area wants to join the research elite, but it has hills
by Garry Kranz
about a heavy dose of irony. Bonz Hart sits behind a
huge, immaculate desk in his Roanoke technology companys
office, checking e-mail while chatting with visitors.
Almost imperceptibly, he glances out the window as a
Norfolk & Southern Railway engine a decidedly
Old Economy vestige wheezes into the gray, foggy
passing train could be a metaphor for the so-called
New Century region, a rugged swath of Southwestern Virginia
comprising 16 localities in the Roanoke and New River
valleys and the Allegheny Highlands. The asset-rich
region of 475,000 people could become as powerful and
fast moving as a high-balling freight train. But unless
high-paying technology jobs become much more plentiful,
Hart worries the area will end up as the caboose, not
the locomotive. At some point, we absolutely have
to come to grips with how to market ourselves,
says Hart, whose profitable 10-year-old company sells
software and services to the oil and gas industry. Twenty
years ago, it would have been hard for people around
here to believe that textile and furniture (industries)
would go away. But they have.
technology-based growth takes hold more strongly here,
its likely to center on the burgeoning biomedicine/life
sciences industry. Two major biotech research institutes,
one at Virginia Tech in Blacksburg and another planned
in Roanoke, want to build on the regions historical
agricultural base by using plant and animal genomics
to develop powerful new drugs and other health care
products. The right mix seems to exist to attract growing
companies here: scenic beauty, low unemployment, little
violent crime, modest cost of living and proximity to
Virginia Tech, regarded as Virginias top research
challenges that remain, however, are as steep as the
surrounding mountains. The chief issue: can Tech achieve
its goal of becoming a top national research center?
It has aimed high, but been set back by the defections
of some top research professors and the planned relocation
of CropTech, a pioneer in using tobacco leaves for drug
production, to South Carolina. Other issues need attention,
too. Air service at Roanoke Regional Airport is limited
and fares are high. Local startups have fled after failing
to find local investment capital. The work force is
graying while a brain drain of migrating
Tech graduates is sapping strength in its laboratories.
Regional marketing groups traditionally have pulled
against one another, although a new consciousness about
the importance of working together may be taking hold.
regions future is inextricably linked to Virginia
Tech. Aside from providing full-time jobs for about
6,400 people, the school is a hub of research in biotechnology,
advanced materials, high-tech manufacturing, transportation,
nanotechnology and other economically promising fields.
Tech wants to earn national recognition as a top-30
research university by 2010. Thats no mean feat,
considering its presently ranked 51st by the National
Science Foundation and is taking on such R&D powerhouses
as the Massachusetts Institute of Technology and Carnegie
Mellon University. Yet, if Tech succeeds in moving to
the upper echelon of research schools, the rewards could
be gobs of new research dollars that boost recruiting
and trigger economic expansion.
science foundation bases its rankings on the amount
of research dollars an institution wins in competitive
grants and other awards. Tech needs to grow its research
expenditures, currently about $220 million, by about
65 percent to match other top-rated institutions. Growing
its endowment funds, which approach $360 million, wouldnt
hurt either. We have great programs. The goal
is to have more of them, says Leonard Ferrari,
the schools vice provost for special initiatives.
things weigh in Techs favor. The Southern Growth
Policies Board, a think tank in Raleigh, N.C., named
it one of the 12 most innovative universities in the
country for technology transfer and economic development.
A good example of that is the Virginia Tech Corporate
Research Park, formed in 1985, which houses about 105
companies. Many are start-ups launched either by Tech
faculty or its graduate students, using technology licensed
from the university. They include Applied Microbiology
& Genetics, a services company; MCT Inc., which
provides chemical testing tools; and Aeroprobe, a company
that makes instrumentation hardware and software as
well as automated lab systems for aerodynamics measuring.
there is the Virginia Bioinformatics Institute, started
with $39 million in state funding two years ago. Its
research could lead to better, more affordable drugs
and to crops that vigorously resist diseases. Since
its inception, the institute has grown rapidly, attracting
$25 million more in external research funding and employing
more than 100 full-time staff. Were doing
mathematical models that could help researchers transform
the time to market of new drugs. We need basic science
breakthroughs that could result in economic development
benefiting not only the region, but the nation as well,
says its director, Bruno Sobral.
