Against the backdrop of a broad decline in venture investing nationwide, some concerns have been raised about San Diego’s hometown VCs and whether they are continuing to actively invest. But San Diego remains a vibrant community for venture capitalists to invest.

We enjoy diverse industries including biotech, wireless, software, cleantech, and more. Good money follows good deals. Great companies find a way of getting funded. Recently the San Diego Venture Group hosted a cleantech panel that consisted of three eminent venture capital partners located in the Bay Area and Los Angeles who are investing in clean technology. Each one oversees a portfolio that includes promising companies in our region. They were astounded at the 600 people who registered for the San Diego event, and the quality of some of the entrepreneurs they spoke with afterward.

Currently, we simply face limited liquidity in our markets. As a result, many venture capital firms are focused on nurturing the existing companies in their portfolio so they can survive this challenging funding cycle. Those firms that have the capacity to invest are finding it’s a great time to do so, with valuations being more realistic.

I have a greater concern about fostering innovation in our region. We need an efficient technology transfer process in our university system to commercialize some of the exceptional intellectual property we have in this region. Stanford University has mastered this process. Innovation is one of the most critical components to economic recovery in our country. Improvements that drive productivity are critical, and technological innovation will play a major role in putting the financial stability of the nation back on the right track. History indicates that the countries and companies that invest in innovation and research and development during an economic downturn will be best positioned to benefit when the economy recovers. Innovation has been one of the leading drivers of economic growth for the past few generations. Technological advancements have helped create a global economy, raise average incomes in many countries and lifted millions of people into the middle class.

The Obama administration has an opportunity to boost U.S. economic competitiveness and spur broad-based economic growth through targeted reforms of our country’s patent system, scientific research-and-development, and workforce development programs. Our patent system and today’s federal programs were designed to address 20th-century problems, not the new challenges posed by globalization and worldwide economic distress.

Today, VC firms outside San Diego are funding the majority of new venture deals in the region. Many are delighted to come here to work with innovative companies. Our regional challenge is not necessarily the VC’s who live and work in San Diego. Our challenge is to stimulate more innovation that can be commercialized out of our IP-rich universities, companies and DoD environs. Highly innovative companies solving real problems with a large market opportunity will attract money. Money follows great deals.

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[This is the second part of a series on how the process of identifying venture-backed startups and commercialization opportunities at the University of Washington is evolving---Eds.]

How does the University of Washington Tech Transfer office view its ongoing relationship with venture capitalists?

On Wednesday, we reported on how venture firms around town are going about their business, working with researchers at the UW and looking for the next big startup. The focus was on recent changes at UW TechTransfer—with the high-profile hires of Linden Rhoads and Janis Machala, both prominent leaders in the tech-business community—that seem to have led to increased involvement with industry and venture capital. I wanted to hear Rhoads’s top-level perspective on this, as well as some more specifics from a few local VCs. I also dug up a couple intriguing bits of news, and things to look for down the road.

Rhoads first stressed the importance of outreach to the community. “We’re hosting many representatives from area firms, as well as Boston firms and other areas, and venture arms of pharmaceutical companies, but given the economic realities, none of that activity has turned out to be the most important to us,” says Rhoads. “Most important to us is the depth of our relationships with our traditional VC partners. It goes far beyond their actual portfolio companies.”

In this “far beyond” realm is the work that Seattle-area venture capitalists do to help recruit star faculty, serve on UW committees, and, of course, meet with the school’s researchers to advise them on commercialization possibilities.

Last month, UW TechTransfer held its first half-day retreat (including an advisory board meeting) since Rhoads took the helm. She says they hosted about 50 top business leaders in a room on campus for five hours: people like Nick Hanauer of Second Avenue Partners, Bob Nelsen of Arch Venture Partners, Matt McIlwain and Greg Gottesman of Madrona Venture Group, Ron Howell of the Washington Research Foundation (WRF Capital), Cameron Myhrvold of Ignition Partners, Bill McAleer from Voyager Capital, and Chad Waite from OVP. (The list of who’s who keeps going— Alan Frazier, Carl Weissman, …Next Page »

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We’ve been writing for months about the renaissance in startup activity at the University of Washington since Linden Rhoads came to campus to run tech transfer.

