannapolis, said the Biopolis could end up as an attractive, saleable asset for Mr. Murdock at the expense of other biotechnology clusters across the state.

“It’s a very large mall,” Mr. Baker said. “I don’t see the organic qualities.”

In Pitching to Angel Investors, Preparation Tops Zeal (NYT)

In Pitching to Angel Investors, Preparation Tops Zeal
By BRENT BOWERS

FOR entrepreneurs hoping to land start-up capital from angel investors, here’s what two recent studies found: Don’t get carried away when you pitch your product because the investors may lose interest faster than you can say “almost unlimited market.”

And one misstep — like stammering a vague reply instead of saying you do not know the answer — can also kill a deal, the authors of the studies say.

Angel investors are generally wealthy people seeking promising start-ups that are too small to attract the attention of venture capitalists. The estimated 260,500 active angels in the United States are the largest source of seed and start-up capital for entrepreneurs (not counting their own savings or money from family and friends), according to Jeffrey Sohl, the director of the Center for Venture Research at the University of New Hampshire.

Even last year, as the recession gathered force, these angels spent $19.2 billion on more than 55,000 ventures, he said, though that was down from $26 billion in 2007. The average investment for each deal last year was $346,500.

By contrast, venture capitalists made only 440 investments in start-ups last year, putting the bulk of their money in later stages of a company’s growth in deals that averaged $7.5 million, Mr. Sohl said. “Angels provide the seed and start-up funding that turns acorns into trees like Starbucks, FedEx, Amazon and Google,” Mr. Sohl said.

Typically, entrepreneurs make their initial pitch to angels in an informal session. If their idea is judged to have promise, they may be invited to give a PowerPoint presentation followed by a question-and-answer session.

With time at a premium, it is imperative for entrepreneurs to come prepared to both meetings with solid arguments about their product’s marketability and with evidence of their commitment to their company in the form of sweat equity and their own investment, experts say.

But enthusiasm is a different matter, according to a study that was presented last week at an entrepreneurship conference at Babson College outside Boston.

“That is the trickiest part,” said Richard Sudek, an angel investor and assistant professor of entrepreneurship at Chapman University in Orange, Calif., and one of the three authors of that study. “We like you to show some excitement, but don’t force it. Being authentic is much more important. There is such a thing as quiet passion. Anything that comes across as slickness is a negative.”

Cheryl Mitteness, a doctoral candidate in entrepreneurial studies at the University of Louisville and one of Mr. Sudek’s co-authors, was even more emphatic. “Show your passion,” she said, “but don’t try to be somebody that you’re not. Angels are very leery of too much enthusiasm.”

Another research paper, by Xiao-Ping Chen and Suresh Kotha of the University of Washington and Xin Yao of Wichita State University and published in The Academy of Management Journal in February, came to much the same conclusion. The effects of perceived passion, defined as cues like facial expressions, tone of voice and hand gestures, “were statistically insignificant,” the article said.

Ms. Chen, a professor at her university’s business school, called the findings “surprising,” especially since she and her colleagues often rely on such signals in their hiring decisions. “You can show your passion through preparedness, how well you’ve thought out your business plan,” she said. “But the style of your presentation doesn’t matter.”

What angels are looking for, authors of both reports said, is evidence of a market opportunity with growth potential, a strong management team and an exit strategy, including a list of possible acquirers, since the eventual sale of the companies they invest in is how they make money.

“Also, angels put a high value on trustworthiness,” said Mr. Sudek of Chapman, a former entrepreneur himself and the chairman-elect of Tech Coast Angels, the largest angel group in the United States. “If you don’t know the answer to a question, say so, and promise to get back to them. Don’t fake it.”

In fact, acknowledging gaps in your knowledge and other weaknesses, and letting angels know you need their help, can add to your credibility, he said.

Here are some other tips from the researchers:

¶Memorize an “elevator pitch” for your product and its potential in 90 seconds or less. It will bolster your confidence, and you can recycle it to win over customers, vendors and employees.

¶Consider hiring a speech coach, but only one familiar with angel investors’ thinking.

¶Attend “pitching contests” that many business schools and angel groups sponsor.

¶In presentations, be upbeat but realistic in your profit and revenue projections. Better yet, draw up optimistic, middle-ground and pessimistic projections to show how carefully you have thought them through.

Ted Ray, founder of Ted’s Tinctures Inc. in Mountain View, Calif., has some advice for fellow entrepreneurs, even though he is only now starting a quest for $500,000 in angel financing.

First, he said, have a product on the market. “Nothing speaks more loudly than revenue coming in,” he said. His two-year-old company, which makes an herbal remedy called FlyRight Jet Lag Formula, had sales last year of $25,000 and is on track to increase that by tenfold this year.

Second, do not ask other people for money unless you have spent your own. He has put $105,000 of his savings into his firm and raised $185,000 from family and friends.

Third, the business plan you show to potential investors should be concise. He suggested using software on Angelsoft.net.

Fourth, seek angels with a record of investing in your field — in his case, consumer products.

And finally, he says, explore every angle. “If an angel says no, ask him for the names of four other angels who might say yes,” Mr. Ray said. “My goal is to get 100 introductions to get 10 meetings to get three presentations to close one deal.”