I attended the FITCI Fall Seminar Series yesterday at FCC. The Topic was “Funding- Where, When, and From Whom to Get It”. The speakers were Robert Linthicum – PNC Bank, Steve Carchedi – Zoom Intelligence, Ron Kaese – TEDCO & Frank Dickson – DBED Challenge & Enterprise Funds (select the links to open their Presentations). At the end of the presentations, someone asked how the downturn in the Economy would effect funding and financing of start-ups. Banks are tight now, due to shortage of money, but the prime is coming down. Banks are always the pickiest sources of funding in any event. The TEDCO & DBED guys are pretty sure that as Tax revenue dwindles some funding cuts are inevitable. But Steve, speaking on behalf of Angle and VC investors, doesn’t expect much of a change at all. Angels are investing their own money, money which they already have in the bank. VC’s are generally on a schedule to invest a certain amount of money over a set period of time, which probably won’t change that much.
One area of “financing” popular in our Biotech arena was not represented. Federally funded research, like NIH Grants and Grants through Military, DHS avenues. I cannot overstate the impact that this has on our region. The whole DC region is really somewhat “recession proof” because we are so dependent upon Federal Government money. Many of the Incubator tenants came out of Ft Detrick with an idea for commercialization/development, like our friends at IBT who just won a huge deal for as much as $65MM. And who isn’t pounding the doors at the Fort Detrick Business Development Office or jumping on board with the Ft Detrick Alliance? If you’re not and you operate a small business, then you should!
These conversations reminded me of a couple of things I read lately. Last week I had intended to blog Jason Balog’s bit in the FNP. Then I ran into him at the Greater Baltimore Tech Council Tech Night last week, so now I need to make amends. From his article:
So what is keeping the industry going? The answer is simple: Big Pharma/Big Biotech with their need for products and the cash to pay for it. Traditionally Big Pharma/Big Biotech was innovative, bringing new products to market and always on the cutting edge of development. However, as the cost of development has skyrocketed and the internal pipeline for new products dried up, Big Pharma/Big Biotech has been forced to find its products and pipeline elsewhere. Furthermore, many of the blockbuster drugs that have made Big Pharma/Big Biotech billions are coming off of patent protection, and the revenues associated with such blockbusters are about to be lost to generics.
Therefore, Big Pharma/Big Biotech is caught in the never ending search for the next blockbuster drug and the revenue that comes with it. According to Deloitte Recap LLC, $78.9 billion of merger and acquisition deals have been completed in 2008 versus a total of $32.2 billion for all of 2007.
At the current rate, the amount of money changing hands in merger and acquisition transactions in 2008 will be triple the amount in 2007.
And yesterday I was following a bunch of stories through FriendFeed and read a really great little bit by Nat Torkington, who I met at SciFoo and blogs for O’Reilly, called “Effect of the Depression on Technology”. His main point is that this “depression” is Good for Innovation:
..This recession will be good for innovation because recessions generally are. During boom times, companies direct development and occupy great talent with at best evolutionary improvements over the state of the art. Companies are great chasers of new things, but aren’t great at making new things. A recession means technologists cease to be paid vast amounts to duplicate the work of others.
Another indirect effect (I left as a comment on his post and copy here) is that as companies cut-back to maintain profitability, they tend to slash workers. This liberates a great many brilliant people who have many ideas for commercialization, pollinating the landscape with new entrepreneurs and small companies.
So what better place to be than in the Biotech market in Frederick County in this day and age? Insulated from the economic downturn by Federal funding or customers who are running off federal funds. Being wined & dined by Big Pharma and investors who want to hang the Biotech banner on their flag post. Surrounded by a blossoming entrepreneur network liberated from the fold because their ability to create value for their organizations was never realized and their ability to innovate attenuated by the short-sighted need for capital preservation.
Welcome to Frederick County, the land of Opportunity.