The big ideas, and the fire in the belly, are easy to find coming from UW these days (Arzeda and EnerG2 pop to mind), but as any businessperson will tell you, starting companies is hard. Joe Eichinger, one of the savvy entrepreneurs Rhoads is leaning on to advise UW faculty, told me he’s been cautioning researchers to think things through a little more, nurture their ideas a little longer, before taking the leap with a startup.

“One of my sore spots is that things sometimes come out of the UW too soon, before the intellectual property is fully developed,” Eichinger says.

Spinning out too soon with a promising idea can create lots of problems, says Eichinger, a veteran medical device entrepreneur with CoAptus Medical, AcousTx, Therus, and Ekos. The faculty inventor might envision one narrow application of an idea, without seeing other potential uses that might be a lot more valuable. If all the far-reaching IP gets licensed to one startup focused on the first application, and that startup drives an extremely hard bargain on licensing other applications to other companies, the idea could get bottled up forever. UW could miss the opportunity to start several companies. And young faculty members otherwise on the tenure track could see their careers derailed from research and teaching by getting wound up in a misguided venture, Eichinger says. “They can get starry-eyed over startups sometimes,” he says.

He ticked off a list of intriguing technologies that aren’t quite ready to emerge in the commercial arena:

—Imagine contact lenses that could be embedded with tiny electrical circuits, powered by small amounts of sunlight. This is the kind of thing featured in The Terminator. The potential applications are endless. The military might want these circuits to detect when soldiers step into a biowarfare chemical zone. They could help people with poor vision surf the Web. They could pick up on subtle biological signals, like whether a diabetic’s blood sugar is out of whack, or whether pressure is building behind the eye that might cause glaucoma. The gaming industry, obviously, sees potential for virtual reality to immerse players in games.

The technology for such lenses has been brewing in the labs of two promising young UW faculty on the tenure track—Babak Parviz in electrical engineering, and Teung Shen in ophthalmology. “It’s breakthrough technology,” Eichinger says. “They are going to be superstars in the future.” But some fundamental questions …Next Page »

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On Monday, Bellevue, WA-based Intellectual Ventures signed an agreement with the Indian Institute of Technology-Bombay to license some of the university’s inventions and to work on technology commercialization strategies with its researchers, as reported by CIOL, Express India, TechFlash, and other outlets. It’s not really big news by itself—Intellectual Ventures has formed similar partnerships with other institutes in India, as well as in China, Japan, Korea, and soon, Singapore—but it fits into the broader strategy the firm is pursuing around the world to foster invention.

Last fall, Intellectual Ventures opened offices in five Asian countries in an effort to gain access to a much wider pool of inventors and talent. Led by global head of technology Patrick Ennis, a physicist and former managing director at Arch Venture Partners—and other members of Intellectual Ventures’ senior leadership team, including co-founder and president Edward Jung—the company is building relationships with prominent academic scientists in Asia, and setting up partnerships whereby it can license certain inventions in exchange for helping with patents and commercialization. The strategy reminds me a lot of Microsoft Research, which has set up labs in China and India in the past 10 years and built partnerships with local university researchers and administrators. (This blueprint is not surprising, given that Intellectual Ventures’ co-founder and CEO Nathan Myhrvold was the founder of Microsoft Research.)

The reception Intellectual Ventures is getting also reminds me of Microsoft Research. While most university officials see the partnerships as benefiting their researchers and increasing the flow of innovation, critics have rolled out the standard “patent troll” fears that the company is coming in to buy up all the best intellectual property—which will only be assuaged by years of relationship building and repeatedly demonstrating that these sorts of deals can benefit both sides.

Nevertheless, Intellectual Ventures’ Indian operation seems to be off to a strong start. It is now staffed by about 15 people, led by Ashok Misra, the former head of IIT-Bombay and a highly respected polymer materials scientist.

I caught up with the staff of Intellectual Ventures to hear about the workings of the Indian university partnership. Nicholas Gibson, one of the firm’s directors of business development in Japan, said via e-mail, “The agreement with IIT-Bombay is important as it gives [us] more direct access to top flight university-based Indian inventors. The deal also gives IIT-B access to commercialization possibilities …Next Page »

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It’s taken as a given that universities are integral to the innovation process. Researchers create technology, the university finds a licensee or a startup company is formed to develop the invention, and products are created that drive growth in the economy.

