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Tax Credit Benefits Investors, Companies

Posted: Apr 23rd, 2007
No good deed goes unpunished, according to a popular adage. Investors employing Indiana's venture capital tax credit, however, are rewarded for their efforts.

Corporate investments may be categorized less as good deeds than calculated moves. Camaraderie, however, among the business community, often plays a role in the launch of companies with uncertain futures.

Enterprises (individuals or groups) with Indiana tax liability can receive a 20% tax credit for investments in eligible companies. Most eligible recipients of the venture capital tax credit are small and technology oriented. An Indiana Chamber report, the Indiana Venture Capital Study, was instrumental in the tax credit's passage in 2002 by the Indiana General Assembly. It became effective on January 1, 2004.

Several elements of the initiative have been enhanced by the Indiana Economic Development Corporation (IEDC). "The approval process for certifying both the eligible companies and investors has sped up dramatically," states Mark Lawrance, Indiana Chamber vice president of corporate evelopment. "We've also increased the cap on the total tax credits in any year from $10 million to $12.5 million."

Bare bones method
Herb Schwartz, president and CEO of Schwartz Biomedical, LLC, credits his industry with attracting investors. "We don't do traditional orthopedics," Schwartz describes. "What we do is develop regeneration technologies. Rather than replace the tissue, we try to get it to heal or regenerate. The area we work in, we're fortunate that it's not only high-tech products, which is interesting, but what we do benefits people."

Schwartz Biomedical and its two subsidiaries (BioDuct, LLC and BioPoly)
have earned IEDC funding. BioDuct was founded in 2004, supported in part
by venture capital tax credit money. In addition, a 21st Century Research and Technology Fund grant (which fosters business and job creation in the state) helped Schwartz Biomedical establish BioPoly that same year.

All three companies occupy office and lab space at the Northeast Indiana Innovation Center, a certified technology park located in Fort Wayne.

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Schwartz Gets 1st IU Program Grant

Posted: Apr 23rd, 2007
Fort Wayne's Schwartz Biomedical LLC has been awarded the first grant from a statewide small business program created by the Indiana University Research and Technology Corporation. The Indiana S4 Initiative is focused on helping emerging technology companies in search of federal SBIR and STTR funding. "We have a real chance this year to mobilize and bring in more federal money than ever to Indiana by really putting in as many quality applications as possible," says Mark Long, IURTC president and CEO.

The Indiana S4 Initiative is focused on helping emerging technology companies in search of federal Small Business Innovation Research and Small Business Technology Transfer funding. The two programs are the largest sources of early-stage financing for technology start ups in the nation, handing out nearly $2 billion in grants and contracts annually.

The SBIR Phase 0 grant will provide Schwartz with professional proposal preparation services. It's the latest in a series of positive developments for the innovative Allen County company. Schwartz also received a 2004 grant from the state's 21st Century Research and Technology Fund and was a first place winner in Purdue University's Indiana Business Plan Competition.

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Breeding ground

Posted: Apr 23rd, 2007
Tissue engineering. It sounds exotic to the point of science fiction. It's real, though. As manager of DePuy Orthopaedics Inc.'s orthobiologics department, Herb Schwartz saw the future in using regenerative technologies in joint replacement procedures such as partial knee surgery.

Yet, instead of developing products for DePuy, Schwartz, a Berne native and Purdue University graduate with a doctorate in biomechanical engineering from the University of Cincinnati, chucked the security of the big corporation for the uncertainty, but potentially lucrative life, of a biomedical entrepreneur.

That was January 2004. Today, his five-person firm has a suite of offices and labs at the Northeast Indiana Innovation Center on Stellhorn Road and is close to bringing to market its first product. BioDuct, a technology and subsidiary of Schwartz Biomedical, is a product that heals damaged meniscus tissue in the knee.

Once it is cleared by the Food and Drug Administration, possibly before the end of the year, BioDuct will be the only product of its kind in the marketplace and could provide an alternative to current partial knee procedures that remove tissue.

Given its proximity to one of the epicenters of orthopedic device manufacturing, Schwartz Biomedical is one of several northeast Indiana small startups in the position to take advantage of an existing market. However, this isn't unique to the orthopedic industry. Other companies have found niches for themselves due to the needs of larger corporations or changes in the marketplace.

Tissue engineering sits below the radar for large orthopedic companies. They tend to be risk adverse, Schwartz said. By assuming the risk and reward, Schwartz has done in two years - from product conceptualization to development - what would have taken considerably longer in a corporate environment.

When Richard Florida created the concept of a "creative class" that drives of the 21st-century economy, Fort Wayne scored in the bottom end of his creativity index for medium-sized cities. Yet, the region is hardly lacking, according to statistics. For example, Indiana has either been slightly ahead or mirrored the national average of patents per 100,000 persons, according to a study undertaken for the Innovation Center by Massachusetts-based Advanced Technologies Inc.

The area is brimming with talented experts developing cutting-edge technologies. Literally around the corner from Schwartz's operation is Solstice Medical. Dan Sands, a Warsaw native and biomedical veteran who holds two patents and 14 patents pending, and his small team are developing radio frequency identification systems to allow medical device manufactures, suppliers, distributors and hospitals improve inventory control, sales and safety.

One challenge for these startups is the region doesn't keep its intellectual property locally. In its report, Advanced Technologies found that "the region is a net exporter of its (intellectual property) with no clear pattern of increasing imports into the region."

According to the study, the region could be doing 15 percent better in new firm formation, which also drives patents. Part of correcting this is making sure would-be entrepreneurs know there are resources, traditional and inventive sources of capital and the tools to get a startup rolling, said Karl LaPan, president and chief operating officer of the Northeast Indiana Innovation Center.

"We need to leverage our assets and retain the trajectory and flow of intellectual property if we are to produce more startup companies," said LaPan.

People can't discount the reluctance of even the brightest mind to give up relative job security for the roller coaster of small-business ownership.

John Taller understands that few things push small-business formation more than losing a job. Formed after the demise of Xolox Corp., Excellon Technologies specializes in contract manufacturing of electro-mechanical assemblies, as well as sensor application engineering and manufacturing. Its clients include Department of Defense contractors such as ITT, BAE, UnderSea Sensor Systems and General Dynamics.

Taller and partner Gil Perry credit a rise in military spending as one key to Excellon's growth.

While the needs of the private sector are often the driving force of small-business growth, mandates and initiatives by the public sector can spur growth, as well.

The Bush administration has made electronic medical record systems, including clinical data, for physicians and hospitals a national priority for improving efficiency and safety. Todd Plesko's Fort Wayne-based company, triPractix, is set to take advantage of the fact that less than 20 percent of the medical market has gone digital.

"A lot of external forces" are driving the business, including the push toward paperless environments, as well as a drive to create organizations to facilitate the exchange of health information on a regional or national scale, Plesko said.

Given the qualitative and anecdotal evidence, northeast Indiana is developing small high-tech businesses in several leading-edge sectors. However, what about the future? Is there an industry that will supplant, say, the orthopedic device manufacturers for attracting similar businesses and talent to the region?

"If we all do our jobs correctly, we will build and grow many different industries that will provide a solid foundation and future for northeast Indiana," LaPan said. "I think the future will belong to those communities that stake out industries and markets where their regional assets, core competencies, and talent base can grow and thrive, and in the process create new industries and vibrant supply chains filling these industries needs.

"We need to cannibalize our existing success in mature industries and convert these industries/markets into new and more attractive successes that create the higher-paying, higher-value jobs of the future that will draw young and well-educated people to the region."

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