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Biotech eyes linking Cleveland, Pittsburgh
Sunday, May 20, 2007

CLEVELAND -- From outer space, distance is relative and state boundaries don't exist. That's the point Baiju Shah hopes to illuminate when he shows off a satellite view of the United States -- Pittsburgh and Cleveland are two nearby dots on a map, their suburbs bleeding into each other, a single corridor of light.

And Mr. Shah, president of BioEnterprise in Cleveland, wants to use that two-hour drive to promote medical research and life-science businesses in both cities. Separately, each is a third-tier player in the field. Together, they'd have the clout of a Minneapolis-St. Paul or the Research Triangle in North Carolina, both of which are industry leaders when it comes to medical research and related investment.

Last month, BioEnterprise and its Pittsburgh counterpart, the Pittsburgh Life Sciences Greenhouse, announced that they would cross-promote each other's biotech sectors, a joint effort to build up the "tech belt" that connects the two cities. June 20 will bring the first real test of that cooperative in the way of the Global Healthcare Investing Conference in Cleveland, where at least 50 venture capital firms will be looking to invest in Cleveland and Pittsburgh startups. Pittsburgh returns the favor in the fall with a conference promoting stem cell medicine.

The Greenhouse is an incubator and startup investor, while BioEnterprise mainly solicits venture capital to help existing companies grow, but their end goal is the same -- to build Pittsburgh and Cleveland into a robust, self-sustaining biotech megaregion. "Money gets attracted to bigger, more successful areas," said John Manzetti, head of the Greenhouse. "Money [attracts] talent. And it will attract technology, too. This collaboration will help do all three those."

The problem is marketing and image, as it often seems to be when Pittsburgh or Cleveland is involved.

The trick, Mr. Shah said, is getting the venture capitalists from the West Coast and the Boston-to-New York corridor to think beyond state borders and recognize that Cleveland and Pittsburgh could be twin cities almost in the same way that Minneapolis-St. Paul are. While not nearly as close physically as the Minnesota metropolises, Pittsburgh and Cleveland are much nearer each other than many on the coasts realize. "As we start taking that message out, the reaction on the coast is one that's quite stunned. They don't have any sense that Cleveland and Pittsburgh are next door to each other," Mr. Shah said.

The combined research talent, which in a perfect world spawns local business investment, is second to none if you add up the two regions, said Mark Coticchia, vice president within Case Western Reserve University's research and tech management division. He, as much as anyone else, has a sense of what both cities have to offer in biotech if they join forces -- before coming to Cleveland, he helped start Carnegie Mellon University's tech transfer office and also served as director of tech transfer at Redleaf Group, a Pittsburgh seed-stage venture firm.

"If you take a look at the amount of research happening in those two regions and draw a circle around it, it's as big as any other geographic region in the country," he said. CMU, Case Western, UPMC and the Cleveland Clinic have as much national clout as any foursome of research hospitals and schools, and Pittsburgh alone has 700 life-sciences firms, large and small, more than 200 of them having been nurtured by the Greenhouse since summer 2002. "From a deal-flow standpoint, you can find a lot of opportunities," Mr. Coticchia said.

Opportunity is one thing. Converting promising technology into a startup that takes root, and converting that into jobs, is another, especially when both regions suffer from a work force that isn't quite ready to accommodate these emerging research fields. Cleveland, for example, has more than 2,000 open job positions in the bioscience field, but no one to fill them. Pittsburgh also faces labor shortages in many sectors, thanks to a stagnant population.

"I think that's a legitimate concern," Mr. Shah said. "You stagnate for a while ... you have to shed old assets, old talents" that don't mesh with your growth sectors. In Cleveland, Ford Motor Co. just announced that it intended to close an engine casting plant for at least a year as a money-saving measure, leaving 500 out of work. But few of those workers would be able to make a quick transition into bioscience.

That means these startups must, to a large extent, import workers from elsewhere. But if that's the case, wouldn't it make as much sense for Pittsburgh to collaborate with Boston or North Carolina? On New York Times columnist Thomas Friedman's "flat earth," where geography is irrelevant and digital connectivity erases political barriers, why is Pittsburgh's proximity to Cleveland so important?

Because, says Mr. Shah, at the seed-venture level, investment isn't global. "Venture capital still tends to be a regional sport ... especially at the earlier stages," he said. "Venture investors want to be heavily involved with their companies. The good firms still strongly believe that their value-add is the time that they spend and the networks they bring into a deal, not just the fact that they put some money in."

Megaregions such as Cleveland-Pittsburgh are the key to global competitiveness, some of the nation's leading think tanks say. Pittsburgh might not be a major player on the global innovation scene, but a region linking Pittsburgh and Cleveland could well be. Down the road, other older, somewhat close industrial centers -- Detroit-Ann Arbor and Chicago-Milwaukee -- could be added to this regional cluster.

"We have very similar economic challenges in this industrial heartland," said John C. Austin, a nonresident fellow with the Brookings Institution and lead author of a 2006 report called Renewing the Great Lakes Region. The 12-state region, which includes Western Pennsylvania (but not Philadelphia), produces one-third of the nation's new technologies, but receives only 12 percent of the venture capital, Mr. Austin said. Getting its share means cooperation.

This cross-border cooperation is a multistep process -- first, you have to get the existing venture firms and CEOs already in the city on board. One example -- Pittsburgh's Draper Triangle Ventures, which last summer announced it would invest in a biotech group called Cardio-Insight Technologies Inc. in Cleveland.

BioEnterprise and the Pittsburgh Greenhouse hope to foster more of these high-tech cross-border relationships in a distinctly low-tech fashion -- by plying the moneyed and those in need of it with food and booze. Pittsburgh and Cleveland biotech CEOs meet for dinner every few months, for beer and steaks, and out of those meetings, friendships and business partnerships can be forged.

The CEO of RedPath Integrated Pathology, a Pittsburgh cancer-diagnosis firm, said the informal meetings will pay dividends someday. "Why am I taking that kind of time?" asked Mary Del Brady. "Companies beget companies. [If] companies are working to strengthen each other," and spinning off other companies, you can reach critical mass a lot sooner, she said.

The second step in this turnpike partnership will come when the money on the coasts fully realizes the fruits that await it in the so-called Tech Belt. The partnership between the two cities means that, when the umbrella groups head to the coasts in search of startup funding, their lists of potential investments is twice as long. And greater investment opportunity means better odds that venture-capital firms will find a technology that piques their specific interests, and greater ease in recruiting vital out-of-state management talent.

"We wowed 'em," said Mr. Manzetti, talking about a January health-care conference in San Francisco, where the Pittsburgh and Cleveland teams presented a united front. "It was pretty exciting to do that. They had no idea" of the bioscience presence here.

The third step -- a long way off -- is when the region becomes self-sustaining, with enough of its own venture capital to nurture the technologies emerging from hospitals, research universities and startups. "We need to commercialize that stuff locally, instead of having it escape to the coast," said Mr. Austin, of Michigan. Too often, biotech entrepreneurs can't find money here, and venture firms force new technologies to move to the coast "so they can baby-sit them," he said.

"We want people traveling here, instead of us going to the coasts," Mr. Shah added. "That's when we'll know we've made it."

First published on May 19, 2007 at 7:43 pm
Bill Toland can be reached at btoland@post-gazette.com or 412-263-2625.
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