But that is a simplistic view of a complex system. And today, a select group of researchers from around the world is gathering at U.C. San Diego to help examine the process of university-industry interaction and technology transfer in more detail. Their focus is a series of questions—that have long been asked but have yet to be definitively answered and are of abiding interest here at Xconomy: What is the true connection between research universities and innovation, and how does it work? How does knowledge really move from the academic laboratory to industry? And are there new ways to improve and accelerate the process?

Sponsored by the Kansas City, MO-based Kauffman Foundation, the seminar is intended to help analyze a global research effort focused on what industry wants from universities, and how those goals can be achieved. The research, part of an onging multi-year study, consists of interviews and other data drawn from more than 90 companies in four countries where innovation and new technologies play a key economic role: the United States, Japan, Canada, and the United Kingdom.

“What we are trying to accomplish is for people to think about what incentivizes and supports a positive interaction between the university and industry,” says Mary Walshok, a UCSD Associate Vice Chancellor and a seminar host. The participants are “people who care about these things, and who are in a position to influence government policy in the U.S., Japan, Canada and the U.K.”

The three-day event begins with a presentation this evening by Larry Smarr, director of the California Institute for Telecommunications and Information Technology, which Walshok says operates as an example of university-industry “best practices.”  The invited participants …Next Page »

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One of the biggest startup ideas at the University of Washington is getting ready to leave the academic nest. Arzeda, which designs custom-built enzymes on computers that can do things Mother Nature never could, has recruited Michael Martino as its CEO and secured commitments from OVP Venture Partners and WRF Capital to anchor its founding $12 million Series A financing round, Xconomy has learned. (The deal hasn’t closed yet, but that’s expected in April, Martino says.)

I caught up with the company’s three scientific founders—Eric Althoff, Daniela Grabs, and Alexandre Zanghellini—earlier this week at their temp digs in the UW TechTransfer office. They were eager to tell me all about the company they are building, and why it has enticed an experienced public company CEO like Martino (formerly of Bothell, WA-based Sonus Pharmaceuticals) as well as the investors to get on board.

The first thing to know is that Arzeda (Ar-ZAY-duh)  is all about enzymes. These complex protein molecules do all sorts of essential jobs in the human body, and are found everywhere in nature. Enzymes in your stomach chop up the steak you eat for dinner, and break down drugs like aspirin in the liver. Scientists have manipulated these handy molecules for all sorts of industrial uses, from cleaning up oil spills to detergent ingredients. Denmark-based Novozymes is one example of a dominant player in the industrial market, while Cambridge, MA-based Genzyme has become one of the world’s biggest biotech companies by making engineered copies of important enzymes for people who suffer from hereditary deficiencies, like the one that causes Gaucher’s disease.

What those companies have in common is that they start from a cookbook dictated by Mother Nature, from which they can make incremental tweaks. But after a decade of research in the UW lab of biochemist David Baker, supported by supercomputers, the Arzeda trio has found a way to design custom enzymes on a computer screen, with all sorts of ideal properties beyond the scope of other companies that essentially start with an enzyme from nature. They have shown it can be done in publications in Science and Nature, and the next step will be to do this in a larger scale commercial setting.

“We don’t need a starting point with an enzyme. We don’t need to improve on the starting point. We design the starting point,” Grabs says. Zanghellini adds, “We are expanding on what nature does.”

Lots of things still need to fall into place before Arzeda can really start humming to execute on this vision. For starters, it is getting a license from the UW to an academic software program called Rosetta that has been modified for commercial use, as well as a few catalytic components for enzyme reactions, plus some full-blown patented enzymes the founders worked on with Baker at the university.

Then comes the financing. Besides OVP and WRF, Martino said he is still courting …Next Page »

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One of the world’s best-selling vaccines, Merck’s Gardasil, is quietly producing some serious money for an unexpected beneficiary—the University of Washington.

Thanks to some hard-fought patent litigation from the 1990s that ended up strengthening and extending the lifespan of a critical piece of UW intellectual property, the university is now raking in a windfall of royalties on Merck’s cervical cancer vaccine. This product’s success has been a driving force that has caused the licensing income UW gets from the Washington Research Foundation to more than triple in the past three years, to $38 million in 2008 from $12 million in 2006.

