Past Events - Spring 2005

Event summaries -- Spring 2005

1. Biotech Conference
2. Tech Visionary Panel
3. Back-2-Basics
4. Dingman Day Lunch

Biotechnology companies learn how to attract more venture capital
by Jeremy Bond, Staff Writer
Article appeared in The Business Gazette on March 18, 2005

Venture capitalists say they look mainly for two things when considering an investment in a life sciences company: an appealing technology and a commitment by its executives to see the company through its early stages.

Maryland has historically had a difficult time competing for venture capital with the nation's other big biotechnology hotbeds, California and Massachusetts. But industry insiders, speaking at a forum last week at the Robert H. Smith School of Business at the University of Maryland, College Park, said money is readily available to Maryland companies if they go about it the right way.

Wei-Wu He, general partner and co-founder of Emerging Technology Partners in Rockville and one of the original members of the team that built Rockville biotech Human Genome Sciences, largely dismissed a question on how to recreate a Maryland version of Sand Hill Road, a street in Menlo Park, Calif., famous for its concentration of venture capital firms.

"Importing money is probably not as difficult as you think," Wei-Wu said.

The Silicon Valley Bank, which began providing capital in the technology-rich center of California, has opened offices in other high-tech areas, including Vienna, Va. The bank is "looking for a company that has some [interesting] ideas," said Megan Scheffel, vice president and relationship manager for the Santa Clara, Calif., bank.

"Capital is the easiest transported commodity," Wei-Wu said. "People are more difficult to transport."

Those in the life sciences field in Maryland are just as good as those in California, he said. Maryland would benefit from more second-generation entrepreneurs who have already done the dirty work.

The state also needs more groups of entrepreneurs who can work well together, he said.
Startups cannot "glue five or six people together and hope they just love each other." Luck favors those who already talk to each other, he said.

One of Wei-Wu's observations appeared to be directed to the Smith School itself. He noted that master's in business administration programs train students to work for big companies that already exist rather than for startups, which are riskier but also happen to make up a large proportion of the industry in Maryland.

More than 50 percent of innovation is taking place in small labs, he said.

"Biotech doesn't happen by itself."

Most recently, venture capital has flowed to later-stage companies, but the pendulum appears to be swinging back to those who want to start new ones, said Jeff Jones, a principal with Emerging Technology Partners. This will lead to a series of "truly novel technologies," he said.
Half of Emerging Technology's two dozen portfolio companies are in this region. While the venture capital firm still seeks later-stage, established technologies, "we are always happy to talk to [startup] entrepreneurs," Jones said.

Emerging Technology Partners has about $60 million under management and is financing about 20 biotechs, some of which are doing well and some of which are struggling.
"Get as much cash as you can," Scheffel suggested. "It'll always be harder than you think."

The insiders had this advice for those seeking capital: develop a novel idea, use great people committed to the industry and establish small goals.

"You want to see progress and achievement of certain milestones," said Frank Bonsal, director and co-founder of Red Abbey Venture Partners in Baltimore. In biotech, this would mean moving from the preclinical stage to Phase 1 and 2 of a clinical trial.

Key to moving forward is perseverance, he said.

"Once you get involved in a company, you better be prepared to stick with it."

Red Abbey has raised $6 billion and is looking for companies that have been in business for a while and have established a reliable timetable, Bonsal said.

Christopher Anzalone, founder and CEO of The Benet Group in Washington, D.C., said the investment group looks for promising technology over all else. Nanotechnology looks particularly promising, with the federal government putting upward of a billion dollars into nanotech research annually.

But Bonsal said using public money to finance nanotech is probably premature. He cited NanoInk, a Chicago company formerly headed by Anzalone, which issued an initial public offering only to later withdraw it due to lack of interest.

"There's capital," Anzalone said. "What's missing is good companies."

Investors should keep an eye on the next new thing, such as nanotech, at the same time that they "look for ashes in the rubble of the bubble bursting," Bonsal said.

"You have to be a good buyer and a good seller," he said. "It takes two decisions to make money in the investment world."

Wei-Wu said he has seen hundreds of business plans and thinks the industry is still underappreciated.

"We're developing more drugs now than in any time in human history," he noted.
The venture capital community will soon move beyond the scare from the burst technology bubble of a few years ago, he said. Local entrepreneurs should remain committed to selling themselves and boosting the Maryland industry in the process.

