Fund could cultivate high-tech jobs; But political influence on dispersal of start-up money is a concern.
ATLANTA - With a venture-capital investment, Cesario Borlongan figures his stem-cell research could be the fuel that spurs the development of the bio-tech industry in Augusta.
"My idea of having this, if we have funding for a start-up company, is to make this available to different stem-cell companies around the U.S., and we can be the pioneer to test the stem-cell safety," he said. "... It would be something that we could sell, not just in Georgia, but to other people who are working in this field of stem-cell research."
The neuroscientist at the Medical College of Georgia and Charlie Norwood Veterans Affairs Medical Center in Augusta developed a way to test stem cell experiments used in the quest to treat a variety of medical conditions. The venture already has contracts with five Fortune 500 companies but could sign up more in this growing field with a bigger lab and extra staff, he said.
"The potential for this can really take off," he said.
His innovation is the type of opportunity Gov. Sonny Perdue may be thinking of when he recommends creation of a venture-capital fund with $10 million in taxpayer money and $30 million from private investors. It would be managed by the Georgia Research Alliance, a public/private partnership that raises money to attract world-famous scientists to the state's universities and also nurtures faculty spin-off companies.
Perdue's idea could be a boon for cities that house research universities like Augusta, Atlanta and Athens.
Many countries like China and Dubai and other state governments, like California and nearby Florida and South Carolina, have built similar funds with the aim of encouraging research that can lead to scientific breakthroughs and high-paying jobs when they become commercially viable. Some governments even invest public-employee pension money in the funds, although that's not in Perdue's plan contained in his budget request to the General Assembly.
Georgia officials have been reluctant to invest money in risky start-up ventures. As a result, some companies based on discoveries at Georgia universities have moved to states that provided money, says Charles Nawrot, associate vice president for technology transfer at the Medical College of Georgia.
"Here, we're close to South Carolina. So if they get money there, it's easy for them to pick up and move," he said.
Georgia needs to put taxpayer money into such investments, supporters say, because the state's network of private investors involved with young companies is relatively small compared with other states.
One Atlanta-based venture-capital investor thinks Perdue's proposal should be bigger. Ross Mason suggests adding another $60 million from the state's university endowments to bring the total to $100 million.
"Why don't we have each of those entities put skin in the game?" he asks.
The risk of financial loss could be one reason for caution. Typically, fewer than four of every 10 start-up companies receiving venture capital ever break even.
But supporters note the rewards from the few that do turn a profit not only can make up for the losers but also return a tidy payoff for investors - including the state.
Beyond the investment risk, many observers worry that a government-operated fund could be manipulated by political forces.
"Academic loyalty and politics will limit the fund's potential for scientific innovation and job creation, so it is critical to insulate the fund by allowing private equity experts to make the final investment decisions," said Kelly McCutchen, executive vice president of the private think tank Georgia Public Policy Foundation.
Instead of using private-equity experts, the initial outline for the fund calls for hiring a veteran fund manager to do the investing.
Nawrot, for one, recognizes the possibility that investments could go to scientists because of their personal connections rather than the strength of their market potential.
"That's going to be a challenge, I think. The Georgia Research Alliance is basically a political organization," he said. "They were born and funded initially by the government, so typically they are going to have a little more political component."
Still, the investments would also be guided by the Research Alliance's own experience.
Since 2002, Alliance staff have sifted through 220 university innovations to find 75 with enough promise to get small grants to study their market potential. Of those, 68 resulted in companies, and 22 of the companies have begun doing business - hiring 375 people.
Those workers earn $75,000 on average, according to the alliance.
Borlongan sees those kinds of jobs coming to Augusta if he can get sufficient backing.
"Even though some people might think that Augusta is a remote area, these companies seek out the expertise," he said, noting that with the Internet, location doesn't matter much. "Yes, I want to have the company here."
walter.jones@morris.com, (404) 589-8424