I learned about this story from Ron Howell, the CEO of the Washington Research Foundation, the Seattle-based organization that manages some critical UW intellectual property from the 1980s. While $40 million a year might sound trivial to an institution that has a $1 billion-a-year research enterprise, it is actually a critical resource to the UW because the cash doesn’t come with a lot of strings attached, and can be used for things like recruiting and retaining star faculty, supporting entrepreneur-in-residence programs to commercialize university inventions, and purchasing state-of-the-art equipment, Howell says. It’s all been a boon to Linden Rhoads and her team at UW TechTransfer, who are on a mission to make UW better at spinning off innovations into the business world.

“What it means is that we’re going to be able to support more scholarship and research,” Howell says. The WRF particularly wants to aim its gifts toward faculty that are approaching “tipping points” where they just need a little more research support to enhance intellectual property that could be the basis for a company, Howell says.

So how did WRF come to be in this enviable position? The tale begins in the early 1980s, when UW researcher Benjamin Hall discovered a technique for making complex peptide molecules in yeast, one of the founding innovations of the modern biotech industry. This technique is today licensed to more than 50 companies, who use the method to make insulin, enzymes for detergents, proteins to make cheese creamier, or for modern vaccines.

This lucrative method was the subject of intense patent lawyering in the early 1990s, when a group of 10 companies from around the world challenged its validity in Europe, Howell says. The opponents included Novo Nordisk, the world’s largest maker of insulin for diabetes, Seattle-based ZymoGenetics, and Japan-based Takeda Pharmaceutical. “They knew the technology was valuable, and they scoured the earth to dig up dirt,” Howell says, to try to suggest that Hall and the UW didn’t really have a valid claim.

After about five years and millions of dollars of lawyering from both sides, the patent was overturned in Europe. But it was only a “pyrrhic victory,” Howell says, because all the investigation uncovered evidence that buttressed the UW’s claim in the U.S. to the point of making it “bulletproof,” Howell says. And, importantly, since this proceeding dragged on in legal limbo for so long, it meant …Next Page »

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Yesterday, we shared the first part of a conversation with Linden Rhoads, the University of Washington’s tech transfer boss. She talked about how she’s making the office hustle a lot more, in particular by brokering meetings between faculty and venture capitalists to brainstorm about the best research ideas with commercial potential.

Today, in Part Two, Rhoads talks more about how this is supposed to work in practice, and a little bit about what life is like at a huge institution after spending her career in startups. Here are edited excerpts.

Xconomy: How will you measure success in your first year?

Linden Rhoads: We are still measuring success, by all the typical metrics. But we’re also looking at the number of resumes that our venture capitalists send to department chairs. We’re looking at the number of faculty candidates that we helped recruit, or for whom we arranged meetings. We’re looking at the number of VCs and industry executives that we introduced to UW researchers, even outside of a licensing agreement. We’re tracking all of that.

X: When you first started, you said you were having a lot of meetings with Bay Area VC’s and the local VCs. What came out of those meetings?

LR: For one thing, in March, we’re going to have our first half-day retreat advisory board meeting since I joined. We’re going to have an entirely reconstituted advisory board that has very significant venture capital representation. This office will be looked on, given our new mandate for ourselves, as a vehicle for increasing the relevance of the university to the region. The members of the advisory board will see themselves as personally responsible for helping to see that an increasing number of researchers at the university are focused on translational research. The breakout topics at that meeting will be all about how to help us do that.

We’re seeing many more venture capitalists on campus now than I’ve ever seen before. It’s as staggering, in the case of some departments, as a 10-to-1 difference in terms of numbers of visits.

You’re obviously familiar with Janis (Machala). I think it would be fair to say before I recruited Janis, this university has never had anything like the Rolodex that I brought, or that she brought, or that the two of us collectively have brought. Or her capability. She’s just a very high-bandwidth individual who has tremendous capacity for coaching, and mentoring would-be entrepreneurs. She has a track record that engenders tremendous good will, and the university is benefitting from that work.

X: What kind of reception are you getting culturally? I know there are some people who say the university has a pure-research mentality that says business is full of a bunch of bad guys.

LR: I think there are still a few holdouts who wish we could put the genie back in the bottle. They wish, ‘Why won’t researchers just go back to being pure of heart?’ You know what? That really amounts to very few people anymore. Most people here …Next Page »

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Silicon is a wonderfully cooperative element. It takes relatively little energy to promote the electrons in a silicon crystal from their usual, docile orbits around the atomic nuclei into wild, free circulation. That’s what makes silicon a semiconductor—valuable for electronic switching devices such as transistors, sensing devices such as the CCDs in cameras and X-ray machines, and energy-generating devices such as photovoltaic cells.

