State's tech sector looking ahead, but cutting back

January 12, 2009

It's two steps forward, one step back, for Indiana's technology sector, but in a tough economic climate, any advancement is worth celebrating.

The good news is that BioCrossroads, the group working to make the state a hotbed for life sciences businesses, is at work on a venture fund that would make millions of dollars available for investment in promising Hoosier firms.

Plans for the fund are sketchy, but it would be a sequel of sorts to Indiana Future Fund I, which raised $73 million six years ago. That money—raised from the state's largest corporations, pensions and universities—was placed with six professional venture capital firms. Four-fifths of the money is committed, and 12 Indiana firms have benefited from Future Fund investments.

While the prospect of another fund is enticing, the research community absorbed some bad news when Gov. Mitch Daniels called for a delay in the formation of a collaborative effort between Indiana and Purdue universities that was designed to leverage national research grants and fund collaborative research aimed at spurring job creation in life sciences and other technology sectors.

Daniels wants to delay the effort to save the $70 million it would have cost the state over two years. One could argue that the last thing the state should cut as it puts together its biennial budget is any expenditure that could spin off jobs, but we appreciate the governor's call to delay, not cancel, the initiative.

In the meantime, perhaps a second venture fund can represent progress on the life sciences front. Of course, the climate for raising money is vastly different today. It's likely that fund manager, Switzerland-based Credit Suisse Group, will have to get creative to pull in millions more for life sciences investment.

If it does, at least one of the venture firms that were assigned money from the first fund seems bullish on making future investments in Indiana start-ups, primarily because Indiana has raised its stature as a life sciences hotbed.

San Francisco-based Burrill & Co., one of the world's largest life sciences venture firms, had reviewed fewer than 10 investment opportunities in Indiana before affiliating with Indiana Future Fund I. Now it reviews several Hoosier biotech business plans every month and its managing director told IBJ it would jump at the chance to sign on with a second fund.

There's something to be said for Indiana Future Fund I's success at building Indiana's reputation as a place to find life sciences deals. Establishing a reputation in the investment community is half the battle when it comes to finding money for start-ups.

It's critical that those promoting our life sciences sector build on that momentum, even as government postpones financial support for economic development initiatives.

There's a fine line between being fiscally responsible and hindering the creation of 21st century jobs. We hope the governor and state legislators have the collective wisdom to strike the proper balance.


To comment on this editorial, write to ibjedit@ibj.com.

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