Tech +: Beyond the Three-Legged Stool

n Entrepreneur‘s top-ten cities roundup, the magazine extols the open, energetic culture and enthusiastic business communities found in entrepreneurial regions. As an example of an innovative Madison start-up, it profiles Heather Hilleren’s, a subscription-based online business that connects grocers, restaurants—and others looking to buy food locally—with area farmers. It cites Madison’s quality of life, educated work force, and resources like University Research Park among the city’s attractions for businesspeople. The magazine also lauds our business community’s diversification, noting that in addition to the three-legged stool of government, the UW and agriculture, industries such as biotech, gaming, medicine and software are buoying our economy.

Here’s a look at other innovative local entrepreneurs in these burgeoning sectors.

In 2006, Beth Donley and Gabriela Cezar started Stemina. At the time, Donley was general counsel and director of business development for WARF and Cezar was a UW faculty member conducting research on human embryonic stem, or hES, cells. “Gabriela was using [hES] cells to build a model for testing whether drugs would cause birth defects,” says Donley. “We’re a great team because our experience meets in the middle. She’s a creative scientist with a very pragmatic approach, having worked at Pfizer prior to coming to UW, and while I have a business, masters and law degrees, my experience is focused on science and technology.”

They developed a business plan, raised $2.6 million, built their space and hired staff. Donley is CEO of Stemina and Cezar is chief scientific officer. “We expanded on Gabriela’s early work by screening about thirty compounds whose effects on human development are known, to discover a library of biomarkers that can predict whether a compound will cause birth defects,” Donley says. Pharmaceutical and chemical companies engage Stemina to test the safety and toxicity of compounds.

Among the resources that helped launch their company, Donley lists Department of Commerce grants and loans, Wisconsin Entrepreneurs’ Network as a portal to business resources, and the Wisconsin Angel Network. “And the UW is such a great resource for technology and people,” she says.

Stemina brought its first product to market within fifteen months of starting operations.

“That’s pretty unusual for a biotech company,” says Donley. “We’re starting to bring revenues in, and hopefully the round of capital we’re raising now will be our last.”

Her focus now is on getting the word out about what the company can do. “Wisconsin is the home of stem cells, and the more we can do to promote that, the better it is for Wisconsin’s biotech community,” she says.

Growing up, Brian Raffel and his brother Steve loved playing Dungeons & Dragons and other games, and with the advent of the personal computer, they taught themselves to create cyber-art. Brian became an art teacher at Middleton High School and Steve a silk-screen printer. In about 1988 they started tinkering with a computer game idea, and came up with Black Crypt.

“I used summers and vacations, and we took a couple of years to put together a demo, with the help of some programmers,”

says Brian. They formed Raven Software in 1990 and have since developed about twenty games—Brian’s lost count.

He says there weren’t really any support resources available for gamers in the beginning. “We were self-financed, and my primary mentor from the business side was our attorney, and he made sure we had an accountant,” he remembers.

When the Raffels sent their demo off to publishers, they were told not to expect responses for quite some time. “But in a couple of days we had six offers, and Electronic Arts flew us out to California,” Brian says. That company financed production of Black Crypt and some subsequent games.

Brian and Steve quit their day jobs around 1993, but found dealing with contracts and publishers distracting. “Our goal wasn’t to make a lot of money; we wanted to make games,” says Brian.

They searched for a strategic partner and in 1997 sold Raven Software to California-based Activision—the now-number-one game publisher’s first acquisition. Brian is vice president of Raven Software and Steve is creative director, and the company has about 150 employees. After the sale, several employees left to form local gaming company Human Head. Others eventually started a company that makes iPhone applications.

The games continue for Brian and Steve. “Our goal is to develop a mega-hit game before we retire,” says Brian.

Trevor Twose, CEO of Mithridion, hopes his company can help reduce U.S. health care costs. The company is beginning clinical trials on a drug that could slow and stop the progression of Alzheimer’s disease and treat schizophrenia without causing cognitive impairment. “There’s no drug right now that can stop Alzheimer’s patients from losing neurons, and that’s what this drug will potentially do,” he says. “A patient on Medicare with Alzheimer’s disease costs three times more than one without. And with schizophrenia, the drugs out there work well, but there’s some cognitive impairment that might stop someone from holding a job.”

Located in University Research Park, Mithridion is Twose’s sixth start-up or early-stage company. It won the Governor’s Business Plan Contest in 2005, which helped it attract the equity financing to begin operations in 2006. In 2008 Mithridion acquired Cognitive Pharmaceuticals and its University of Toledo-spawned technology. “It brought in this very close to clinical stage drug candidate, and we’ve been able to exploit the technology platform to generate additional products,” says Twose.”We’re one of only a few companies in the area actually producing drug products,” he adds. “It’s very highly regulated and expensive, and it takes a long time. The Madison area started in biotech producing products for researchers, or services, like Covance or PPD Development.”

