Monthly Archives: December 2016

Southeastern and Texas cities are doing particularly well among the country’s 200 largest metro areas, according to the Milken Institute

Congratulations to Tampa, Orlando and Jacksonville as a few of the Florida metro areas with the strongest gains in their rankings!

Competing metros: Tampa Bay rebounds to best performance in decade in Milken Institute rankings

Posted December 16th, 2016 by Tampa Bay times

Here’s a feel-good column to unwrap this holiday season that will reveal the Tampa Bay metro area is rebounding as one of the better performing, larger metro areas in the United States.

That’s great news after a decade of rough times in the bay area economy, hitting a low ranking among the nation’s top 200 metros at No. 169 in 2009. That’s when the recession cut deepest in Tampa Bay and Florida, and the housing market bust was most intense.

So here’s the best gift, courtesy of the Milken Institute’s just released 2016 annual survey of the best performers among the country’s 200 largest metro areas.

Tampa Bay ranks No. 33, up 25 spots from No. 58 in 2015 and up a whopping 136 metro spots from seven years ago when this market pretty much hit bottom at No. 169.

That bears repeating. The Tampa-St. Petersburg-Clearwater metro area leapfrogged 25 (from 58 to 33) metro areas in one year and 136 of the nation’s 200 top metro areas since a low in 2009.

Looks like all the talk of “swagger” by Tampa Mayor Bob Buckhorn isn’t just political hype after all.

Why do we care if we are 33rd this year? Because the trajectory has been up seven years straight. These are not static changes. Every one of those 200 metro areas is striving to do better, to out-compete its peers.

Rising so quickly as Tampa Bay has is testament to the improved Florida economy but also points to the local efforts at economic gains achieved over time.

Tampa Bay’s ranking this year is the highest it has been since 2005, when this metro market ranked 25th by Milken in that year’s metro survey.

That’s an impressive comeback, one that underpins the growing confidence in this metro area’s broader business community. Unemployment is down. Tourism remains strong. A construction boom is under way from the downtowns of St. Petersburg and Tampa to southern Hillsborough north to Wesley Chapel.

And new companies with major league names like Johnson & Johnson and Citigroup are expanding here while up-and-coming area firms from CareSync and BlueGrace Logistics are winning strong investment backing and aggressively adding jobs.

And on Jan. 9, this market gets to kick off the new year by basking in the public spotlight as host of the third annual College Football Playoff National Championship at Raymond James Stadium in Tampa.

But enough with the self-congratulatory back slapping. There’s more to learn from the Milken Institute survey, which has been analyzing metro performances since 1999.

The survey’s “Best-Performing Cities: Where America’s Jobs Are Created and Sustained” index uses a comprehensive set of data to rank both 200 large and 201 smaller metros across the United States. Measures like growth in employment, wages and technology output are heavily weighted. Milken chooses not to include cost-of-living and quality-of-life conditions (which arguably would only improve Tampa Bay’s status).

Here are a few key takeaways from the overall survey.

  • At No. 1, San Jose/Silicon Valley repeated as the top metro area among 200 large metros, both as the nation’s innovation capital but also for its top rating for wage growth.
  • Top metro performers were strikingly stable compared with 2015. The top six large metros in the 2016 rankings were the same as last year, though there were a few ranking shifts among those six. In all, 19 of last year’s top 25 metros made the cut in 2016.
  • Milken researchers said the top-performing metros have “cohesive strategies” that distinguish them from others and offer lessons that may be adaptable for other localities. Here’s one lesson for Tampa Bay: All the top ranked metro areas have major tech sector clusters and high rates of entrepreneurship. This market is working to raise its tech sector, and the still-young startup community here is gaining ground. Consider this a strong reminder to keep the focus, energy and resources on these core Tampa Bay sectors.
  • While Tampa Bay’s comeback in the rankings is impressive, another Central Florida metro also deserves attention. The Orlando metro area ranked 9th in the nationwide large metro rankings, soaring from 28th last year and making it the only Florida metro area to crack the top 10 in 2016. The principal driver: job growth. The smaller Orlando metro market routinely outpaced job expansions reported in larger metro markets of Florida.

Let me suggest another factor in Orlando’s success not captured in the Milken survey. That metro area’s economic development organizations are regionally streamlined to speak with one voice. They are also efficient and communicate to each other so they rarely duplicate efforts or compete against one another. Tampa Bay, by contrast, still struggles to operate as a single market, though there are signs of improving cooperation.

