NANO, BIO and Crossing Borders

 

 

MEETINGS

 

This year’s NanoBusiness Alliance meeting demonstrated an interesting new development – a track of nano bio meetings.  The life sciences are branching off into their own focus within the greater organization.  This could be a very good sign as the “industry” of nanotech matures.  Still under discussion is how one invests in nanotech when it is common practice to invest in the management of a company as well as the technology.

 

Insight into this issue is offered by Josh Wolfe, Managing Parter/Co-Founder of Lux Capital: "A nano-rose by any other name is still a rose. We don't care what you call

      this – whether it’s something less hyperbolic like advanced materials or something more buzzy like nanotech. One thing is certain: Technologies change, companies 

change, industries change – but human nature is a constant. And there'll always be camps of promotional people saying some technology is the new-new-must-invest-in 

thing and there'll be a counter-camp sounding the alarms of skepticism. That's a healthy, necessary balance – when it breaks down, you get bubbles and crashes. But 

people across time have also always overestimated things in the short run and underestimated them in the long run. Any pessimism and uncertainty from the herd of 

our investment peers is music to our ears. …We at Lux care about two things: finding businesses that use nanotech to either radically shift the economics of

manufacturing, or endowing some product already on a market with new functionality that opens up entirely new markets. The science may be rocket science, but 

                                            sound business fundamentals aren't."

 

Abe Yokell, Associate at RockPort Capital Partners, offers his perspective: “RockPort doesn’t invest in nanotech as a rule but rather invests in advanced materials that have value-added applications to the end user, particularly in the energy & power and process & prevention (industrial, environmental, etc.) sectors.”  What does RockPort look for in a nanotech/advanced materials investment?  “As with any investment, we look for a strong and experienced entrepreneurial management team, a defendable competitive advantage that drives superior economics, large and/or growing addressable markets, a strong value proposition beyond pure economics, and an opportunity for our team to add value beyond just capital.  Interestingly, perhaps one of the biggest difficulties in the nanotech space is the youth of the industry and the lack of strong entrepreneurial management teams that sectors such as the biotech and software/IT have generated,” says Yokell.  Now that life sciences is moving into the nano spotlight, we’ll have an opportunity to see how his comments play out.

 

BIO2005 was an exciting meeting this year as well.  Philadelphia ’s energy funneled into the Convention Center and environs of BIO.  In fact, BIO took over Philadelphia , infusing its own energy throughout the city. Two interesting marketing efforts deserve mention.  The first was the Women in Bio (WIB) Monday evening cocktail party (no frivolous focus this, considering the expense and care lavished on these “free” parties) at The Academy of Natural Sciences, catered by Callahan’s. The hors d’oeurves made mouths water: duck with dumplings, chicken rolled in seaweed served like cigarettes, spicy spring rolls and corn with pancetta. The gathering was intimate enough to allow for quality time and networking and consumption of those fabulous morsels as well as learning about this up and coming organization.  WIB, headed by Robbie Melton, is “a vibrant national organization dedicated to the success of women executives and entrepreneurs in biotechnology and bioscience industries. We were founded to encourage, support, educate and provide networking opportunities as well as to facilitate access to funding and resources necessary to grow successful companies,” according to their mission statement.  The organization is expanding and looking for interested parties to start local and state chapters.  For more information contact Melton at: womeninbio@comcast.net.  Melton herself, is a vibrant and dedicated force spearheading this effort.

 

Another interesting fact about women in biotech I learned at BIO is connected to the law firm of Woodcock Washburn, whose main office is in Philadelphia .   "Woodcock Washburn has a great track record for advancing its women attorneys.  We are particularly proud of the fact that, in 2004, the Pennsylvania Bar Association awarded Woodcock Washburn the 'Women in the Profession's Award' for 'Promoting Women Lawyers to Leadership Positions.' 

