Riding the Biotech Boom
Executive director John Flavin discusses the university's new Chicago Innovation Exchange and Booth's pivotal role
The biotechnology sector is experiencing its biggest boom in a decade. In 2013, 38 biotech companies listed initial public offerings in the United States. Through Booth's Career Services, life-sciences businesses posted more than 300 job openings. Booth alumni, students, and faculty can share in the industry's growth through the new Chicago Innovation Exchange (CIE), a hub for multidisciplinary collaborations and support for business commercialization and start-up activities, and an outgrowth of the expanded Polsky Center for Entrepreneurship and Innovation.
John Flavin, executive director of the CIE, participated in a biotech panel discussion at a Booth Business Forum sponsored by Career Services in late January at Gleacher Center. Here, he talks about Booth's role in the CIE, which will open this fall in Hyde Park.
Chicago Booth Magazine: How will the CIE help cultivate new businesses?
Flavin: One focus will be on the life sciences, including companies developing therapeutics, diagnostics, and even health-care IT. We're trying to connect faculty innovators to commercial partners, who are vital to setting the right path for a new technology. Many ideas incubated here will form companies that hopefully will bring new products to the market.
CBM: You're planning a 34,000-square-foot campus along 53rd Street. What work will take place there?
Flavin: We're getting interest from industry in custom accelerators to solve some of the problems they face, and we will also host the Polsky Center's accelerator program for 10 UChicago companies in the summer. One space will include a fabrication lab with 3-D printing and prototyping capabilities for proof-of-concept work.
CBM: Your partners include Argonne National Laboratory, the Institute for Molecular Engineering, the Marine Biological Laboratory, the Computation Institute, and UChicago Tech. How is Booth involved in the exchange?
Flavin: The CIE reports to a board of governors, and dean Sunil Kumar is chairman. Ellen Rudnick, executive director of the Polsky Center, is on the board along with several deans from the university. Engaging corporate partners, mentors, service providers, and venture-capital firms will help support the translation of a good idea into a marketable product. This market exposure and programming provided by the Polsky Center will attract talented entrepreneurs. Exposing the best students and faculty from Booth to the innovative research under way at the university will be the first steps in commercializing this research.
CBM: How did your biotech experience prepare you for this role?
Flavin: I helped take two biotech businesses public and cofounded an investment group, Flavin Ventures. I've always straddled business and science, articulating how what we were doing in the lab could translate into value for share-holders. Previously, I was executive director of Chicago Innovation Mentors, which supports faculty in developing companies around complex technologies in health care, energy, and high-powered computing.
CBM: How can alumni participate in the exchange?
Flavin: Alumni can get involved through mentoring opportunities and programming. We're running a $20 million Innovation Fund, which will invest in companies that form here, so there also are opportunities from a giving perspective.
CBM: Mayor Rahm Emanuel wants to expand Chicago's biotech sector, and the State of Illinois recently gave $3.5 million for a start-up incubator. How will the CIE connect to this "biohub?"
Flavin: Our niche will be in the process of moving from the creation of an idea to the formation of an R&D venture and connecting to the market. The biohub can provide access to specialized resources as our biotech ventures grow.
CBM: What makes biotech attractive to investors?
Flavin: A lot of the biotech companies in the public markets have done very well recently, and investors who have made money are looking to reinvest in early-stage companies. Companies such as Amgen Inc., Biogen Idec Inc., and Genentech Inc. started as an idea. Something in the lab at the University of Chicago today could be the seed technology in the next Amgen, and the CIE will play a key role in enabling those types of innovators to get to market. ■
Photo by Robert Kozloff
A Case Study with a Payoff
Booth start-up gets funding from a renowned investor whose work the founders studied in their entrepreneurial finance course
By Judith Crown
The Booth class, Entrepreneurial Finance and Private Equity, features a case study on a 30-year-old financial-data company founded by the entrepreneur and tech investor Jeff Parker. When David Kedmey, '08, and Xiao-Ping (Steven) Zhang, '08, took the class, little could they have imagined that Parker one day would invest in their start-up and serve as chairman of their company's board.
It was at Booth that the pair came up with the idea for software that could discern recurring patterns in financial and economic time-series data, such as stock prices or housing starts. They were looking to build on Zhang's research. An expert in information-processing technologies and currently a professor at Ryerson University in Toronto, Zhang holds patents in pattern-based search technologies.
In the years following graduation, the pair developed EidoSearch (eido is a Greek word that means to perceive or discern). The Toronto-based software company applies information-processing techniques to make time-series data searchable. For example, if a company's stock has spiked to what looks like a peak, portfolio managers and traders can use EidoSearch to find other stocks that exhib- ited similar patterns. Predicting the inevitable dip in those stocks would inform an investor when to hedge, back off, or sell out of a position.
Although Zhang and Kedmey began to formulate a plan while at Booth, they returned to salaried day jobs after graduation while applying for grants and fully forming their product. They landed some initial sales to early adopters. "Those were big wins because as you're out there trying to raise money, nothing speaks to people more than a customer willing to pay for what you do," Kedmey said in an interview.
A break came in summer 2012, when the fledgling business was accepted to the selective New York incubator, FinTech Innovation Lab, a joint venture of the city and major Wall Street banks. "That gave us a big boost in credibility," Kedmey said. "We got in front of the people that could make use of our technology."
Then, an advisor introduced the pair to Mike Hirshland, the founder of Boston venture-capital firm Resolute Ventures, who in turn introduced them to one of his limited partners - Jeff Parker.
Kedmey had wanted to get in touch with Parker since he studied the entrepreneur's early start-up, Technical Data Corp, in the entrepreneurial finance class with Luigi Zingales, Robert C. McCormack Professor of Entrepreneurship and Finance and David G. Booth Faculty Fellow. Zhang learned of the company in the class taught by Steven Neil Kaplan, Neubauer Family Distinguished Service Professor of Entrepreneurship and Finance.
Although the case dates back to the early 1980s, Kaplan noted, "the concepts and the lessons are timeless."
Parker has specialized in financial services technology and headed Thomson Corp.'s financial-services subsidiary. He now is an active early-stage company investor. "I like charts and the technical side of investment," Parker said in an interview. "You want to see what the market is saying about a financial instrument and harness the data of past activity. It's what doctors do. They offer the range of possible outcomes based on past experience."
EidoSearch completed a $2 million round of financing in July 2013 led by Resolute. Parker joined the company as chairman in November. The start-up now has a revenue stream and customers such as FXCM Inc., a currency broker, and TIG Advisors LLC, an alternative investment manager.
The company's next challenge is to ramp up sales and marketing and develop features and functions that make it easy to get inside client workflows. And therein lies a lesson for entrepreneurs - a start-up's success is not just based on its idea, but its execution, Parker noted.
"People are inundated by information," Parker said. "How do you get someone's attention? You have to make it simple and intuitive."
The summer financing round enabled EidoSearch to launch a proper drive to commercialize the product, Kedmey said. "We're starting to harvest those efforts and take the product to the next level." ■
Photo courtesy of David Kedmey