But silicon would be more wondrous if it were even more responsive—if an incoming photon needed less energy to knock loose an electron, for example, or if a single photon could kick loose many electrons. In pursuit of this vision, chemists, physicists, and engineers have spent decades trying out various ways of modifying silicon crystals—for example, by doping them with atoms of arsenic or other elements that put more free electrons into the mix.

Almost ten years ago, graduate students in the laboratory of physics professor Eric Mazur at Harvard University stumbled across a new way of making silicon more responsive: they found that if they blasted the surface of a silicon wafer with an incredibly brief pulse of laser energy in the presence of gaseous sulfur and other dopants, the resulting material—which they called “black silicon”—was much better at absorbing photons and releasing electrons. And this week, after nearly three years in hyper-stealth mode, a spinoff company with an exclusive license from Harvard to commercialize the process has begun talking with reporters.

Executives for the company, called SiOnyx, believe that its technology will help semiconductor manufacturers build far more sensitive detectors and far more efficient photovoltaic cells, using essentially the same silicon-based processes they currently depend on—thereby revolutionizing areas such as medical imaging, digital photography, and solar energy generation.

The venture-funded startup has emerged with a bang, securing exclusive coverage by New York Times technology writer John Markoff in today’s edition. But SiOnyx CEO Stephen Saylor and principal scientist James Carey, a PhD graduate of Mazur’s lab, also showed me around their Beverly, MA, facility last week, on the condition that this post would appear after Markoff’s story.

“You’ve never been able to detect light the way this stuff detects light,” says Saylor, referring to black silicon’s remarkable sensitivity to incoming photons, especially photons at infrared energies, which pass through normal silicon as if it were transparent. That property could make it an ideal, and inexpensive, replacement for less-sensitive detectors in devices as varied as X-ray and CRT machines, surveillance satellites, night-vision goggles, and consumer digital cameras. “It means that you solve a clear and obvious pain point for a very large number of customers,” Saylor says.

And because black silicon is just silicon that’s been roughed up a bit by femtosecond laser pulses and chemical treatment, SiOnyx’s technology could theoretically be integrated into existing semiconductor fabrication lines without much disruption. “You can do everything we’re talking about without extraordinary, Herculean effort, and you can do it in a way that fits with high-volume manufacturing flows,” says Carey.

SiOnyx was incorporated in 2005, secured the Harvard license in early 2006, and obtained $11 million in venture financing from Harris & Harris, Polaris Venture Partners, and RedShift Ventures in 2007. The company is going public with its story because “we have enough momentum now both with strategic partners and with the technology that it makes sense at this point to share a little more about what we are up to,” say Saylor.

Harvard, for its part, is holding up SiOnyx as one early result of the ongoing overhaul of the university’s technology licensing efforts. The school gained a reputation early in this decade as being unresponsive, even hostile, toward faculty and students who wished to commercialize discoveries made in the university’s labs, especially in areas outside of biotechnology and drug development. For years after the discovery of black silicon in Mazur’s lab, the school’s technology transfer office “wasn’t very excited” about the work, according to Carey.

But in 2005 the university brought in university licensing veteran Isaac Kohlberg to rebuild its technology transfer operation from scratch. Saylor and Carey say it was Kohlberg and his staff who finally understood black silicon’s potential and ironed out the licensing deal that made SiOnyx possible.

“The exciting steps being taken to develop [black silicon] for commercial application serve as even more evidence of the entrepreneurial energy that continues to gel and accelerate at Harvard,” Kohlberg says in a press release set to be issued tomorrow by SiOnyx and Harvard’s Office of Technology Development.

Bob Metcalfe, a general partner at Polaris Ventures who sits on SiOnyx’s board, thinks Kohlberg is right: “Harvard seems to be getting its act together in patent licensing,” he says.

