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Friday, Jan. 23, 2009 | Duane Roth is the man with the 20,000-foot view of San Diego’s technology industries. As the chief executive officer of Connect, the high-tech and biotech industry association, he is best-positioned to spot trends in one of the most important sectors in the region’s economy.
Right now, the trends — like in just about every other aspect of the world economy — are headed downward. And Roth sees turbulent times ahead as the old model of discovering a drug and building a big company around it continues to give way to a new model that is largely dependent on outsourcing. He, however, remains confident that San Diego will remain a leader in the so-called innovation economy.
Roth sat down with us to talk about the difficult present and uncertain future facing the region’s high-tech and biotech industries.
Layoffs continue to mount in the San Diego tech economy. How bad do you think it will get before it gets better?
It is hard to know. It will be a gradual downsizing. Hopefully, it will be offset by larger companies who through increased programs in research will be hiring people. Also, the [National Institutes of Health] budget will increase, National Science Foundation budgets will increase. From a federal funding standpoint there will be new opportunities for scientists and engineers. I don’t see this turning into a free fall yet. People will be moving around, but that is not uncommon in our industry.
Beyond the overall economic crisis, what are some specific challenges facing San Diego’s tech and biotech industries?
The lack of early, early stage funding — what we call the “valley of death.” So you have a research grant from the National Institutes of Health, you do two, three, five years worth of work and you make a discovery. And that discovery actually could lead to a product that could be useful. We look at the business behind the discovery. It’s too early to start a company and it’s too early for real money. So who funds that? And there is no good answer to that.
Who was funding it before?
Previously, when it was brand new, venture capital, angel (investors) and so on. Anytime something new comes along — biotech, what we call high tech or software or the internet — the first money in those things, because it is so new and exciting, is naive. But out of that comes some winners. But over time, 20 or 25 years, we learn that there are so many ways to fail, that we almost want perfect packages before we fund them. So the venture guys have moved to what we call “upstream.” Something that they may have funded 20 years ago, something that is just a brilliant scientific discovery, and form a company around it — they would now say we need to have a product that is ready for clinical testing — human testing. So who does the toxicology, the scale up, the pre-clinical work, so we can get it so it’s a year away from the first human dose? [There is the] same problem in high tech. We need $100,000 to build a prototype to see if it actually works. Well, who’s going to give you a hundred grand?
There has been a lot of talk about clean technology in San Diego — to the point where it is being touted as a transformative industry for the local economy like biotech was. Is this realistic or overblown?
I think it is an important area. We have an important group in algae — that is more biotech-like. We did our first clean-tech round table a few years ago, and I was stunned at what was going on. Diesel conversions to clean diesel, natural gas conversions, things like that. What medicine and energy have in common is we (the nation) spend a lot of money on both, and [San Diego is] strong in both.
In his inaugural address, President Obama spoke of the need to “restore science to its rightful place.” What does that mean to San Diego?
I hope it means that there will be an increase in federal funding for research. If there is, we will compete and win our fair share. Anytime we are in a competition for a grant with NIH or NSF (National Science Foundation) we do extremely well because we have very talented scientific teams and we collaborate. We should not argue for set asides or earmarks, we should argue for more federal funding and more peer-reviewed grant funding. We compete for those grants very well. It’s a cultural thing — we tend to compete very well when it is a level playing field.
How would you rate our congressional delegation when it comes to getting science and technology funding to San Diego?
I think our delegation is very aware of the strengths of San Diego. Unfortunately, they don’t sit on the right committees. Even on a national basis there aren’t enough scientists and engineers in Congress.
You have talked in the past about how there needs to be better communication between old San Diego (the downtown establishment) and new San Diego (the tech industry). How do you see this happening?
I think the communication has greatly improved. We have really made an effort to make sure [Mayor Jerry Sanders] understands the challenges. He and Jim Waring (chairman of CleanTECH San Diego’s board) came to me, and we formed CleanTECH San Diego. That helped him understand how powerful engineers and scientists focus on what we can do about this problem. I think it is the first time we have seen a public official step up on an issue like this.
Should we expect leaders in the tech and biotech industries to become more active in San Diego politics?
It’s not that they are not political people. The politics we most care about are in Washington and Sacramento, things like regulation, trade and intellectual property. The local things — transportation, housing, energy and water — we care about those things, but we are not leaders. We want to be engaged in that, and are engaged, but we aren’t the group that should be leading.