Now the Madison area boasts a handful of drug-product producers, including Quintessence Biosciences and Cellectar, which are also entering clinical trials. “It’s an indication the Madison region is maturing,” notes Twose.

Like many other local emerging companies, Mithridion needs an infusion of capital. “Over the last year I’ve been making presentations to pharmaceutical companies and venture capitalists around the U.S. and even internationally,” Twose says. “While it’s certainly become easier to raise initial seed money around here, if you’re further along you have to go out in the wide world.”

He expects to complete phase one of clinical testing by 2010 and hopes to raise enough money over the next year to do phase two clinical trials with Alzheimer’s patients. “Then we’ll be testing efficacy as well as safety,” he says. “I’m excited about the potential to slow and stop disease progress.”

Mark Gehring, CEO of Sharendipity, has big goals for the company he, Greg Tracy, Dale Beermann and another partner, who has since left, launched last May. “We want to change the way software gets developed,” he says. “Today, if you have an idea, you have to find a programmer who can program it. We’re trying to establish a collaborative environment where people can use different components we make available to create applications.”

Tech-savvy people and organizations share content, such as templates, that anyone can use to create their own interactive software. For example, Sharendipity has partnered with Harqen, a Milwaukee-based web telephone company whose voice technology people can use to build custom games or other applications.

It empowers non-technical people to develop software. “The starting point is casual games and educational teaching tools,” says Gehring. As part of a grant awarded to the Madison Metropolitan School District, teachers will be trained to use Sharendipity, and at a special after-school program they’ll teach kids to create their own educational learning tools. Organizations like StudyBlue and Broadcast Interactive Media are also using the platform to make user-generated flash cards and web-TV games, respectively.

Gehring co-founded two start-ups prior to Sharendipity. The first, Geometrics, used software he’d developed at UW–Madison for planning radiation treatments. Philips Medical Systems now distributes the software. “It’s successful because it’s a platform where people could plug in radiation therapy research components,” he explains. “The technology is similar to Sharendipity’s, but ours is a very general platform.”

The second start-up, UltraVisual Medical Systems, developed general imaging solutions for hospitals. After a merger with Emageon, Gehring served as chief technology officer until he and his partners left to form Sharendipity.Gehring plans to continue partnering with companies and adding content to the Sharendipity platform. “Our long-term vision is to have a consumer-oriented platform with all kinds of applications, and that takes a long time to build,” he says.

In just a couple of decades, Madison’s biotech, gaming, medicine and software industries have changed dramatically.

“It’s exciting to see the growth in biotech,” says Laura Strong, COO of Quintessence Biosciences and board president of BioForward. “The pioneers were tool companies making devices to use in human health, like Promega, and we’ve developed a community of many more types of companies, like Quintessence, which is a drug development company. It’s a very different business model.”

University Research Park has seen significant biotech growth recently. “In the last fifteen months we’ve had three large transactions where large national or global organizations acquired our companies,” says director Mark Bugher. “Hologic bought Third Wave Technologies and Third Wave’s CEO, Kevin Conroy, acquired Exact Sciences and brought it to Madison. Roche acquired both Mirus and Nimblegen. Novagen’s founders had EMD Biosciences, a Merck company. When they announced they’d consolidate research and development in San Diego, employees dislocated by that started Semba Biosciences here in the park. It’s particularly rewarding when acquired businesses stay in Wisconsin and also yield new companies.”

The gaming industry started about fifteen years ago and took off like a rocket, marvels Don Madelung, president of Herzing University, which offers a degree program in gaming development. “It’s a maverick industry, by design for many, but it’s maturing and finding niches in many industries and will continue to grow, from purely entertainment to educational and lifestyle-enhancing programs,” he says.Medicine includes health care and a host of high-tech businesses, many of which overlap with the biotech sector, such as pharmaceutical companies. “We’re establishing a cluster of nuclear medicine technologies here that could change the future of health care and solve a lot of medical supply chain issues,” says Kathy Collins, southwest regional director at the Wisconsin Entrepreneurs’ Network. “If you look around Madison, you see companies like Tomotherapy and Cellectar moving into the second stage of development, and there are a lot of new technologies.”

The biggest software business in town is Epic Systems, notes Carl Gulbrandsen, managing director at Wisconsin Alumni Research Foundation. “It’s the most successful UW spinoff that didn’t go through WARF,” he says. “People work there awhile and then start another company, and that will probably continue. It’s a great economic engine for the community.”Microsoft and Google now have offices in Madison, an indicator that the city’s software industry is a serious contender.

“WARF is looking at it very closely—it’s different from companies we typically look at—it’s less dependent on patents and we’re trying to understand it better and get involved,” Gulbrandsen says.