Exactly what makes black silicon such an effective absorber of photons is a question that even Mazur and Carey couldn’t answer at first. The material is one of many offshoots of work going on in Mazur’s lab in the late 1990s using femtosecond lasers—devices that can emit an intense pulse of light lasting only a millionth of a billionth of a second. Mazur lab researchers found that zapping a silicon wafer with such pulses in the presence of sulfur hexafluoride gas—an experiment initially carried out on a whim—left the wafer festooned with tiny cones. Silicon roughened in this way soaks up almost all of the light that strikes it in visible wavelengths, appearing black—hence the name.

“It took several years for us to begin thinking properly about what we had,” says Carey. “The original thought was that the surface roughening process was what created the advantage.” The researchers hypothesized that photons were bouncing from cone to cone—and that the more times they bounced, the higher the likelihood that they’d be absorbed, thus dislodging electrons. But then Carey and his coworkers realized that black silicon was also absorbing infrared light, “which you can’t explain just by …Next Page »

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Linden Rhoads of the University of Washington isn’t the only person in town trying to push a powerhouse research institution to become a hotbed for startups. Ulrich Mueller joined the Fred Hutchinson Cancer Research Center in Seattle almost a year ago to be its vice president for industry relations and technology transfer. His mission: Forge more collaborations with the biotech and pharmaceutical industry without selling the institution’s soul.

The “Hutch,” as it is known, is one of the world’s leading biomedical research centers, with 2,844 employees and an annual research budget of more than $308 million in fiscal 2009. Yet it doesn’t tend to spin off companies like its peers around the country. One startup emerged from the Hutch in 2006, while the Mayo Clinic spun off nine, Massachusetts General Hospital created eight, and M.D. Anderson Cancer Center gave rise to two new companies, according to an annual survey by the Association of University Technology Managers.

Mueller previously had been managing director of technology transfer at M.D. Anderson in Houston. He has a doctorate in cell and molecular biology from Baylor University, so he can speak the language of the lab. He also was closely involved with forming two startup companies there, so he has learned how the venture capital game is played. I sat down with him at his office to ask how about what he aims to accomplish at the Hutch.

Xconomy: What kind of situation did you inherit here in terms of technology transfer? What did the lay of the land look like?

Ulrich Mueller: My predecessor did a great job of really setting up a good office and good practices as far as looking at and evaluating technologies being developed here. A real focus had been on finding startup opportunities, and obviously we’ve had some successes there with Ikaria and Apoptos. So it was very nice for me to walk in to an office that was well set up.

X: What was really your mandate when you came in, from Lee Hartwell (the center’s president, and a Nobel Prize-winning cancer biologist)?

UM: Both Lee and our board are really interested in seeing us continue to expand our activities. They want continued consistency in terms of helping develop technologies, and really bringing ways to expand new opportunities for our scientists, potentially through interesting new industry collaborations. It’s not just about what we can out-license, or build up and out-license to companies, or maybe even do startups every now and then when we find the right opportunity. It’s also about where we may be able to bring in technologies from companies to help some of our research programs.

X: Does that mean bringing in more sponsored research dollars from companies?

UM: Yes, in some cases. Where companies are interested in developing certain capabilities in, say, molecular diagnostics, where we have a good discovery engine. Where can we set up really collaborative, sponsored research agreements where they would fund some of that work and potentially get rights to developing products from that work.

X: What’s the biggest challenge in this job? What do you need to improve around here?

UM: A lot of what we do is an educational process for both sides. We have a lot of scientists who are very well-versed in entrepreneurial activity, but a lot of other scientists aren’t very familiar with it, and don’t understand the potential value of finding commercial partnerships. Part of our job is to work with the faculty and find the right opportunities. Not to the point of worrying about patenting every single discovery here, but finding those opportunities where working with a commercial partner makes sense.

On the outside, a lot of people don’t understand what’s being done here at the Hutch. One of the things we’re doing in this office is developing relationships with local biotech companies and the investing community, and also some of the larger groups on the West Coast and East Coast, and really providing communication on the type of things we’re doing. Maybe they’ll be interested in investing or a strategic partnership.

X: What’s surprised you here, since you’ve had a year to look under the hood? …Next Page »

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Tom Ranken is the first to admit he can get a bit ornery on the subject of venture capital in the Northwest. “It used to make me foam at the mouth when VCs would say there’s plenty of money out there and all the good ideas get funded,” he says.

