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What BioDiscovery (and other agricultural tech firms) will find in Davis, California

It’s hard to describe Davis, California, to people who have never been there.

It’s the dichotomy of community members (think Waiheke Island) who want to keep genetically modified organisms away from their organic gardens, and they happen to live next to one of the largest agricultural research centres in the US, if not the world.

As a former business journalist in the area for six years, I’ve sat in intimate conversations between Monsanto lobbyists and politicians, toured a native-plant sanctuary and seed farm and, five minutes away, trudged through fields of genetically modified tomatoes.

This month it was announced the research and development of a New Zealand agricultural tech firm is poised for growth, but taking its brain trust to Davis.

Biotech firm BioConsortia has raised $US15 million in series B funding from Silicon Valley to further the research and development of crop-selection technology.

The company was formed last month to become the parent company of Parnell-based BioDiscovery, which invented the original technology in New Zealand and, in January, was awarded a $5 million grant by Callaghan Innovation, also known as taxpayer money.

The move across the Pacific is just one sparking debate about New Zealand-grown firms taking government grants then flocking to US shores.

It reminds me of the time my mom yelled at me for moving six hours away from home to attend university. The university I chose was fiercely competitive, had more applicants than desks, and a fantastic track record of job placement with Big Five accounting firms (yes, there were five back then).

In fact, my old university was equal distance from San Francisco and Los Angeles, and none of us was from that tiny university town. We went there for the education, then left.

The university next to our home pretty much took every person who filled out their names correctly on the application, then graduates went to work for the government or In-N-Out Burger.

So back to BioDiscovery. It's not gone forever. Think of it as a teenager going away to summer camp. 

There are two things that make me think this deal is going to be a hit on a global scale.

First, Silicon Valley doesn’t invest in agriculture. It invests in software companies first and foremost, with biotech a distant second. Even then, agriculture is a tiny subset of biotechnology venture funding.

The huge life science companies — Monsanto, Bayer CropScience and DuPont Pioneer, for example — invest in agricultural research and sometimes gobble up an ag startup to gain control of some sort of intellectual property, invention or technology.

But most venture firms and angel investors can’t be bothered with feeding the world if there is a company out there that can make their Internet faster.

In the fourth quarter of 2013, Silicon Valley investors made 133 deals, totalling $1.34 billion, involving software companies. By contrast, those investors only inked 29 deals totaling $428 million for the entire biotech sector, according to the latest PwC MoneyTree report.

The second reason the BioConsortium deal should be a hit is the management. The $US15 million came from Khosla Ventures and Otter Capital, both of Silicon Valley, who appointed Marcus Meadows-Smith as chief executive.

Mr Meadows-Smith is the former chief executive of AgraQuest, which was later acquired by Bayer CropScience.

But he wasn’t the founder of AgraQuest, which makes biopesticides.

The idea was born in a university lab by scientist Pam Marrone in Davis. The startup was fostered by the university’s intellectual property and burgeoning entrepreneurial partnerships, then placed into the care of Mr Meadows-Smith.

And he delivered.

The Bayer CropScience deal – worth close to $500 million – marked the first time a global giant has purchased a biopesticide company.

This isn’t a case of big, bad America luring away a Kiwi firm. Mr Meadows-Smith isn’t even American. He is an Englishman.

This is about globalisation and the agricultural sector’s competition for venture dollars. Davis, for decades now, has been cementing the infrastructure needed to foster biotech companies.

What is New Zealand doing to foster growth for innovation in the ag sector? I still don’t understand AgResearch’s rationale for moving jobs away from Hamilton which, to me, has the makings of a perfect laboratory for ag research.

I would have centralised operations in Hamilton, snatched up land in Waikato, and started fostering relationships with financiers and entrepreneurs in Auckland and abroad.

So far, the so-called Waikato Agricultural Research Hub has showed little interest from the private sector. It needs a leader with business acumen and a clear business plan on how research and innovations are to be commercialised.

Take Davis, for example.

At the heart of the tiny town of 66,000 residents is the Davis campus of the University of California (UC).

A 2003 study of California’s biotech firms found that University of California scientists founded one-third of all biotech firms and one-fourth of all biotech firms are located within 35 miles of a UC campus.

In 2012, 19 new startups were formed between Sacramento and San Francisco, roughly the same distance between Auckland and Hamilton.

This wasn’t an accident.

For the past decade or so, biotech companies have set up shop along the main expressway connecting San Francisco to Sacramento, Interstate 80.

The biotech bonanza all started when life sciences company Genentech acquired about 100 acres in the mid-’90s along Interstate 80.

