Reg Kelly, Scotsman from Humble Roots, Finds New Purpose at QB3 in Mission Bay

6/21/10Follow @xconomy

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sitting on a desk. “I really had to start and create QB3 from zero,” Kelly says.

One of the key early decisions was finding the right team. Kelly did that by recruiting associate director Doug Crawford. “We hit it off. We’re both very hard driving, hard working. It’s always fun to do something with someone rather than try to do it on your own,” Kelly says.

The lack of operating capital was the No. 1 problem. It wasn’t going to rain down from Sacramento automatically, so Kelly turned to the private sector. He called his friend Art Levinson, then the CEO of Genentech, and asked him what wasn’t working in the relationship between academia and industry. Levinson cited intellectual property red tape as a big problem, so Kelly resolved to work behind the scenes at the university to find a better way. Six months later, Genentech and UCSF had forged a blanket intellectual property agreement that greatly increased technology transfer.

This was really the period, Kelly said, that he was hustling. He connected with an eclectic bunch of business and government leaders, including General Electric CEO Jeff Immelt, Dreyer’s Ice Cream founder T. Gary Rogers, and the government of Malaysia, who all committed to support the vision of translating basic science into products and jobs. Brook Byers, the legendary venture capitalist at Kleiner Perkins Caufield & Byers, agreed to put his name on an auditorium at the Mission Bay campus.

This growing legion of supporters for QB3, in turn, helped put pressure on California lawmakers to keep supporting the effort through some tough budget-cutting cycles. The level of state support climbed from $1.2 million in the first year to $7.5 million at its peak, although recent cuts have brought state support back down to $5 million a year, Kelly says.

Despite the cuts, the activity is increasing at QB3. The operation has hatched 22 startups, and gets two to four requests a week from others that are seeking to work in one of its incubator spaces. The Mission Bay Capital Fund was established last year with $7.5 million to invest in about 15 startups with ties to UC entrepreneurs. It’s already made a couple investments, but it’s really just getting started, Kelly says.

Getting startups to physically locate in Mission Bay is an essential piece of the puzzle Kelly is working on. The plan is to create a place where the intellectual, creative types of the university, the clinicians who treat patients, and the hard-driving entrepreneurs who develop new drugs are all in the same place, “cheek by jowl,” as Kelly says. The entrepreneurs have usually been missing from that equation, because of their need to keep costs low, which drives them to look for cheaper warehouse-like space in places like South San Francisco. But that creates disconnects which make it more difficult for people to build the kind of close working relationships across disciplines that are needed for something so complex as drug development, Kelly says. Getting them all together in one place, Kelly says, should make Mission Bay “the academic health center of the 21st century.”

This effort is still in the early days. The day I met Kelly, bulldozers were moving dirt across the street for the new UCSF Medical Center at Mission Bay. Last Thursday, the news broke that Salesforce.com founder Marc Benioff and his wife are donating $100 million for the new hospital. It’s a big part of a $1.5 billion hospital system planned for Mission Bay, which will start to open in 2014.

Kelly is so eager when he talks about this that he often started answering me before I was done with my questions. He is pouring “the energy of a convert” into this undertaking. He recently turned 70 years old. I had to ask him whether he had a big celebration.

No, the poor kid from Scotland was out hustling that day, too. He was giving a talk about QB3 and the Mission Bay vision at a venture capital conference.

“Isn’t it appropriate?” Kelly says.

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