A recent Pricewaterhouse Coopers “MoneyTree” survey found venture capital investment in Rhode Island companies to be up during the second quarter – outpacing, in fact, the rate of such deals throughout New England.
That news should have served as a positive sign in terms of economic development. After all, seven companies in Rhode Island received a total of more than $50 million during the quarter. That’s a sharp contrast to some recent quarters, where it has been common to see just one or two venture capital deals done, if any.v
But the positive news was short-lived. The same week those survey results were released, we learned that Spherics Inc. – a Lincoln-based biotechnology company that was spun out of Brown University in the late 1990s, and earlier this year had received $26.4 million in venture capital – is planning to leave Rhode Island for Mansfield, Mass. MassDevelopment, a state-funded economic development agency, has agreed to loan the company $2.5 million, which will allow Spherics to build a manufacturing facility in the Cabot Industrial Park.
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By all reports, Spherics would like to have stayed here. Company executives met with state Economic Development Corporation officials on several occasions. But in the end, the state could not find them suitable space. Spherics was looking for a building in northern Rhode Island, closer to the Bay State homes of the majority of its 25 employees.
It is easy to put a positive spin on the Spherics story. One could argue that it serves as evidence that the state’s Slater Technology Fund works. One of the main goals of the fund, after all, is to grow companies out of the state’s colleges and universities.
In the case of Spherics, the Slater Fund first granted the fledgling company $75,000 and then loaned it $125,000. Company officials paid the state back on their way to securing several rounds of venture capital.
But the whole story is not such a positive one for Rhode Island, because as Spherics reaches its new heights, it does so as a Massachusetts-based company.
This is a formula that Rhode Island cannot afford to follow for long. It’s not enough for the Slater Fund to grow companies. It must be to grow companies – and keep them here.
Lawmakers need to examine what happened with Spherics and see what can be done to make sure it does not become a pattern. We have suggested that the Slater Technology Fund is under-funded and we continue to hold that belief. The fund must be built up enough so that when companies like Spherics are identified, we can compete – specifically, with Massachusetts – to provide the loan programs it takes to move them from one stage of development to another.
It is also obvious that the state needs to be more aggressive in working with developers to rehabilitate so many of the older buildings that could be turned into homes for biotech manufacturers.
Rhode Island doesn’t need to develop new technology companies for Massachusetts. Rhode Island needs to develop new technology companies – for Rhode Island.