  • While Orlando, Tampa Bay, Fort Lauderdale and Fort Myers metro areas saw strong gains in their Milken rankings, Florida cities like Tallahassee, Pensacola, Ocala and Lakeland saw their rankings drop.
  • In the related Milken rankings of 201 smaller metro areas across the United States, the Villages ranked tops in Florida at 13th, though it fell from 6th in the 2015 survey. Bringing up the rear: In Citrus County, the Homosassa Springs metro area ranked 170th, improving from 187th last year. The area’s economy, which encompasses Crystal River, was hurt by the premature closing of the Duke Energy nuclear power plant there. A replacement natural gas plant now in the works should help a slow rebound.

A final footnote: Among the top 10 large metros ranked by Milken are two Southeast markets (other than Orlando at No. 9). Raleigh, N.C., a perennial hot spot for higher wage jobs and a better educated workforce, ranked 6th this year, as it did in 2015. The other metro on the upswing is Nashville, which landed at 7th from 18th in 2015.

St. Petersburg economic leaders toured Raleigh earlier this fall to learn some of its best practices. Tampa business leaders took a benchmarking trip to Nashville in 2013.

These kinds of trips can only contribute to a better performing Tampa Bay market.


TissueTech’s Umbilical Cord Technology Shows Promise in Spina Bifida Patients

New Hope for Spina Bifida’s Youngest Patients

Posted November 1st, 2016 by TMC

Seven years ago, Lovepreet K. Mann was standing at a crosswalk in Salt Lake City with her husband and colleague, Dr. Ramesha Papanna. They had been testing an underwater glue for fetal surgery, and a thought suddenly occurred to her. There, on the street in Utah, the couple began a discussion that would ultimately lead to a patch made from human umbilical cord. Today, it is being used to help repair spina bifida in babies before they’re even born.

A “super C-section”

Spina bifida is a birth defect characterized by an incomplete closing of the bones and membranes surrounding the spinal cord. In most cases, tissues and nerves are exposed in an opening along several vertebrae in the baby’s back, making him or her highly susceptible to life-threatening infections and sometimes triggering complete paralysis of the legs as well as bladder incontinence and a range of cognitive difficulties. The condition is typically detected in a pregnant woman’s 20-week anatomy scan, during which time the ultrasound tech identifies either a lemon-shaped head or a “banana sign,” both caused by pulls in the cranial area from the spinal malformation.

For decades, the standard treatment has included postnatal surgery, but sentiments shifted after the groundbreaking NIH-funded MOMS Trial (Management of Myelomeningocele Study) initiated in 2003, in which standard repair results were benchmarked against more than 90 fetal repair cases. The results spoke volumes. Babies who underwent fetal repair were much less likely to need a ventricular shunt for hydrocephalus. Furthermore, twice as many children from the fetal surgery group were able to walk without crutches at 30 months of age, compared to those who received the surgery after birth.

Not all patients qualify for the highly specialized, extremely complex procedure, which involves either pulling the skin together or stitching a patch directly onto the spina bifida site of the fetus while it is still in the mother’s womb. Likened to a “super C-section,” the intricate series of surgical steps (making an incision in the mother, protecting the placenta, opening up the amniotic sac, preserving the fluid, performing the repair through a tiny three-inch by four-inch window in the uterus, replacing the fluid, closing the uterus and then the mother layer by layer) is also not without risk. Most babies who undergo fetal surgery will be born prematurely. There is potential for post-surgical complications and infections. There is the risk of death. And, until Mann, a research instructor in the Department of Obstetrics, Gynecology and Reproductive Sciences at McGovern Medical School, thought of using the regenerative material she and Papanna had been studying to patch the site, there was the likely possibility of scar tissue formation, which meant further injury to the spinal cord as the child grew and developed.

Originally, Papanna, the principal investigator and an assistant professor in the Department of Obstetrics, Gynecology and Reproductive Sciences at McGovern Medical School at The University of Texas Health Science Center at Houston and a maternal-fetal medicine specialist at The Fetal Center at Children’s Memorial Hermann Hospital, was interested in using amniotic membrane from the placenta to seal fetal membranes—the layers of the amniotic sac—after surgeries in utero. He and Mann flew to Miami to meet with expert ophthalmologist Scheffer C.G. Tseng, M.D., Ph.D., who was using a human amniotic membrane patch to repair corneas. After spending a week in his center, the two were even more impressed at its regenerative properties.