Not only does the Partnership at Woodcock Washburn include seven women (23% of the total partnership), but each also serves in a significant managerial capacity, serving as the Co-Chair of the Policy Committee, Co-Chair of the Litigation Practice Group, Co-Chair of Prosecution/Client Counseling Practice Group, Chair of the Marketing Committee, Chair of the Hiring Committee, Chair of the Food and Agriculture Marketing Subcommittee, and Co-Lead of our Atlanta Office," says Patrick Farley, an IP attorney at the firm.

 

 

The second interesting marketing idea came from the State of Pennsylvania .  They had a creative and very strategically and tactically integrated concept for their Monday night reception.  They sent out invitations to Pennsylvanians in the life sciences, whether currently located in or out of the state, who are C-level in their organizations. The state went into alumni databases for bioscience graduates as well as sourcing C-level executives who currently work in Pennsylvania .  The goal was to promote networking and to show how the bioscience community is thriving in Pennsylvania .   “Our follow-up is courting CEOs to start a one-on-one conversation with the purpose of relocation and expansion,” says Laura Felty, Director of Constituent Affairs, Technology Investment Office.   An organized methodology for follow-up to a cocktail reception –  very smart.

 

 

CROSS-BORDER INSIGHTS

An important, and often neglected, aspect of cross-border relationships is how the cultures of the two countries affect their ability to do business.  Sometimes cultures take a back seat to other, more dominant, similarities. 

 

Take the United States and Canada , for instance.  We have different cultures, yet our physical proximity and language similarities make ours one of the largest, and most successful, cross-border business regions in the world (biotech is merely one industry in the larger trade relations picture).   Having adjacent physical borders, while convenient, is not enough, however.   Successful efforts at alliances occur through concerted efforts, usually initiated by non-U.S. entities. The MaRS Discovery District in Toronto understands this concept.  MaRS “is designed to bring together the communities of science, business and capital. This convergence will not only fuel regional development, but also accelerate the creation of new technology partnerships spanning the Canada-U.S. border.  Just as innovation and commercialization are global concepts, the most successful alliances in the new knowledge economy will be global alliances," says Dr. Ilse Treurnicht, the new CEO of MaRS Discovery District.  

Most business owners recognize that to really succeed they must penetrate the U.S. market, forging a global alliance.  Knowing that and being able to act on it are two different stories, however.  Which factors, cultural and business, accelerate and which hinder the creation of successful alliances?  Let’s examine another thriving biotech region, Medicon Valley , to get an overview and some insights. 

Medicon Valley, one of Europe’s largest biotech regions, encompasses the Greater Copenhagen area in Denmark and the Skane region of southern Sweden .  The “valley” concept was born in the mid-1990s and represents a dense cluster organization of universities, hospitals and companies, many R&D-based, that focus on biotech, life sciences, medtech, pharma and an “industry” virtually unknown in the United States – functional foods (yes, there are foods that bring health benefits in the US, they are just not organized under an umbrella). A food is considered functional when it has been demonstrated to beneficially affect one or more target functions in the body (other than a purely nutritional effect).  In Sweden , functional food science is a multi-disciplinary collaboration with the food industry and health and medical care system. 

Medicon Valley is a totally member-financed nonprofit corporation, says Chairman of the Board Per Belfrage, Professor of Medical and Physiological Chemistry at the Biomedical Center at Lund University in Sweden . Almost 10 years after its founding, the borders between Sweden and Denmark ’s biotech entities are still being integrated under one umbrella – and this is a situation of two “local” countries trying to integrate.

 

The cultural differences begin at the tech transfer level at universities.  Swedish universities have characterized their technology development as a triple helix – an interaction and integration of industry, university (in this case Lund University) and the authorities, or government arms.  These three entities work in unison to support the efforts of the start-up.  That’s an enormous amount of organized support from a company’s inception and a virtual guarantee that if something can go right, it will. 