But now Ranken, the former CEO of the bioinformatics company VizX Labs, thinks the VCs may be at least partly right. He has had the change of heart after doing a research project this spring that dug into why the Northwest doesn’t create more biotech startups. He and Jim Severson, the former vice provost of technology transfer at the University of Washington, identified all 21 life sciences startups formed in the state from 2006 through 2007, and interviewed CEOs at 11 of them about what the region needs to provide more fertile grounds for new companies. (Click here for the full WBBA report)

It’s hard to find good comparisons on startup creation by region, Ranken says, but one study has suggested that a startup is formed for every $65 million in sponsored research. By that rule of thumb, the region should have produced three times as many startups, he says.

The study, paid for by the Washington Biotechnology and Biomedical Association and the City of Seattle, debunked several popular perceptions about the drought, Ranken says. It found there isn’t a shortage of management talent, and the region is actually exporting some of its talent. Venture capital is nearly impossible to get for small companies that aren’t likely to go public, yet it can be scored for companies with big ideas that could someday generate more than $100 million to $200 million a year in revenue. Technology transfer isn’t as big of a road block as it once was to commercializing ideas from the University of Washington. But one real issue at the region’s anchor university is an academic culture that frowns on entrepreneurial efforts, Ranken and Severson found.

“The academic culture here seems to be that once the knowledge is published, it’s done,” Ranken says.

Here’s a sampling of recommendations from the report:

—Perform more research to understand what Ranken and Severson dubbed “Good Life Science Businesses.” These are the firms that do the industry’s grunt work—managing clinical trials, contract manufacturing, and running toxicology tests. These companies collect steady fees and fulfill key functions in the local biotech machine, but get little recognition because they will never become the next biotech to change medical practice, like Amgen (NASDAQ: AMGN) or Genentech (NYSE: DNA). “The Good Life Sciences Businesses are seen as the Ma and Pa grocery stores, when Ma and Pa come in to the store, do a little work and go home,” says Ranken, who calls that perception “garbage.” Examples of low-profile, yet important, companies are Quintiles, a contract research organization based in Research Triangle Park, NC, and Axio Research, a small contract research organization in Seattle, he says.

—Round up some of those former Immunoids and Icosians who scattered after corporate takeovers and re-connect them in a life sciences angel network for companies that don’t qualify for venture funding. “Local angel networks have little life sciences expertise and angel capital is nearly impossible to identify and access in Washington,” according to the report.

—Copy the model of Accelerator, the startup incubator affiliated with top venture firms and Leroy Hood’s Institute for Systems Biology, and apply it to medical devices, diagnostics, and (here we go again) the so-called Good Life Sciences Businesses.

—The WBBA needs to redesign its networking events that connect entrepreneurs to other entrepreneurs, or hook up inventors with entrepreneurs. “These activities probably will require many different foci, venues, times, etc. to remain fresh and vital,” according to the report.

The report has made an impression on the WBBA, says Jack Faris, the trade group’s president, who sat in on some of the interviews and heard some feedback first-hand. “We want to pursue most if not all of the recommendations,” he says.

One recommendation that’s dead on arrival? Amending the state’s Constitution to allow direct state aid to startup businesses. Some executives would like to see that happen in order allow the state to do something aggressive on a global scale, like Massachusetts Gov. Deval Patrick’s initiative to put $1 billion into supporting life sciences over the next 10 years.

“Here it would take a two-thirds vote of the legislature and a vote of the people,” Ranken says. “It’s politically impossible.”

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Last night I rode my bike down from our First Hill office to Lake Union Park to mingle with some biotechies. This year, the Washington Biotechnology and Biomedical Association’s annual Summer Social was tucked inside the Naval Reserve Building, although the way the West-facing windows let in so much early evening sunlight, it was almost like being outdoors.

There were lots of familiar faces to me, having covered the local biotech scene for five years at The Seattle Times, but also a lot of unfamiliar faces—younger ones, too. The attendance figure I gathered from WBBA’s Kathleen Poston was around 300, pretty darn good for a sunny Thursday evening in July.

Here’s a quick rundown from some of the interesting people I met:

–Tom Ranken. The former president of WBBA, now with Xactagen (gotta love a company name that starts with X), just finished an interesting project. He interviewed local entrepreneurs about why more biotech startups haven’t been formed in the region in the last few years. One surprising conclusion: the University of Washington’s Technology Transfer office isn’t nearly as big a roadblock as it once was. “Five years ago, people (in industry) were rabid about tech transfer. That’s not really the case anymore,” Ranken says.