What makes the material so “magical,” as Papanna puts it, is a compound called heavy chain hyaluronic acid/pentraxin3, which initiates natural regeneration of the tissues at the repair site, rather than healing by scar formation. The distinction is important in spina bifida repair since one creates a healthy, biologically compatible environment while the other often leads to scarring of the spinal cord to the repair site. This can lead to loss of bladder and motor function later in life. If scarring occurs, further surgeries are required to remove the scar tissue and protect the spine.

“The molecule is the same one that is present around the egg of every woman who ovulates every month, in the lining of the womb and the placenta. This is essential to maintain normal reproductive function,” Papanna said. “Nature has created a solution, and we have harnessed it to our benefit.”

But this wasn’t the fairytale ending Papanna and Mann had hoped for. Despite its phenomenal healing properties, the amniotic membrane patch was paper-thin and flimsy, making it difficult to work with.

“If the site gets infected, the baby dies,” explained Kenneth Moise, M.D., director of the Fetal Intervention Fellowship Program at McGovern Medical School and co-director of The Fetal Center at Children’s Memorial Hermann Hospital. “It’s covering the spinal cord, so it has to be a watertight seal—CSF [cerebrospinal fluid] can’t leak out and infections can’t come in.”

Unfortunately, every time Papanna practiced his stitches on the delicate material, it tore. So he looked to the umbilical cord, which contains the same “magical” molecules as the amniotic membrane, but is thicker and far more pliable.

“It was so obvious,” Papanna said. “The umbilical cord has the same regenerative properties.”

Success stories

Mann and Papanna contacted Tseng, who created a new patch and sent it back to them for testing. After suturing multiple chicken breasts and injecting blue dye as a proxy for cerebral spinal fluid, Papanna and Mann were satisfied that it could provide the watertight seal necessary for spina bifida repair. Papanna’s lab studied its performance in animal models and he was granted approval from the FDA for clinical use in three cases. He and a team of surgeons including Moise, Kuojen Tsao, M.D., co-director of the Fetal Center at Children’s Memorial Hermann Hospital and an associate professor at McGovern Medical School’s Department of Pediatric Surgery, and pediatric neurosurgeon Stephen Fletcher, D.O., an associate professor in McGovern Medical School’s Department of Pediatric Surgery, performed the first surgery in July 2015. A second case was performed a few months later, and the results of the two surgeries were published in Obstetrics and Gynecology in July of this year.

So far, they have been success stories. In both cases, the surgeries went well and the babies were born at 37 and a half weeks, just three weeks shy of full term. At birth, the patch was still in place and there were no signs of leakage or fluid inside. Moreover, both babies retained lower limb function as well as normal bowel movements. The one peculiarity was that, at birth, the site had not yet regenerated—it was semi-translucent, and when Papanna tapped the baby’s head, he could see the cerebrospinal fluid underneath the patch. Within a few weeks, however, the skin grew into the patch exactly as expected.

“Every day you could watch the blood vessels and the tissues grow closer together,” Papanna said. “It was incredible.”

A third case was completed and as the months pass, all three babies continue to exhibit normal leg movement and bladder control and no need for further repair. The true test will come with time, but already the patch is showing promise as the next big advancement in fetal surgery: whereas the MOMS Trial demonstrated that fetal surgery could vastly improve outcomes in mobility and neurological development, this patch could take the procedure a step further, resulting in an even more improved outcome for children with spina bifida. Perhaps, in the future, there will be no more need for surgical revisions, no additional repairs, few if any symptoms. An entirely normal childhood.

“People are trying stem cells and different ‘off the shelf’ patches, but this patch is doing more than any of the others,” Mann said. “It’s helping with regeneration of existing skin. It’s creating organized growth of tissues, and the body doesn’t reject it. Even more, its source is abundant since the umbilical cord from every pregnancy could produce a new patch.”

“Where are all the other babies?”

Currently, Papanna and his team are pursuing additional clinical studies and working to expand their approval from the FDA for more cases. They hope to apply the patch using fetoscopic repair techniques, which would reduce surgical risks to both the mother and the baby. Ultimately, they also aim to create a standard of care for babies diagnosed with spina bifida.

“Right now, the techniques being used to close the spina bifida are all over the map, and the outcomes vary considerably,” said Moise, who recently returned from Botswana where the International Fetal Medicine and Surgery Society convened for their annual conference.

“Nobody has a standard way of treating this, but we all agree that whatever patches or fetoscopic approach we use, the outcomes should be judged against the MOMS Trial. We all want to develop something better than what we’re already doing.”

Moise expects that a standard of care, as well as increasingly positive outcomes, will also encourage OBGYNs to refer more of their patients to fetal centers for counseling.