Back then, it was surrounded by cow paddocks and orchards. (Remember when I said I’d snatch up land in Waikato a few paragraphs ago and you probably thought I was crazy. What’s going to happen when Auckland encroaches south of the Bombays a couple of decades from now?)

Now, the Genentech site is one of the world's largest biotech manufacturing plants for the large-scale production of pharmaceutical proteins from mammals.

Between spin-off companies from Genentech employees and research coming out of the UC Davis labs, the university saw an opportunity for commercialisation.

UC Davis Innovation Access is a programme that not only helps scientists with securing their intellectual property but also links scientists with entrepreneurs (MBA students) to create startups.

This isn’t just a Davis programme, other campuses leverage innovation as well. Combined, the University of California campuses receive more US patents than any other university in the world, and reap millions in royalties.

New Zealand has the components but they are too spread out and disjointed to serve as proper infrastructure to foster many startups, particularly in agricultural innovation.

Another hurdle is the country's transportation network. I've heard the argument for Palmerston North and Massey University to serve as the hub, but it is too far from Auckland, New Zealand's gateway to the world. With the Waikato Expressway underway and major boon to connecting regional economies, this puts Auckland-Hamilton in the same position that San Francisco-Davis was in 20 years ago.

What any agricultural research firm from around the world will find in Davis is a well-established research centre, a two-hour drive to capital, collaboration between an idea factory and the business community and enough land for crop research.

Some will argue that it’s not just BioDiscovery that is taking its Callaghan Innovation grants then jet-setting. Software, medical device firms and other tech sectors each come with their own sets of challenges.

But New Zealand, if you don’t start connecting the dots soon, agricultural innovation is going to be yours to lose.

More facts about Davis, California:

• The city of Davis built a tunnel for toads and frogs to pass through so they wouldn’t get squished on the motorway. When they didn’t use the tunnel, lamps were installed in a bid to attract frogs with a well-lit thoroughfare. Some frogs died by the heat generated from the lamps.

• Amid the agricultural fields, the city used to have a drive-in theatre specialising in pornography.

• My ex-husband is from Davis, and one of his favourite topics of conversation was the old drive-in theatre.

• Davis is a cyclists’ paradise. The city has so many bicycles, the traffic lights feature bicycle insignias rather than that of a pedestrian when it’s time to cross the road.

• In addition to agriculture and biotech, UC Davis has several unrelated research centres, including transportation, neurology, energy and primates.

• In 1980, a young university couple was abducted in Davis and their bodies were found in another town. Coined “The UC Davis Sweetheart Murders,” the case went cold for decades until a local author and journalist, Joel Davis, started snooping around the dusty boxes of evidence. DNA technology, not available at the time of the murders, has since matched the crime scene to an inmate already in prison for unrelated crimes.   

sflores@nbr.co.nz

More by Stephanie Flores

Comments and questions
9

Time to formalise this connection with the State of California, as the Chileans have done? Or to establish a P4 Club in Davis, between the nationals of NZ, Singapore, Chile, Brunei?

http://chile-california.org/

Plant & Food Research USA is located in Davis, California, home to the University of California-Davis and central to California’s leading research and commercial organizations in the agriculture and food sectors. http://www.plantandfood.co.nz/page/about-us/contact/locations/davis-usa/

Science and Innovation Minister Steven Joyce yesterday announced the establishment of a senior science and innovation representative in China. ... “This is the third region where New Zealand has appointed a science and innovation counsellor, with the other two based in the United States and Europe since 2004. (11.4.2013) http://www.beehive.govt.nz/release/new-science-amp-innovation-counsellor-china .

OK, can we assume Stephanie attended uni at Cal Poly - San Luis Obispo? It may be competitive, but it is still the Cal State system, not the UC system. Hahahaha.

The Auckland/Hamilton idea is one that will work in theory - but will never happen in reality. In California, business drives the tech and biotech sectors. In NZ, government drives especially the biotech sector. That's why biotech in NZ is mostly an epic fail, despite its theoretical possibilities.

In California, biotech business seeks out uni researchers and uni researchers become biotech businesses. California universities such as Davis are happy to provide some help on IP and then get the hell out of the way, as much as possible.

In NZ, universities are connected to and driven mainly by government funds - even the biggest and best, U of Auckland through its Uniservices arm, has an overwhelming public culture, not private sector. NZ universities do not provide incentives to staff to become entrepreneurs. Just the opposite. Staff are rewarded by their scores on a government-designed research evaluation system that is still - in the 2010s! - driven by publish or perish.

For Auckland-Hamilton biotech to succeed, some real biotech businesses from overseas need to locate a business unit there and show NZ how biotech can be done without government. Although possible, this is unlikely.