"Keep trying, keep trying," Wei-Wu said. "If we're focused on it, [and] we keep trying, you never know. You never know.

"We have the right ingredients."

Tech Visionary Panel: Grid Computing
February 2, 2005, 8030 a.m. - 11:00 a.m.
Summary by Michael Grenier

The final frontier of grid computing is sometimes referred to as “ubiquitous computing”, the notion that your idle PC is crunching data for a stranger somewhere halfway around the world.  This is vision is clearly a long way off, however, enterprise level grids that provide serious parallel computing are already starting to add-value today.

On February 2^nd, The Dingman Center hosted a discussion on the future of grid computing for regional venture capital professionals.  The panel for this event included: Michael Cummings, Alan Sussman, Dr. Henry Lucas, and Robert Cohen (bios are below).

The term grid computing is still being used to describe a variety of different computer applications and technologies.  The panel was able to separate out different definitions, but generally they all defined grid computing as some type of distributed computing, memory or storage with differing degrees of abstraction for the end-user.  At the extreme, the user has no knowledge of or control over where and what machines are doing the actual data processing or where the data they are using is being stored.  This is somewhat analogous to the electrical grid where consumers just “flip a switch” and know almost nothing about where the electricity is made or how it gets to them.

Professor Lucas made the pointed that while the idea of using latent resources makes sense to CEO, there are several organizational hurdles to adoption of grids.  The CIO may resist adoption of another complex technology, and users may resist adoption of a technology that takes their machine out of their complete control.  Public distributed computing projects like SETI@Home have run into several issues of quality control.  However, companies have had more success because of their ability to dictate IT practices.

Industry professional Robert Cohen explained that companies with serious parallel computing needs are using cluster computing and enterprise grids today to great benefit.  Brokerage firms are using enterprise grids to help run complex multivariate financial modeling in 1/10^th of the time.  Pharmaceutical companies are using enterprise grids to conduct new product research via complex molecular level modeling.  Auto manufacturers are using enterprise grids to accelerate new product development and to simulate crash tests.  They have even extended those grids to their partners as well.  Mr. Cohen's presentation is available here.

Mr. Cohen believes firms could realize 15-30% gains in annual efficiency in the next five years.  His own research showed drastic increases in output, productivity, and decreases in employment and product costs.

(Moderator) Phil Garfinkle, Venture Partner at Gabriel Venture Partners
Phil Garfinkle is a three-time successful entrepreneur, an experienced CEO, and an active angel investor. He is widely credited as the pioneer of online photofinishing and holds many patents in this area, as well as in the fields of communications and networking. As a Venture Partner, Phil continues to focus on emerging applications for disruptive technologies. Prior to Gabriel, he was a founder of Yazam, a global VC firm that was acquired by US Technologies. Prior to Yazam, he founded PhotoNet Japan, which went public in 2002. Phil was most notably the founder, CEO, and Chairman of PictureVision, which was sold to Kodak. At Kodak, he also served as a General Manager and in the CTO's office. His operating experience also includes having been the CTO/VP Engineering at Network Imaging, and VP for Information Technologies at ASG.

Smith Professor Hank Lucas, Professor of Information Systems
Professor Lucas' research interests include the impact of information technology on organizations, IT in organization design, electronic commerce, and the value of information technology. A prolific researcher, he has authored 11 books as well as monographs and more than 70 articles in professional periodicals on the impact of technology, information technology in organization design, the return on investments in technology, implementation of information technology, expert systems, decision-making for technology, and information technology and corporate strategy. His most recent books include Information Technology and the Productivity Paradox: Assessing the Value of Investing in IT (Oxford University Press, 1999) and The T-Form Organization: Using Technology to Design Organizations for the 21st Century.

Michael Cummings, Visiting Associate Professor, Center for Bioinformatics and Computational Biology
Professor Cummings' research interests are in the areas of molecular evolutionary genetics (including population genetics, systematics, comparative genomics) and computer science related to bioinformatics, computational biology, and Grid computing.  He has authored or co-authored 38 publications. His research is supported by the National Science Foundation, National Aeronautics and Space Administration, Department of Energy, Alfred P. Sloan Foundation, Fujitsu Laboratories of America, and Intel Corporation.