“We should be three times busier than we are,” Moise said. “There are over 200 babies born in Texas every year with spina bifida. Two hundred. And we might do eight or 10 cases a year. Where are all the other babies?”

Even more, he hopes standardizing treatment will change the climate surrounding fetal repair surgery worldwide. Currently, there are only a handful of sites outside the U.S. that do fetal surgical repairs. According to Moise, many countries, including most of Western Europe, consider a spina bifida diagnosis the equivalent of an unviable pregnancy.

“They think we’re crazy to do what we do,” Moise said.

The endurance test that is entrepreneurialism

21-karl-meltzer-lede-w710-h473We were immensely impressed reading about ultra-marathon runner Karl Meltzer’s hiking of the entire Appalachian Trail recently. Meltzer averaged an insane 47 miles of hiking a day for 45 consecutive days to accomplish this record. While we are no endurance athletes ourselves, we thought that Meltzer’s feat held some relevance for the endurance test that is entrepreneurialism, so we dug a little deeper to find out how he went about accomplishing this incredible feat.

As is detailed in the New York Magazine article linked above, Meltzer used some of the following tenets to guide his efforts in hiking the Appalachian Trail. We’ve added some thoughts below on several of the principles as we believe each applies to building a growth company.

Pace yourself

For Meltzer, this concept meant not going out too fast too early when he felt great at the beginning of his hike. For an entrepreneur, we believe “pacing oneself” is very sound advice in building a great company. The business media loves to glorify once-in-a-lifetime, strike-it-rich successes like WhatsApp’s sale to Facebook, before real businesses have been built and products monetized. From our experience, we know that such successes do happen in each market upswing, but these are very rare; a more likely path to success comes from disciplined adherence to sound business principles over many years. For an entrepreneur, building a company can feel a bit like Sisyphus pushing the rock up a hill, but one customer will lead to another customer, and on and on it will go. Along the way, it is important to celebrate the successes as they come but not get too frustrated if they don’t come all at once.

Beat and broken down? Focus on what you can control

For Meltzer, he had an injury mid-hike, and he knew that an injured shin could be potentially disastrous for his attempt to break the record in hiking the Appalachian Trail. Much to Metzer’s credit, he had the mental discipline and energy to focus on those small steps which were right in front of him, and this focus allowed him to overcome the adversity. For an entrepreneur, this tenet is a great analog to focusing on what one can control along the growth company path. Along the journey, large customers may promise that they are going to buy and then go silent; investors may seem interested but then get cold feet; board members may give contradictory advice. It is critical that an entrepreneur focus on what he or she can control within his or her own company, building the team along the way with people who are trustworthy, smart, and driven. Success is more likely to come from a thousand prudent decisions along the way, not one dramatic thunderbolt as portrayed in the movies.

Practice gratitude

We have to admit that this may have been our favorite of Metzer’s tenets. As minority growth investors, we have to live by this credo, as we are not in control of the companies where we invest and most of the success in our portfolio comes from the hard work of the team on the ground. We are passionate about entrepreneurs and know how hard it is to build a great growth company, so we always try to thank our portfolio companies for their hard work whenever we can. In much the same way, an entrepreneur is only as strong as the team that she builds around her, so investing in a culture where expressing gratitude is the norm makes so much sense to us. People work harder when acknowledged for their contributions, and it takes a team to build something truly special.

Focus on the process

Metzer knew that he couldn’t do the whole hike in one fell swoop, so he broke the hike down into its component pieces which made the daunting task seem more manageable. Similarly, we often counsel our entrepreneurs to build sustainable processes into their companies so that they and their employees can replicate tasks easily and are not as exposed to human error when building a company. By giving employees clearly defined processes which allow them to focus on what’s really important, an entrepreneur greatly increases the chances that his company will be successful. It is easy to look at the totality of what needs to happen to scale a business and become overwhelmed; by breaking the greater task into its component parts and then putting a process around each, an entrepreneur has a much greater likelihood of success.

Embrace struggle

It turns out that hiking the Appalachian Trail faster than anyone else ever has is really hard! Metzer knew that it would be difficult, but he embraced the struggle and accomplished something remarkable. We don’t know any other way to say it, so we’ll just be blunt – building a successful growth company is really hard! However, the rewards, both monetary and intrinsic, can be well worth the struggle, but an entrepreneur must enjoy the journey along the way and recognize that it will be very hard, with many peaks and valleys. A successful exit will likely be monetarily life-changing for many of the employees at a successful growth company, but we have found that most entrepreneurs look back at the journey and struggle of building a team, getting a product to market, winning (or losing) a customer as the fondest memories of their entrepreneurial journey. Enjoy the struggle – it will go by fast and you’ll create a lifetime of memories with great people along the way if you laugh at yourself during the tough times and then celebrate the successes along the way.

