January 26, 2014 7:03 pm

Technology start-up hotspots for MBAs

Technology may be global, interconnected and pervasive, but when starting up and developing a business, tech entrepreneurs know that geography still matters. Many MBAs head for San Francisco, New York, Berlin, Los Angeles, London, Hong Kong or other hubs to be close to important success factors such as talent pools, economic incentives, investors and customers.

Silicon Beach in Los Angeles has become southern California’s tech-centric answer to Silicon Valley, with a recent survey ranking it third among the world’s top start-up “ecosystems”, behind Silicon Valley and Tel Aviv. The city has been a launch pad for successful new online companies in recent years, such as Hulu, eHarmony, Maker Studios, LegalZoom, ShoeDazzle, BeachMint and Cornerstone OnDemand. Meanwhile the University of California: Los Angeles, the University of Southern California, and the California Institute of Technology produce more engineering graduates each year than Stanford and Berkeley universities, major suppliers to Silicon Valley.

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Leo Petrossian, an MBA student at UCLA Anderson School of Management, and some fellow entrepreneurs are working on an idea to bring operating theatre technology to battlefields, ski slopes and other places where brain injuries are common. Petrossian met his co-founders during an entrepreneurship event last year, where one of them was presenting while the others heckled from the audience.

Their project employs an algorithm based on research by UCLA’s medical centre to enable measurement of intracranial blood pressure using a non-invasive ultrasound device. So far they have won $100,000 in start-up funds from various business plan competitions.

But progress has not been without complications. Petrossian says the Obamacare reforms to the US health system created a more difficult environment for “med-tech” entrepreneurs in 2013. “Raising capital from investors has become particularly challenging because of high levels of uncertainty in the medical industry that are a result of the Affordable Care Act,” he says. There has also been a big contraction in the number of venture capital firms active in the industry, he adds.

Leo Petrossian believes funding for 'med-tech' startups will suffer as a result of Obamacare

Petrossian believes that the best companies will still get funding, but many very good ventures will be unable to obtain funds to support growth.

“My coursework at Anderson has taught me it takes a lot more than a technology to build a great business,” he says.

Al Osborne, senior associate dean of UCLA Anderson and faculty director of the Harold Price Center for Entrepreneurial Studies, says: “There is a lot going on here in the entrepreneurship renaissance that is evolving and growing in Los Angeles.”

But Osborne adds that many tech entrepreneurs do not pay enough attention to customers when trying to commercialise their ideas. At UCLA, students learn academic and discipline-based principles but are then placed in situations where the priority is applying those principles and solving problems, once they have gone through the process of identifying needs.

Anderson’s Technology and Innovation Partners Program, for example, places MBA students with UCLA researchers and inventors through the university’s Office of Intellectual Property to evaluate the commercial potential of certain patented ideas or discoveries.

Anderson’s MBA electives include a seminar on technology commercialisation and new business development. This gathers law students, scientists, engineers and business school graduates into teams to evaluate technologies in association with UCLA researchers.

Across the Pacific, Hong Kong is vying to be the top start-up city in Asia with initiatives such as StartmeupHK, a project backed by the Hong Kong government. In November, Eric Schmidt, Google executive chairman, launched a partnership with the Chinese University of Hong Kong to assist the island’s “natively entrepreneurial” students and incubate start-ups.

“For the past 10 or 15 years, more overseas Chinese and Hong Kong people who have studied abroad and gained an understanding of markets elsewhere have returned to Hong Kong, particularly after the financial tsunami in 2008,” says Kevin Au, director of the Center for Entrepreneurship at CUHK. “They have brought back ideas, connections and knowledge, and that has really helped our start-up community.”

The environment here is still developing and Hong Kong’s biotech industry has a long way to go, but there is a lot of government support

- Ming-Chung Wong, MBA graduate of the Center for Entrepreneurship at CUHK and founder of Lotus Innovative Health

Ming-Chung Wong, one of the business school’s MBA graduates, is an example of this. Born and raised in the US, he holds a BSc in molecular biology and biochemistry but decided he wanted more from his working life than sitting in a lab in San Diego. Family ties in Hong Kong attracted him to CUHK. Three years ago, Wong founded Lotus Innovative Health, a drug development company at the Hong Kong science and technology park that designs drugs and health supplements for the treatment and care of eye diseases.

The biggest benefit from attending CUHK was the contacts he made. “I had no background in Asia, but the business school . . . introduced me to investors and alumni in similar industries,” he says. “Unfortunately, my Chinese is still pretty poor, which creates challenges, so the networking has been really important.”

Wong has attracted a $100,000 grant from the Bill & Melinda Gates Foundation and one of HK$10m ($1.3m) from the Hong Kong government. “The environment here is still developing and Hong Kong’s biotech industry has a long way to go, but there is a lot of government support. It would be very difficult to find that kind of government support in the US. Investors here do not understand the biotech field as well. But there is a very supportive atmosphere and I am having fun for the first time in my 10-year working life.”

If Hong Kong is to fulfil its tech start-up aspirations, Prof Au says it must work harder on developing what he calls “T-shaped” talent. “We have very smart business people and engineers, but we lack people who have deep knowledge in their domain of specialisation and also broad knowledge across a range of domains,” he says.

“While we have a lot of money, there is a lack of understanding. We have many high net worth individuals, but not all have the patience it takes to invest in start-ups, which might take several years to bear fruit.”

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Surgical strike: innovation French-style

Renaud Marin and Arnold Ferlin of Anastom Surgical©Elizabeth Rull

Tradition of innovation: Arnold Ferlin and Renaud Marin set up their medical device business after doing MBAs in France

Entrepreneurs Renaud Marin and Arnold Ferlin, both MBA graduates from French business school EMLyon, found benefits to their location in France when starting up Anastom Surgical, a medical device company aimed at assisting surgeons during prostate cancer surgery. The FT spoke with Marin.

How did you come up with the idea?

As part of our MBA, we had to propose a company project. Arnold met some surgeons who explained the challenges of circular suturing but didn’t have the technology to manage it more efficiently. Arnold is a mechanical engineer and was able to come up with a solution.

How important was business school?

Because we were doing an MBA, we had a year to be in sandbox mode, trying out the concept, studying the market and figuring out whether there was a project here that could attract an investor. The school was key in helping us shape the project, not just because of its dedicated entrepreneurship course, but also by giving us access to international competitions. We submitted our first business plan to the Moot Corp investment competition (now Venture Labs) at the McCombs School of Business. We didn’t reach the finals, but came away with some very encouraging feedback. A month after finishing the MBA, we had filed our first patent and we were ready to go.

What did you learn at business school?

Our MBA debunked a lot of myths about entrepreneurship. I used to think of it as like music: you write the business plan and simply have to execute it. EMLyon helped us understand that things not going to plan is a part of the process. We have had three prototypes so far and if you can’t manage that kind of uncertainty you are most likely going to give up.

What are the pros and cons of being a tech entrepreneur in France?

Starting up in France has been very easy, because of the tradition of innovation and access to some very good surgeons. But medical devices are a global market, and the US is the biggest. We have been going to the US to get more surgeons on board. It is difficult to create a worldwide company if you are working only with French surgeons. If we can’t find the funds in France, we wouldn’t have a problem looking to locate elsewhere.

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