Robert Cohen, Fellow, Economic Strategy Institute
Dr. Cohen works on a number of telecommunications and Internet issues. He authored ESI's study on the impact of the Internet on the U.S. economy, and had earlier estimated the impact of a more rapid deployment of broadband communications on productivity and economic growth. He recently served as President of the Forecasters Club of New York, and has taught at the City University of New York and NYU's Stern School of Business. Cohen received a Ph.D. in economics from the New School for Social Research.

Alan Sussman, Assistant professor, Computer Science Department
Professor Sussman's current research emphasis is on the design and implementation of high performance database systems for multi-dimensional data sets, with many applications including analysis of remote-sensing data, medical information systems and support for processing and visualization of scientific simulation results. Previous and continuing work includes compilers and runtime support for parallelizing geometrically complex and/or adaptive scientific computations on distributed memory parallel machines.

Back-2-Basics Panel Discussion
Making Decisions with Imperfect Information
February 10, 2005, 8:00 a.m. - 10:00 a.m.
Write up by Elenora Vasyushina

PowerPoint presentation of Professor Bob Baum

Professors Bob Baum and Alex Triantis and Business Leaders Howard Friedman and  David Lesser were the panelists for this Back-2-Basics Discussion.

Key Takeaways

Perfect information is very rare and there is never enough information to make a perfect decision. In the situation of a new venture formation, the information is extremely imperfect and asymmetrical. It is important to move fast to remove some uncertainty.

There are several categories of imperfect information:

(1)    Non-existent information
(2)    Right information, but difficult to find, too complex to comprehend, secret or
        changing information
(3)    Wrong information

To obtain information, you need to have certain human, financial and time resources that often times are lacking in the situation of a new venture creation and entrepreneurs need to consider what resources they have at hand.

There might be different solutions to the problem of imperfect information:

(1)    Giving up on seeking additional information
(2)    Taking incremental actions to gain necessary information
(3)    Risk sharing through partnerships

Sometimes the problem is having too much information that diverts you from your initial plan and harms business in the end. Entrepreneurs have to learn how to filter out irrelevant or incorrect information and trust their intuition.

There are different types of uncertainty:

(1)    Technical or operational
(2)    Economic
(3)    Financial
(4)    Regulatory or environmental

Some types of risks can be hedged by derivatives, insurance and real options.

Different people have different levels of risk tolerance. These personal characteristics should guide people to the types of businesses they are best suited for, because different industries require different levels of risk tolerance.  

Lessons Learned

Dingman Day Lunch
Friday, February 11, 2005, 12:00 noon
Write up by Matt Fleischer

The Dingman Center for Entrepreneurship and invited guests were able to enjoy two great talks from former Dingman scholars on Friday, February 11.  Rich Harris and Mike Borek spoke to a crowd of about 50 students, faculty, and friends of the center about their professional experiences since receiving their Smith MBAs.  Both discussed how to maintain a strong work/life balance while succeeding in the hectic, demanding world of entrepreneurship.

Rich Harris is currently a partner at SpaceVest, a local venture capital firm.  He used his experiences and connections from being a Dingman Scholar to enter the world of venture investing. He spoke of his quick rise to partnership through making sound investments and a great exit in the late 90's.  Of course, timing and a little bit of luck have helped this former scholar to a successful career.

On the other end of the spectrum, Mike Borek founded his own company after being a Dingman Scholar and graduating from Smith.  Router Solutions, a hardware networking company, has kept Mike busy since graduation.  He has raised venture capital and continues to move the company forward.  Mike spoke of his enjoyment of the entrepreneurial side of the world of private equity and his resilience and persistence to make his latest company flourish. 

Following the former scholars was current Dingman Scholar, Kara Holzer, who spoke of her involvement with the Smith Store.  Kara, CEO of the Smith Store, which is one of the student-run businesses in the Dingman Center, told of their current success and posed questions to the audience to help gain insight for future success.  The Smith Store was founded in 2001 by Smith's Entrepreneurship Club, and under Kara's reign has taken revenues from $5,000 for all of last year to more than $25,000 just in the first semester of the 2004-05 academic year. The audience helped Kara look at and talk about some tough issues -- such as recruitment and retaining volunteers, and passing the legacy of The Smith Store on to the next generation of Dingman Scholars.

The lunch provided current and potential Dingman Scholars with a view of life after Dingman through the eyes of two successful former Scholars.  Members of the audience were able to hear from a former student who has continued his entrepreneurial spirit by forming his company right after graduation and one who took his entrepreneurial drive to help fund start-up companies.