I had a conversation this past week with a local player in the entrepreneurial community about Madison's hopes for growing an indigenous biotechnology community. This was perhaps the most sobering assessment I have yet heard of Madison's prospects. This fellow, relying on experience in other tech centers, including Silicon Valley, said that the only chance for Madison to become a biotechnology industrial district was to lure an established company here through tax credits. The thought underlying this plan is that, more than anything, startup companies need managerial talent, and managerial talent is best found inside successful behemoths. Madison has business ideas, but few seasoned managers.

I think this path would be a mistake.

Quick, can you name any existing technology industrial district that was successfully formed in this way? Perhaps the closest is the Research Triangle Park in North Carolina, which benefitted greatly from attracting IBM and the National Institute of Environmental Health Sciences in the mid-1960s. But the first major IPO from the Triangle was Red Hat in 1999, and the principals in that company had nothing to do with IBM. My impression is that much of the recent success of the Triangle is directly traceable to the excitement created by Red Hat.

Existing technology industrial districts were home grown. Silicon Vally: HP; Boston: DEC; Seattle: Microsoft; etc. People who recognize this keep looking for the home run in Madison, but the nature of the biotech businesses here may make that difficult. Most local companies are in diagnostics, which does not attract big money, even though it may require a substantial investment. The real returns are to be found in therapeutics -- which is riskier than diagnostics. Moreover, the time until super-profitability for such companies may be measured in decades, not years.

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