And drink coffee

This was our favorite of Metzer’s tenets!  And the only one we can say with confidence we have fully mastered.

The NVCA’s letter to the President-elect

The National Venture Capital Association (NVCA) has sent a letter to President-elect Donald Trump outlining how the entrepreneurial ecosystem is the key to creating new jobs and economic opportunity for Americans who feel left behind by the modern economy.

startup_trendsThe letter outlines an agenda crucial for supporting entrepreneurship and building a strong economy in all areas of the country, including: a tax policy that encourages new company formation; making capital markets work for small-cap companies; encouraging talented immigrants to build or work at American startups; making life-saving medical innovation a reality; increasing basic research investment; and other key policies that would bolster the entrepreneurial ecosystem and foster new company creation.

The NVCA’s letter opens with a brief paean to entrepreneurship:

Entrepreneurship is the key to expanded economic opportunity in the United States.  From FedEx to Genentech, entrepreneurs have fueled growth and expanded opportunity across the American economy.  America’s venture capitalists have been hard at work supporting these startups with tremendous growth potential in areas like personalized medicine, next-generation computing, 3D printing, and synthetic biology.

Young companies, many of them venture-backed, create an average of 3 million new jobs a year and have been responsible for almost all net new job creation in the United States in the last forty years.  In addition, venture capital has backed nearly half of all companies that have gone public since 1974, which have collectively been responsible for 85 percent of R&D investment during this period.  In short, while a small industry by relative standards, venture capital is mighty in its outsized role in supporting economic activity and creating growth and economic opportunity.

27,000 U.S. venture-backed startups have received $290 billion in funding—and 11,000 of those received funding for the first time—since 2012.  To put this into perspective, that calculates to about $170 million invested into 15 startups each day.  An underappreciated truth is that startup activity has proliferated in the middle of the country in recent years.  Since 2012, nearly half of all startups receiving venture capital backing have been based outside of California, Massachusetts and New York.  Specifically, about 12,900 venture-backed companies in the other 47 states have raised $83 billion in funding since 2012.  What’s more, the collective annual growth rate of companies receiving funding in these states (10.1%) has exceeded that of the top three states.

We highlight/excerpt three of their recommendations below, but we also encourage all our readers to check out the NVCA’s letter in its entirety.  (We also provide a few links to some of the relevant Greatest Hits here at Navigating Venture.)

1. Support tax policy that encourages new company formation.  Since the Reagan Administration, our tax code has been relatively effective at encouraging patient, long-term investment, but on net has been hostile to entrepreneurial companies.  For example, punitive loss limitation rules punish startups for hiring or investing in innovation, while benefits such as the R&D credit are inaccessible to startups.  Unfortunately, tax reform conversations in Washington have ignored these challenges while at the same time proposing to raise taxes on long-term startup investment to pay for unrelated priorities.For instance, carried interest has been an important feature of the tax code that has properly aligned the interests of entrepreneurs and venture investors since the creation of the modern venture capital industry.  Increasing the tax rate on carried interest capital gains will have an outsized impact on entrepreneurship due to the venture industry’s longer holding periods, higher risk, smaller size, and less reliance on fees for compensation.  These factors will magnify the negative impact of the tax increase for venture capital fund formation outside of the traditional venture regions on the coasts.

2. Reform the regulatory state to bolster startup activity.  When Washington piles on new regulations it is startups who are most adversely affected because these young, high-growth companies do not have the resources to navigate the regulatory state like large companies.  At the same time, government red tape is inhibiting government entities from tapping into venture-backed innovation in fields such as cybersecurity due to challenges with the government acquisition process.

3. Make life-saving medical innovation a reality.  The future has never been brighter in terms of scientific and health care discoveries that are on the horizon.  Venture capital is investing in revolutionary medical innovation and groundbreaking treatments and cures that are aimed at diagnosing, treating, and curing the deadliest and costly diseases.

Unfortunately, medical innovation is at risk unless policymakers adopt modern approaches to development, regulation, and reimbursement for medicine and medical devices.  Progress has been made to streamline the regulatory approval process at the Food and Drug Administration, particularly for novel technologies, but more improvements are needed.  In addition, we need to establish pro-innovation approaches to reimbursement at the Centers for Medicare and Medicaid.

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