John Kinzell is a serial entrepreneur who hails originally from Alberta. He was building his newest company, Xeris Pharmaceuticals, in the Marin County town of Larkspur, California, but grew increasingly concerned about regulations emerging from the state capital of Sacramento. “You have to have people tracking a particular activity and filling out paperwork and submitting it,” Kinzell says. “There are costs related to that. It’s regulatory overreach.”
Exploring new locations, he examined Phoenix and Tuscon in Arizona, Denver and Boulder in Colorado, Raleigh-Durham and Winston-Salem in North Carolina and Austin, Texas. His criteria were taxes, regulatory climate, quality of life and how well each area had established clusters of biotechnology activity centered on universities with life-science programs and medical schools.
Austin prevailed in 2011 because Kinzell was able up to line up an impressive series of benefits. First, he was able to find very affordable space in the Austin Technology Incubator, paying only $250 a month for an executive-size o!ce, with access to copying machines, conference rooms and a kitchen. “It’s a great way to launch,” he says.
Second, the Central Texas Angel Network, which includes executives who made millions at Dell (known as “Dellionaires”), led a round of fund-raising that netted $1.8 million for Xeris. The governor’s o!ce is nearing final approval to give the company $1.9 million from its emerging technology fund, another tool in the Texas Inc. playbook. “There is serious wealth in this state,” Kinzell says.
Third, Kinzell was confident that he could either recruit talent from other biotech centers on the East and West coasts or find talent locally. So far, he has not had to relocate any executives. One of his first hires was an engineer who had worked for Merck and Astra Zeneca and was seeking new career directions. [He enrolled at UT-Austin and the university provided him as an intern to Kinzell, who hired a second person, with an excellent technical background, after meeting her at a Christmas party at the Austin incubator.]
Overall, Kinzell says he believes he has found ideal conditions to launch his company, much better than in California. “You’re a bigger fish in a smaller pond here,” he says.
Mir Imran, CEO of InCube, is a Silicon Valley legend, having spun off 22 mostly medical companies from his research and innovation firm. However, as taxes and living costs increase there, he is expanding to San Antonio because of its “powerful ecosystem of innovation.” San Antonio gave InCube $10 million in 2010 to open a research center there, and three of InCube’s companies raised $9.2 million from the state’s emerging technology fund after they relocated. “The city took a very long view of our coming there,” says Imran, who commutes twice a month to San Antonio. “Building companies is expensive and risky. They were willing to share some of that risk. While these companies may produce a small number of jobs during their development stages, what we end up producing is a new generation of entrepreneurs. That is the magic. It’s very contagious.”
San Antonio is not as developed a technology hub as Austin, but it has been gaining ground partly because of the role of Henry Cisneros, a local who served in the Clinton Administration, who also created BioMed SA, a non-profit that has been promoting the development of the medical technology and life-sciences industry in San Antonio for decades. Imram worked with BioMed but also found strong collaboration with a University of Texas Health Science Center and the U.S. military’s trauma research and care center, its largest in the world. The city also hosts diabetes clinics and research institutes, which are other possible sources of intellectual property for InCube to license and commercialize. “Everyone in Texas is looking at universities in their cities as engines of economic development,” Imran adds. “San Antonio is clearly abuzz with it.”
Dallas and the Telecom Corridor
Largely unheralded, the Dallas area has emerged as one of the largest concentrations of telecommunications companies and their suppliers on the planet. “Austin gets a lot of the glitz and is known for tech startups, but Dallas and Richardson are better known for bigger companies,” says Bill Sproull, president of the Richardson Chamber of Commerce and one of the architects of the Telecom Corridor that runs from Dallas to the northern suburb of Richardson. “If you are supporting a big carrier like an AT&T or Verizon, this is the world’s center for carrier-class technology. That’s why the equipment manufacturers are located here.”
The list of big companies with a big presence is impressive. Cisco Systems, the California-based tech giant, has made several acquisitions in the area, including Monterrey Networks, and maintains its largest headcount outside of Silicon Valley in Richardson. Samsung Electronics also maintains its North American headquarters in Richardson. Ericsson, which already maintained an R&D presence in the corridor, took over 2,400 employees when NorTel, the former NorthernTelecom, crashed and burned. Fujistu, Alcatel-Lucent, China’s Huawei, Nokia and RIM also have big operations there. That concentration is one reason that AT&T, the world’s largest telecom company, moved its corporate headquarters from San Antonio to downtown Dallas a few years back.
Actually, there are two other technology clusters that support and complement Telecom Corridor. One is a semiconductor cluster created by Jack Kilby of Texas Instruments (TI) and the inventor of the integrated circuit. TI’s digital signal processing chips play a big role in cell phones and wireless devices, and the company has spun off dozens, perhaps hundreds, of start-up companies. Another cluster is called the business process and outsourcing industry that H. Ross Perot created. Hewlett-Packard bought Perot’s EDS and Dell later would buy a successor company called Perot Systems. Dallas, it turns out, is about a lot more than just J.R. Ewing.