Tech has other accomplishments to cheer. Its College
of Engineering ranks 23rd nationally, according to U.S.
News & World Report. To help Tech crack the top
30, the engineering school is gunning for the top 10.
Doing so requires recruiting topnotch research faculty,
increasing the number of graduate students by more than
50 percent, translating applied research into commercial
products and nurturing faculty-run start-ups, says Edmund
Henneke, associate dean for research and graduate studies.
The engineering school has outlined ambitious plans
to build an Institute for Critical Technologies, similar
to research facilities at Georgia Tech, the University
of California-Berkeley and the Raleigh, N.C.-based Research
Triangle Institute. We absolutely have to have
this (facility) if we want to move into the top 10.
It may even be necessary for us to remain in the top
25 of engineering schools, says Henneke.
course, these endeavors cost money, which is in especially
short supply because of the states budget crisis.
The state budget axe cut Tech deeply. Tech administrators
were forced to slash $25 million in operating expenses
this year and trim another $31 million from next years
budget. About 90 faculty positions are being eliminated
while other faculty members have been shifted to lower
pay. The engineering school alone could lose 10 percent
of its senior faculty and the institutional memory they
possess. Likewise the bioinformatics facility, originally
approved to hire up to 33 research faculty, is reeling.
Its now approved to hire less than half that number.
engineering school also must rely on the generosity
of Virginia voters, who will decide Nov. 5 whether to
approve $900 million in bonds to fund capital projects
at state colleges and universities. Given the sagging
economy and the states budget woes, that issue
is in limbo. Henneke has his fingers crossed: should
the measure pass, Techs engineering school would
get $17 million to build the critical technologies institute
about half its proposed construction cost. (Tech
would receive $100 million in total if the referendum
passes.) Tech also is trying to regroup after seeing
prized possessions slip away. Besides CropTech, the
Tech community is also losing Wireless Valley, a telecommunications
firm started by former Virginia Tech professor Ted Rappaport.
It moved to Austin, Texas, after Rappaport defected
to the University of Texas this summer. Among the reasons
the two promising enterprises left was their inability
to raise funds locally.
the setbacks, Tech administrators chirp optimistically
that the top-30 goal is attainable. This really
is going to test our resolve, says Leonard K.
Peters, vice provost for research. But were
not going to make it into the top 30 on state investment
alone. About two-thirds of our (research) funding comes
from the federal government, and we have to recruit
more of that. Peters also notes that Tech receives
about 16 percent of its research dollars from private
industry, which he says is twice the national average.
Virginia Tech gets a lot of attention, the city of Roanoke
also is busy wooing technology firms. Although railroads
and banking are still important local industries, change
seems afoot in this city of 95,000 people. Just blocks
from Bonz Harts office at Meridium is a corridor
dubbed eTown, part of Roanokes Warehouse
Row. The city spent $636,000 last year to buy a pair
of warehouses there, with a view to developing them
into a high-tech business incubator. Roanoke also is
floating bonds to build Riverside Centre for Research
and Technology, a 110-acre complex planned for another
area of downtown. Thus far, $14 million in general obligation
bonds have been issued to pay for the initial construction
phase. During the next 10 to 15 years, city officials
estimate capital investment in Riverside could approach
$200 million. The first tenant already is signed up.
Carilion Biomedical Institute, a not-for-profit created
by Carilion Health Systems, has blueprints for a 50,000-square-foot
facility to be built there. Its aim: to fund R&D
activities at its two local hospitals, as well as at
Virginia Tech and the University of Virginia, in hopes
of commercializing biotech products. Carilions
facility also figures to complement the Virginia Bioinformatics
IT relocated to Roanoke from Bedford County in 1999
to take advantage of a fiber-optic network that crisscrosses
downtown. The 11-person company needs high-speed access
to serve customers using its video-monitoring tools.
Says Juliet Silver, the companys CEO: The
climate here is changing from a railroad town to more
of a technology-based entrepreneurial center.
The more things change in the region, though, the more
they stay the same. Even as biotech and high tech take
center stage, retail and service companies continue
to exert strong influence. Jobs in those sectors account
for a good chunk of the regions per-capita wage
of $29,000 roughly equivalent to the national
average and only slightly below Virginias benchmark.