–Jane Shaw. The well-connected and always fashionably bespectacled trade commissioner from the Canadian Consulate’s office reminded me to connect with our neighbors to the Nnorth. Ken Galbraith, a former executive at the Vancouver, BC-based biotechs QLT and AnorMED, now a general partner with Ventures West, is said to have his finger on the pulse of life sciences there. I sense a road trip in the future!

–Erik Nilsson. The president of Seattle-based Insilicos has sharpened up his elevator pitch since I last saw him. “We can measure HDL (good cholesterol), and we can measure LDL (bad cholesterol), but we don’t really have a simple blood test that can tell if you have cardiovascular disease.” His company, naturally, is working on such a test, and expects data from its first clinical trial to be published in a couple months, probably in the journal Circulation.

–Neile Grayson. The former business executive at Sonus Pharmaceuticals has teamed up with another Sonus refugee, Richard Daifuku, to start a clinical trials/drug development strategy consulting business called Phase1two3. Everyone involved with Sonus is still a bit “shocked” at how the company’s lead cancer drug candidate flamed out last September, she says.

–Rob Carlson. Here’s a new face, though I didn’t actually meet him. He was recommended by Richard Gayle, founder of SpreadingScience.com, when I asked Gayle who was the most interesting person he met for the first time at last night’s event. Carlson, who has a doctorate in physics from Princeton, recently left the UW to form a startup called Biodesic that, among other things, is working on technology to make it easier to detect proteins in the blood.

–Gary Spanner. The economic development manager from the Pacific Northwest National Laboratory in Richland, WA, mentioned two innovative companies spinning off from the lab. Infinia, an alternative-energy company backed by notables like Khosla Ventures and Vulcan Capital is one; the other is InEnTec, which cut a deal last fall with Dow Corning to recycle hazardous waste.

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The Massachusetts Technology Transfer Center announced its latest round of Technology Investigation Awards for Massachusetts researchers today. The awards of $40,000 each went to seven teams of researchers working on projects they hope to develop into commercial products.

According to MTTC, the center’s awards have helped to launch more than 20 companies since 2004 based on technologies licensed by Massachusetts researchers and students, including cellulosic biofuel company SunEthanol, liver tissue cell screening startup Hepregen, and nanoscale solar-cell technology company Solasta.

Startups funded or coached by the center have raised more than $70 million from investors and grants. “Translational awards such as these are very difficult to secure and the MTTC offers the first and only award program that is available to researchers at all Massachusetts research institutions,” the center said in a press release.

This spring’s award winners are:

• Jeffrey M. Karp, Harvard MIT division of Health Sciences and Technology, Brigham and Women’s Hospital, Harvard Medical School: “A Tissue Adhesive Tape Inspired by Nature”
• Rajiv Gupta, Ph.D., Volume CT Laboratory, Massachusetts General Hospital; Alexander Slocum, Ph.D., Precision Engineering Research Group, Massachusetts Institute of Technology; Nevan Hanumara, Mechanical Engineering, Massachusetts Institute of Technology; Conor Walsh, Mechanical Engineering, Massachusetts Institute of Technology: “Robopsy—Inexpensive Medical Robotics”
• Uday B. Pal, Department of Manufacturing, Boston University: “Solid Oxide Membrane Electrolyzer for the Production of Pure Hydrogen and Syn-gas from a Source of Waste and Steam”
• Satish K. Singh, Ph.D., Department of Gastroenterology, Boston University; Mark N. Horenstein, Ph.D., Department of Electrical and Computer Engineering, Boston University; Andre Sharon, Ph.D., Fraunhofer Center for Innovative Manufacturing: “Variable Stiffness Endoscope with Smart Articulated Joints”
• John A. Porco, Ph.D., Department of Chemistry, Boston University: “Chemical Synthesis of Cyclopenta[b] benzofurans and their Development as Adjuvants to Chemotherapy”
• Rajeev Ram, Massachusetts Institute of Technology: “Manufacturability of Application Specific Microbioreactor Modules”
• George Tegos, Ph.D., Department of Dermatology, Massachusetts General Hospital: “Photodynamic Therapy (PDT) with efflux pump inhibitors to combat localized MRSA (Methicillin-Resistant Staphylococcus aurous infections)”

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