 

Within the university system itself there is a marked difference from the American system.  In the Biomedical Center at Lund University , for instance, the structural basis of the school is more dynamic, integrated and flexible.  This is accomplished by using a mosaic model consisting of three major departments (Experimental Medical Science, Laboratory Medicine and Clinical/Medical Research) and a system in which tenure is granted by the school, not a specific department. Faculty have an enormous amount of flexibility to do research on a multidisciplinary team without having to change departments and worry about tenure.  From this freedom comes innovation, and the genesis of new companies.

 

But there’s even more (and this article is just an overview of an intricately networked organization and country). Per-Olof Hegg, Professor of Chemistry at Lund University , is also the President of the university’s Innovation Industrial Liaison.  He helps with the commercialization of companies and ideas stemming from the university.  What distinguishes Hegg from others in similar roles is his background in industry.  Having worked at Unilever, Hegg has business acumen as well as academic credentials – a crucial combination for this sort of undertaking (and one lacking among many U.S. technology commercialization departments).  According to Hegg, each year there are about 400 initial discussions about commercialization.  These discussions yield 200 viable ideas.  From that follows 100 detailed discussions, which are then narrowed down to the generation of 50 business plans.  The final yield is 20 to 25 new companies.

 

Another major difference between the U.S. and Swedish systems is that, in Sweden, professors or inventors own 100% of their patent – excellent for the professor, not so good for the university.  There are forces within Sweden determined to create a more win-win situation, where the reward system would change.  An example would be dividing monies equally among the professor/inventor, the university and the professor’s department.  This solution would also help to stem the brain drain from Sweden – everyone leaves to go where the money and opportunities for money are. 

 

Ideon Science Park is also a unique entity.  According to Hans Möller, Chief Executive Officer of Ideon, it is the largest science park/incubator in Sweden .  Adjacent to the Lund University campus, Ideon was founded in 1983 by private money and is owned by Lund University and Ikea. (The founder of Ikea was the first investor in Ideon and is a significant supporter of the university – and the architecture and interior design of these buildings reflect that influence.) Ideon houses mostly life sciences companies with a varying structure depending on the company’s needs – the buildings are literally flexible to accommodate growth and shrinkage.  The incubator has a two-year maximum residency for start-ups; then the company can move to another part of the park if it wishes.  According to Möller, there is a 90% survival rate of companies housed at Ideon and a 60% survival rate of companies that have moved out. 

 

In terms of licensing, most start-ups are looking to be swallowed by mid-sized companies who will then sell their ideas to big pharma.  This idea is based on the acknowledgment that small start-up companies are not even on the radar of big pharma, while mid-size companies are. 

 

The common thread heard from many start-ups is that they are technology, or product, companies, not marketing companies. This line was repeated verbatim, like a mass mantra. Their goal is to sell, license, or otherwise partner their company’s intellectual property with an American company that has an existing sales force and marketing machine.  The concept sounds smart and logical.  But if one looks at Sweden ’s huge success stories, Pharmacia is a striking example of a home-grown company that did not follow this mantra.

 

The mantra is a reflection of the cultural differences in how Swedes and their U.S. counterparts do business.  Swedes are more collaborative and thoughtful – they look to partner with other firms, and they take their time to fully understand a situation before moving.  Because they don’t scale up as quickly as U.S. companies, they say, U.S. venture capitalists are less interested in doing business with them. 

 

Of course, that’s once they can get the attention of our VCs.  As discussed in an earlier article, examining the difficulty of Canadian companies in attracting U.S. venture interest, VCs tend to be very local, not wanting to physically go far from their base to do their investing. For a New York State VC, going to Toronto was considered a leap not worth taking.  Sweden is a long way from New York .  Compounding the issue is the  “we are not a marketing company” mantra, which is often practiced by U.S. start-ups as well and represents a misunderstanding of the role of marketing and public relations in a start-up.  While the start-up can look for an established U.S. partner to market the end product to consumers and the healthcare community, it must get on the U.S. radar to establish that partnership. For start-ups in both countries, this takes marketing and public relations of a much more basic level.  Most companies do not seem to understand  this concept.  Many U.S. companies, and VCs in particular, are not going to go hunting for a start-up – in fact, they are barricading their doors from the pounding of existing companies who are trying to secure financing.  In Sweden ’s case, this is a shame because many start-ups have extremely clear and to-the-point presentations about their companies that would impress an American VC.  They have been properly coached, and their communications show it.

