“Budget jihad”

Posted on July 24th, 2009 – 12:43 AM
By Thomas Lee

If you need to know how much is riding on the new Dr. Doris Taylor company the University of Minnesota plans to spin out later this year, consider the following story, confirmed by several sources.

About four months ago, Matt Kramer, Gov. Tim Pawlenty’s chief of staff, summons Taylor and Jay Schrankler, who run’s the university’s Office of Technology Commercialization, to a meeting to discuss the yet-to-be named spin off company. Taylor, you may remember, gained international fame last year when she successfully grew a beating rat’s heart in the jar.

U officials believe Taylor’s work in regenerative medicine will do for the school what the pacemaker did for Medtronic. By the end of this year, the U hopes to spin out the first of what they hope to be many lucrative start-ups based on Taylor’s work: a company that helps drug companies test their therapies on human tissue.

Kramer was certainly impressed, as was Dan McElroy, the commissioner of the state Department of Economic Development (DEED) who attended the meeting. But things took a turn for the worst when Schrankler told McElroy, correctly, that the company might not stay in Minnesota if it couldn’t find local investors.

The prospect of losing one of the most promising companies to emerge out of the U in decades did not sit well with McElroy, who threatened to “wage budget jihad” on the U if the start-up left Minnesota.

Yowzers! (Apparently, the term jihad is a popular word these days for both Muslim extremists and state economic development officials.)

McElroy denies using those words.

“I talked to Commissioner McElroy and he assured me that he said no such thing,” said DEED spokeswoman Kirsten Morell. “Rather he expressed DEED’s willingness to be helpful and do what we can to ensure that the company, as it continues to develop, stays in Minnesota. The University of Minnesota is a tremendous partner and asset to the state and we want to work with them to advance their initiatives.”

When asked about the incident, Schrankler, perhaps channeling his inner Hillary Clinton, smiled and replied “Let me put to you this way: we had a good, no-holds bar discussion,” sounding more like he was negotiating a nuclear arms treaty with the Russians than staring down the DEED commissioner.

Is it my imagination or is McElroy getting a little grumpy lately? Just a few weeks ago, the DEED commissioner chewed out U vice president of research Tim Mulchay for some seemingly innocent remarks Schrankler made to this reporter about nanotechnology.  I guess giving press conferences each month about the state’s rising unemployment numbers is testing McElroy’s patience.

Sadly, this episode represents the state of political leadership in Minnesota. Maybe the Pawlenty Administration should do something useful and pass an angel investment tax credit instead of making threats against U officials. You can’t scream at U officials for moving a company out of Minnesota if you do nothing to keep them here. (Also see “Farewell Vital Medix” post below)

In any case, Schrankler and Doug Johnson, who heads the U’s Venture Center, say while they hope the company remains in Minnesota, they will do what’s best for the start-up.

“We don’t want to screw this one up,” Schrankler said.

Unable to find the right talent in Minnesota, the U recently hired a headhunter to launch a nationwide search for a CEO. The school is raising $1 million from angel investors and local wealthy families, most notably the Pohlads.

The U has also assembled an all-star cast to advise the start-up, including AppTec founder and former CEO Bonnie Baskin, John McDonald, former vice president of research for MGI Pharma, and Kathleen Tune, a principal with local VC firm Thomas, McNerney & Partners.

Hopefully the U will succeed, jihad aside.

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