That has caused some to wonder if economic and political
leaders are star struck by tech companies, to the detriment
of more traditional segments.
the case of the New Century Venture Center, an incubator
launched in Roanoke with state funds six years ago.
The incubator has spawned about 20 companies that have
created dozens of new jobs and produced $2 million in
tax revenue since 2000. Armed with those stats, President
Lisa Ison was optimistic she could persuade the city
of Roanoke to pony up $100,000 to help the incubator
cover operating expenses, especially needful in light
of Virginias budget austerity. It was the first
time her organization had asked for city money. To Isons
dismay, the request was turned down. I cant
believe we didnt get a dime from Roanoke,
she says. (But) the city is focusing on biotech
and technology companies, and I guess we dont
fall into that niche.
County illustrates the strategy of mixing emerging sectors
with old standbys. As a bedroom community of 86,000
people, the county wants to lessen the tax burden on
residents. Last year, Novozymes Biologicals Inc. became
the first company to locate in Roanoke Countys
457-acre Center for Research and Technology, and it
plans to spend about $12 million on new facilities.
The big payoff wont come for several years, when
the enzyme makers two new manufacturing plants
are added to the tax rolls. Nor is the county passing
up less-glamorous projects. Home-improvement retailer
Lowes and mass marketer Wal-Mart each opened new
stores in Roanoke County within the past year. The big-box
retailers produce huge chunks of tax revenue: anywhere
from $500,000 to $800,000 per store, says economic development
chief Doug Chittum. Side by side, thats enough
to pay for a new school, he says.
to stimulate commercialization isnt lacking here;
the missing ingredient is venture capital. To prevent
a repeat of the CropTech and Wireless Valley departures,
the region somehow must make local start-ups a magnet
for private investment. A new study by the Brookings
Institute, a Washington, D.C.-based policy research
group, paints a stark picture. It concludes that emerging
as a center for biotech R&D is beyond the grasp
of metropolitan areas that lack private investment capital,
including venture capitalists, and the ability to convert
research into commercially viable products. Says
Gary Atkinson, head of the Roanoke office of Virginias
Center for Innovative Technology: Weve always
had real scientists doing hard science leading to real
products, so we should be attractive to venture capitalists.
But its the same story venture capitalists
want to be near what they invest in.
points up another problem: a stigma of physical isolation.
Despite being bisected by Interstate 81, the region
is about 250 miles from Richmond, the state capital,
and even farther from Northern Virginia and Washington,
D.C., where most of the states venture capital
is concentrated. That makes it too far for many investors
One problem has been a fragmented approach to marketing,
area business leaders say. Outside investors tend to
view the region as the remnant of a bygone era, not
a crucible for generating wealth. Localities sometimes
have competing priorities that torpedo efforts to market
the region as a whole, rather than in separate parts.
The Valley has a large bundle of shared needs,
but the localities might have very different and specific
needs. This rose-colored glasses thing where you look
at the whole region you cant do that if
it means compromising the needs of your residents. But
if the individual localities are healthy, then the whole
region will be healthy, says Chittum of Roanoke
change that perception, two groups the New River
Valley Alliance and the Roanoke Economic Development
Partnership have agreed to do more trade missions
together and promote each others localities. This
is a relatively new approach; the two historically have
concentrated on their own turf and not worked together
on a large scale. In fact, the New River organization
recently reorganized, firing its 60 board members and
paring down to about 13. The cross-promotional initiative
could work, although a new group recently formed to
market the Allegheny Highlands adds more confusion than
clarity. Business leaders and public officials also
have formed a coalition to try and bring more airlines
and lower fares to the Roanoke Regional Airport.
like Hart, are restless for change. He notes that 65
percent of his companys workers moved to the region,
so tech-based economic development could help him recruit
more homegrown talent. But there is a larger issue at
stake. If we dont do this for ourselves,
says Hart, we ought to at least be doing it for
our children. There arent enough high-paying jobs
to keep kids here, or to lure them back once they leave.
the region stands on the threshold of the 21st century,
its New Century moniker takes on profound
significance. The railroads still chug along, but new
economic forces are rumbling through these pristine
valleys. The regions leaders need to get onboard
or risk being left at the station.
Return to Virginia Business - September 2002