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W. Marc Bernsau
Wednesday, March 3, 2010
Thought Leaders
Mass. Tech Transfer Center's Barrow talks of recession impact on innovation
By James M. Connolly
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Abigail Barrow sits at a nexus of the Massachusetts innovation sector. As director of the Massachusetts Technology Transfer Center, she reaches out to universities and other research centers to identify technologies that could form the basis for new companies, and then helps to guide the entrepreneurial team through the processes of product development and funding. A Mass High Tech All-Star in 2008, Barrow shared her thoughts on the impact of the recession on tech innovation with MHT managing editor James M. Connolly.
MHT: Are we out of the recession?
Barrow: I don’t think so. Hopefully we’re at the bottom, but I don’t think we’re out of it yet. There are signs of recovery, but in Britain we say that one cuckoo does not a summer make.
MHT: Are ideas still coming out of the researchers?
Barrow: You know, Massachusetts is incredibly lucky because the federal government still sends a lot of funding every year to the institutions. Our universities, research institutes and hospitals get between $5 billion and $6 billion a year from the federal government to fund basic research, and that’s still coming in. And in the past year, with the stimulus funds, that’s even increased.
MHT: So that basic engine of research work isn’t stopping?
Barrow: Now the hard thing is taking that very basic, very early-stage research, finding the technology in there that is exciting commercially and moving those into existing companies or startup companies.
MHT: What can your office do?
Barrow: One of the things that we hope to do is provide small proof-of-concept grants — very small grants, $30,000 — to take the technology that is on the researchers’ bench, develop some data that shows the technology is going to work or that it’s not going to work. What that also does is that it gets the faculty thinking about what they have in the lab that they can apply for money for. So it really is a catalyst for more commercialization. The supply of technology is still there, in spades, that’s not disappearing at the moment. But some of the step-one tools to pull them out further is not.
MHT: Is the funding there to renew the grants?
Barrow: Not at the moment, but I’m working very hard on Beacon Hill. …They’re very receptive. Everybody loved it, but there’s no money.
MHT: What type of idea would you have confidence in if you were a researcher right now?
Barrow: You can still start companies around any technology right now. And, it’s kind the best of times and the worst of times. It’s the worst of times in that it’s very very hard to get funding, although that seems to be easing up a bit. But venture capitalists and other investors have really driven valuations down. They are taking a long time making decisions. Companies that three years ago would have been funded in 6 months to 12 months are now taking 18 months to two years to get money.
The best of times are really twofold. You can get really good management and entrepreneurs to work with you for a really long time for equity. We’re almost back to a point where people would work just for equity. You can get a really good team together. You can also do a lot more with a lot less money. While it’s harder to raise money, once you do raise the money you can actually get a lot further with it because you can be a lot more aggressive with what you pay people, not just people but for services.
MHT: There seems to be an undercurrent that the companies doing well now are the ones that can help people save money. True?
Barrow: People say “faster, better, cheaper.” I think people used to hope for faster and better, but now you really have to be cheaper as well, particularly in health care. Everything is becoming so cost-conscious in health care.
MHT: What’s the mood like at universities for potential entrepreneurs?
Barrow: They are focusing on getting their big research grants, and a lot of it is getting the right resources so they can find somebody who can run the company. There’s been a change. Ten to 15 years ago you talked to a researcher and they wanted to do a startup and really wanted to go with the startup. Now it seems like they want to be involved with the startup but they want to maintain their academic careers. So it’s much more the graduate students and the post-docs who actually go with the startups.
MHT: What was the impact of the recession on tech transfer?
Barrow: The big worry for institutions with the recession was their endowments. It effectively closed up sources of funding within the universities for discretionary activities. That meant that everyone had to get back to basics. So there wasn’t the funding for interesting and creative programs. What put that back a bit was the stimulus funding coming in for research. That made everybody happier.
MHT: Have the characteristics of startups changed in the past year or two?
Barrow: The startups that we’ve seen have tended to be focused in a few areas. Obviously life sciences because half of the basic research here is life sciences related. But I think everybody is looking at clean energy, some new communications, new materials. We’re not seeing very much Web 2.0. So we think people are really interested in making what I call real products, tangible things.
MHT: Are VCs asking different questions?
Barrow: I think they are being very careful when they put money into a deal that they can plan that out, how they are going to get all the money they need for that deal. They may be putting money into the first round, but how much can the rest of the syndicate invest. How many other people do they need to pull in to invest in the company in order to get to product launch. They want to see that they can get the company to some big inflection point or get it to a point where it is acquirable, so that they can get their money out.
They want to know that you get at least two more rounds from the current syndicate without having to go out to bring more people into the deal.
MHT: How has the startup process changed in past few years?
Barrow: I think now people understand that in order to get funding you have to have a really tight plan. You can’t just have a brilliant idea. You have to be really thoughtful.
MHT: What other changes do you see out there?
Barrow: I think one of the interesting things is that students are getting a lot more interested in entrepreneurship, particularly grad students and post docs. I think they are more open to having more industry oriented careers but also more entrepreneurial careers. They see that they can go out and work in a couple of startups, do imteresting plans and product developments, they still have the opportunity to come back to an academic career if they want to. They aren’t thinking that if they leave academia to work in a startup company they aren’t ever going to be able to come back to academia.
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