Pasadena Pushes Ideas Out of Labs, Into Start-Ups
In these uncertain times, venture capital investors still look with favor on Pasadena, attracted by the “hard science” work at Caltech, the Jet Propulsion Laboratory, Huntington Medical Research Institute, the nearby City of Hope and other institutions.
As a result, Pasadena and neighboring communities are budding hotbeds of new companies pursuing discoveries in biotechnology, optical electronics and computer and material sciences. Some 100 Pasadena companies are in high-technology businesses, local officials estimate.
Most of these companies are small and fragile, but they offer object lessons of what can be accomplished if prominent institutions encourage entrepreneurship in a community.
They also offer evidence of a shift in thinking about the role private investment can play in meeting social and community needs.
Technology creates jobs and is a catalyst for development, said Robert Swayze, a Los Angeles County economic development manager who spearheaded building of the Business Technology Center in Altadena, the nation’s largest government-owned incubator of start-up firms.
To be sure, technology is risky. Pasadena also is home to Idealab, the highly publicized Internet incubator that has seen many of its dot-com companies fail, with losses of venture investments.
But the firms spawned by Caltech and the San Gabriel Valley’s universities and medical research institutions are more substantial than e-company models of recent years.
There is real science behind them, as a look at four new companies demonstrates.
Nanostream Inc. is a 1 1/2-year-old company that makes semiconductor chips that analyze microscopic amounts of blood or other fluid. The ability to work with tiny quantities “enables pharmaceutical companies to do drug discovery tests, but there can be many other applications for microfluidics,” said company founder Stephen O’Connor, a Caltech PhD.
Nanostream grew out of research at Caltech sponsored by the Defense Advanced Research Projects Agency, which has backed numerous technological developments of the last 50 years.
O’Connor, who at 31 is on his fourth start-up, began his first company when he was still a student. One he sold to a partner, a second he closed down and a third, Clinical Micro Sensors, became a successful company that is now a subsidiary of Motorola. For Nanostream, O’Connor has raised about $10 million in venture capital from investment funds in Munich, Germany, Boston and the Shamrock Group in Los Angeles, which invests Disney family money.
Materia Inc. develops advanced catalysts for chemical and pharmaceutical firms. The 3-year-old firm has been working in material sciences, developing very hard plastics, which it demonstrates by constructing prototype golf club heads and baseball bats.
The company grew out of research in the Caltech lab of professor Robert Grubbs, who is a co-founder of Materia, along with CEO Michael Giardella, who did post-doctoral work at Caltech, and Dr. Richard Lerner, head of the Scripps Research Institute in La Jolla.
Giardella has raised $8.4 million in equity capital from, among others, Clear Partners, a Los Angeles investment firm. He wants to raise $15 million more to expand Materia, which has 20 employees and $4 million in annual revenue.
GenBasix Inc. is a new company, formed at the City of Hope hospital and research center in Duarte. The firm is collecting blood samples to measure gene mutations that could predispose patients to breast cancer and other diseases, Chief Executive William Hughes said.
The company works to determine how the complex interactions of the body’s proteins, genetic makeup and the effects of lifestyle--diet, smoking, etc.--lead to disease. The aim is to develop uniquely individual diagnoses and prevention regimens.
GenBasix has raised initial capital from the Athenaeum Fund, a venture capital source organized by professor John Baldeschwieler of Caltech, a longtime sponsor of entrepreneurship at the school.
Via Space Technologies develops commercial applications of technologies discovered in research at JPL and Caltech.
An initial tenant at the Business Technology Center in Altadena, Via Space has spawned three companies since 1998, including Tunable Photonics, which has developed instruments for controlling wavelengths of light to speed information flow in fiber-optic Internet networks.
And Via Space is working on three more companies, said Chief Executive Carl Kukkonen, who headed microelectronics operations at JPL before founding Via Space.
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The effort to develop commercial products from JPL and Caltech research is not driven by fashion or hopes of instant stock market riches. It is mandated by the Bayh-Dole Act, an early 1980s law that says attempts must be made to find commercial offshoots for technology developed with taxpayer dollars.
The law, along with Caltech’s own policies, benefits companies in this area. “Caltech does $150 million in research and development a year and JPL does another $150 million. That gives companies here a head start,” Kukkonen said.
Still, the creation of those four companies and many more would scarcely have been possible a decade ago at Caltech in Pasadena.
The great scientific institution that traditionally developed space and defense program technologies had balked at commercializing its discoveries.
But that changed by the mid-1990s as declining defense budgets threatened support for Caltech research. In 1996, the school began a program to commercialize its technology. And David Baltimore, the renowned biologist who was named Caltech president in 1997, has emphasized support of entrepreneurship. Now Caltech spawns about 20 new companies every year.
Pasadena also has changed. Five years ago, the city rejected attempts to develop a center for biotechnology along one of its underutilized business thoroughfares. Today, two biotech centers are contemplated for the city and its neighboring communities.
The city, Caltech and other institutions are supporting Pasadena Entretec, a new organization that supports entrepreneurial business by arranging networking events and trying to attract management talent and capital to the area.
The action already is brisk. Huntington Memorial Research Institute has formed a company named Galvanix to commercialize technology for stimulating nerve endings. Galvanix’s first product is a method of affecting nerves in the urinary tract to alleviate incontinence, a problem that afflicts adults of all ages, said Dr. Roger Crossley, Galvanix’s CEO.
At Caltech, two juniors, Michael Hochberg and Thomas Baehr-Jones, have launched Simulant Inc., a company based on a method they developed to link numerous personal computers to simulate lab work and thereby cut the cost of constructing lightwave networks for the Internet. Simulant has received $400,000 in venture capital from ITU.com, a Los Angeles investment fund.
Umachines Inc. is a 3-year-old Pasadena firm that is launching advanced products to assist in the manufacture of lightwave networks for Internet transmission. Lightwave, or optical, networks are hot right now, with many new firms springing up to make optical components. But it will be years before the technology settles down and successful companies emerge, said Thomas Tsao, a Caltech PhD in electrical engineering who founded Umachines.
Tsao believes that Umachines’ improved manufacturing method will make the firm a long-term winner. He has raised almost $10 million in venture financing from several funds, including Palomar Ventures of Santa Monica.
Money is flowing to Pasadena. Integrated Micro Machines, a maker of optical switches that was founded by Denny Miu, a former Caltech and UCLA professor, recently got a $25-million investment from Cisco Systems.
Clinical Micro Sensors, a company founded by Caltech graduates who developed a diagnostic semiconductor that uses DNA, was bought by Motorola for $280 million last year.
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Yes, but what do high-tech investments do for the residents of Pasadena, a city of 145,000 with a sizable number of undereducated poor people? “High-tech investment is a catalyst for further development,” Swayze said. A new retail and light-manufacturing complex is going to be built as an expansion of the Business Technology Center, which now has 15 start-up tenants.
And technology represents employment with a future. “We don’t have to come up with job-creating ideas,” Swayze said. “JPL and Caltech do that, and the commercialization of their technology creates new economic opportunity.”
It’s hard science, and it’s real. That’s why Pasadena has become a focus for investment funds now building up in Los Angeles and Southern California.
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James Flanigan can be reached at jim.flanigan@latimes.com.