 

Some companies acknowledge that they need a physical presence in the United States .  These companies will establish an office of some type when they reach a certain critical mass.  But where? 

 

“I don’t think about New York .  I know about NYU, etc., but don’t think of New York as a bioscience place,” says Rikard Ost, Professor and a founder of Ceba Foods. Ceba, a functional food holding company, has interesting products that would probably sell well in the United States as well as globally.  Ceba makes oat-based products such as ice cream and milk.  These non-dairy products have the flavor and mouth feel of the “real”  (fat) thing, distinguishing them from other health foods. Aventure, another Ceba subsidiary, makes an oat-produced beer that tastes like regular beer, but, because it’s made from oats, lowers cholesterol (as do the other products).    “You think of Manhattan …it’s a nice place to visit…. [You go to] the Empire State Building …with your family.  But when you think of science, you think of Harvard.  MIT, Boston, Cal Tech, Harvard, Cambridge comes to mind.  I don’t associate New York with biotech or IT either,” says Ost.  “The general idea [of these two disciplines] is not there.”  When Ceba forms a daughter company in the United States to attract VC money, New York is not even on their map.  This issue is compounded by the one-on-one financing strategy New York State has established to draw biotech business here. Like Sweden ’s, it is a quiet strategy and, like the Swedish start-ups, it could cost the state in the long run.  With each party using a relatively passive method of commercialization, the likelihood of the two ever meeting is very low. 

 

Ola Forsström-Olsson is CEO of Ludisi, a leading software firm in the rapidly growing proteomics sector, which specializes in 2D gel analysis. Ludisi does the analysis better, cheaper and faster, with quality increases of up to 500%.  The company’s first U.S. presence was in Fairfax, Virginia, because they felt they had to be near Washington, DC.  But they moved to Boston in 2005, because Ken Morse, Senior Lecturer and Managing Director of the MIT Entrepreneurship Center , is there.  Forsström-Olsson had heard Morse present a sales seminar in Copenhagen .  Forsström-Olsson was impressed, liked Morse, and followed him to Cambridge .

  

 

Probi , a probiotics biotech company, says it isn’t a marketing company (the mantra) and that’s why they are not even interested in a U.S. presence.  They rely on their licensee/partners, Danone and Institute Rosell, to achieve market penetration in the United States .  Ulf Aberg, Project Manager for Food at Position Skane (an agency for investment and tourism in southern Sweden), says, “Swedish companies don’t dare to go to the U.S. because they are very small. VCs (U.S. ones) say there are too many small companies in Sweden and maybe they should be larger companies ( Copenhagen , for instance, has larger companies and might have better luck with VCs).” 

 

Skane -- the “bread basket of Sweden ” -- represents 50% of Swedish food production. Food companies interested in the East Coast focus on the Chicago area.  Biotech is San Diego, LA, San Francisco, Boston .  The story with individual companies and relationships is different.  Take Quaker Oats, for example.    Swedish functional food companies want to contact U.S. companies such as Quaker Oats.  Likewise, companies such as Quaker Oats want to meet Swedish, or other, companies that can help make their foods more healthy.  Alliances such as these are done on a one-to-one basis between companies.  It’s very targeted.

 

So what’s the answer?  The opportunities are ripe, but who will cross the Swedish/American border first?  More importantly, who will change the Swedes’ image of New York State and City?

 

Even with cultural differences, the willingness to make a committed effort lies in American hands.  There’s a lot to be learned – all we have to do is change the mantra.