Biotech has mostly been an epic fail in New Zealand because of the country's entrenched sandal-wearing lentil-eating Greenie mob with their superstitious torches and their anti-science scaremongering pitchforks raised high, carefully crafted to frighten the masses, and more importantly themselves.

As a Harvard Professor snorted at me once (at Harvard too I might add) after I explained to him New Zealand's laws around doing even the most basic modern biological experiments involving gene cloning and or modification (the stuff that puts the tech into biotech) let alone the more advanced stuff - well you can't do science in New Zealand then. And guess what, they don't.

Which all means that down the track once again New Zealand will be a price taker and not a price setter.

Time to push ahead with the NZ-EU FTA?

Speakers at this week’s Auckland – Fraunhofer workshop will include; the University of Auckland’s Vice Chancellor, Professor Stuart McCutcheon; the CEO of Callaghan Innovation, Dr Mary Quin; Professor Verl; the national manager for commercialisation at MBIE, Dr Kjesten Wiig; and the CEO of Auckland UniServices, Dr Andy Shenk. Speakers from Germany will also include professors, scientists, and engineers from the two applied research institutes. http://www.engineering.auckland.ac.nz/uoa/home/news/template/news_item.jsp?cid=594872

University of Delaware President Patrick Harker, Delaware Economic Development Office Director Alan Levin and Fraunhofer USA President Georg Rosenfeld signed a partnership agreement Thursday, July 14, that will combine the strengths of the Fraunhofer Center for Molecular Biotechnology (CMB) in applied translational research and of UD in basic research. ... This six-year agreement will provide increased investment from Fraunhofer CMB’s parent organization, German-based Fraunhofer Gesellschaft. ... This type of partnership is the model upon which the Fraunhofer organization was established and has developed throughout its history.” http://www.udel.edu/udaily/2012/jul/fraunhofer-partnership-071811.html

Fraunhofer Chile Research (FCR) is a wholly owned subsidiary of the Fraunhofer Gesellschaft. Its aim is to improve industrial competitiveness through applied Research in Chile and the Latam region. The Centre for Systems Biotechnology works closely with Chilean research organizations and provides research services for a broad range of public and private enterprises not only in Chile but also the wider South American region. ... This project has received funding from the European Union’s Seventh Framework Programme for research, technological development and demonstration under grant agreement No 613513. http://disco-fp7.eu/about-us/institutions/fcr/

The formation of the Bio Commerce Centre in Palmerston North and Innovation Waikato in Hamilton has been, and will continue to be, a major
contributor to commercialisation of biotechnology in the Manawatu and Waikato regions. (2006) http://www.nzbio.org.nz/portals/2/images/IndustryReports/NZBio_Growth_Brochure.pdf

AgResearch was moving people from its Invermay site near Dunedin and its Ruakura site near Hamilton. ... "Food HQ is based in Palmerston North. We'll be working more closely with Fonterra, Massey University and Plant and Food as well as the Biocommerce Centre. Many of them do research at Palmerston North." http://www.stuff.co.nz/business/farming/agribusiness/9821457/AgResearch-growth-a-40m-venture

The factors that seem to have encouraged the emergence of world leading research are diverse ranging from strong basic science in medical research and science push in sheep genomics, to industry pull in the case of forest biotechnology. Growth in these and other biotech-based
sectors may be constrained by the poor performance of New Zealand’s National System of Innovation. The system is dominated by Crown Research Institutes and universities which rely on government for the majority of their funding. Leading edge work is carried out in certain
areas, but this tends to involve links with a small number of organisations rather than strong connections to any wider system of innovation. There have been major changes to research, science and technology policy since the late 80’s, but it remains to be seen whether these will
result in improved performance. (Marsh, 2002)
ftp://mngt.waikato.ac.nz/repec/Wai/econwp/0203_Marsh.pdf
Does New Zealand have an Innovation System for Biotechnology?
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A team of scientists is setting up shop in Christchurch to work with biotech companies. Michael Berry reports on three of the region's promising firms who will be working with them - Gelita, Synlait Milk and Canterbury Scientific. Something you probably didn't know. Most of Crown research institute Industrial Research's 350 researchers reside in Wellington, the mecca of public servants. And only a quarter of the researchers are spread between Auckland and Christchurch. Someone in the corridors of power has finally seen the light and is sending some of this brain power south ... 18.8.2012
http://www.stuff.co.nz/business/industries/7501624/Science-team-formed-to-help-firms

Been a c level exec in 4 nz biotech startups

NZ is not suitable

Incubate & run which is what all are doing

Concern is NZ immaturity & lack of clean IP

Yep, I agree. Been there done that.

To repeat, NZ not suitable for biotech.

Let's move on, nothing more to see here.