Matt Gentry/The Roanoke Times

Michelle Mullins, research scientist for Novozymes Biologicals, performs a DNA fingerprinting procedure in the company's laboratory in Salem.

Monday, May 13, 2002
Virginia Tech is an economic powerhouse sitting in Roanoke's back yard
Tech, Roanoke join forces

By MEGAN SCHNABEL
THE ROANOKE TIMES

    When a large Danish company bought Salem's Sybron Biochemicals last year, employees and local government officials worried that the microbe developer might not stay in the Roanoke Valley.

    After all, Novozymes A/S already owned more than a thousand acres of land near North Carolina's technology-rich Research Triangle, and the Salem division, renamed Novozymes Biologicals, was outgrowing a building that was too small for its 76 employees.

    So when top executives flew in from Denmark for a visit, Ted Melnik, the Salem division's president, wanted to guarantee a good impression of the valley. He and Phil Sparks, head of the Roanoke Valley Economic Development Partnership, set up a meeting to sell the area to the Danish visitors.

    It didn't take much effort to persuade Virginia Tech President Charles Steger to attend.

    Steger and Bruno Sobral, the school's director of bioinformatics, spent hours with the Novozymes executives, talking about how the company could take advantage of the research and resources at Virginia Tech.

    "He really sold the advantages of having a technology business expand here in the valley," Melnik recalled. "It was very, very well received by my Danish board."

    Virginia Tech's presentation was an important factor in the company's decision to expand in the Roanoke Valley, though not the only one. Novozymes employees rallied to keep the company in the Roanoke Valley, and state and local governments pledged incentives to sweeten the deal.

    "The people from Denmark needed to know that this wasn't a backwater community," Melnik said.

    In both behind-the-scenes meetings and highly visible public actions, Virginia Tech makes its presence felt in the Roanoke Valley every day.

    With 6,400 full-time employees, 26,000 students and an annual budget of $677 million, Virginia Tech is an economic powerhouse sitting in Roanoke's back yard. In fact, Virginia Tech was one of 12 universities featured in "Innovation U: New University Roles in a Knowledge Economy," just published by the Southern Growth Policies Board. The book, which also highlights schools including Georgia Tech and Stanford University, credits the 12 institutions with "leading the way in promoting technology-oriented economic development in their states and communities."

    And as the university struggles to cope with budget cuts, while trying to crack the list of the nation's Top 30 research institutions, Roanoke could find itself playing a more critical role: It is the political and business hub of Southwest Virginia, and home to Carilion Health System, which could be a major player in Tech's quest.

Why Roanoke should care

    Roanoke derives great benefit from Virginia Tech.

    Local employers hungrily eye the thousands of students who graduate each year from Tech, a ready-made work force. Almost 6,000 Virginia Tech alumni already live in the Roanoke Valley.

    The Center for Organizational and Technological Advancement, which connects university research to the state's businesses and governments, hosted 100 programs at the Hotel Roanoke and Conference Center in the 2000- 01 fiscal year.

    The university's cooperative extension program offers residents free assistance with topics including money management, farming, gardening and nutrition.

    More than 230 people commute from their homes in the Roanoke Valley to jobs at Virginia Tech. Eleven percent of the traffic coming through Roanoke Regional Airport is tied to the university. This semester, 125 people are enrolled in Virginia Tech classes at the Roanoke Higher Education Center. Some 35 percent of the group bookings at the Hotel Roanoke over the last nine months have come through the university.

    And there is the university-sponsored research - the development of nanomaterials, the creation of cloned pigs - that makes the area around Blacksburg an ideal place to incubate technology companies.

    So far, most of the companies that have spun off from Virginia Tech have stayed close to the fold; the Virginia Tech Corporate Research Center alone houses more than 100 companies, many of them created by Tech faculty or graduates or based on technologies licensed from Tech.

    The Roanoke Valley should embrace, not fear, that kind of economic growth because it's creating a critical mass of technology companies in the region, said Greg Feldmann, a principal in Gryphon Capital Partners, a Roanoke-based venture capital firm.

    "There's been a little bit of paranoia over whether we're going to get shut out, left in the cold," he said. "I don't believe that. Whether something's located in Blacksburg or Roanoke, we're still going to see a benefit out of it."

    It's unrealistic to expect that Roanoke will lure research labs away from Tech, Sparks acknowledged. But he believes Roanoke can transform itself into a research and development hot spot, a place where discoveries made at Virginia Tech can be turned into commercially viable products.

    He sees it happening already at the Roanoke-based Carilion Biomedical Institute, a joint venture of Roanoke-based Carilion Health System, Virginia Tech and the University of Virginia, that works to commercialize research conducted at the two universities.

    But the whole model depends on Virginia Tech's ability to continue its research - and, university officials would say, on its ability to propel itself into the ranks of the Top 30.

    Without that research, the Roanoke Valley would lack a means to escape from its traditional manufacturing-based economy, Sparks said.

    The need to diversify the region's economy was driven home by a report released in 2000 by Chmura Economics & Analytics of Richmond, which found that the region was stuck in a manufacturing rut and needed to embrace high-tech industry if it wanted to grow.

    The study found that Western Virginia had been experiencing near-zero job growth, while the rest of the nation was enjoying an economic boom. The lag was particularly noticeable in the technology sector: Employment at high-tech related industries in the New Century Region grew at an annual average rate of just 1 percent from 1995 to 1999, compared to the state's high-tech growth rate of 6.3 percent.

    The study cited the Carilion Biomedical Institute and Tech's Bioinformatics Center as two possible catalysts for high-tech growth, and it identified proximity to higher education institutions as a key characteristic of fast-growing regions.

    "We've got to realize the importance of Virginia Tech," Sparks said. "It's really a major, major player."

    Elaine Tuttle, whose consulting firm, the Business Advisory Group, works with local technology companies, put it more bluntly.

    "If Roanoke does not embrace and support and partner with Virginia Tech ... it's basically a decision to become a retirement, low-tech community."

A 'grown-up town'

    Virginia Tech doesn't hold all of the cards. If the school wants to crack the Top 30, if it wants to attract top-notch faculty and students, it needs Roanoke.

    A traditional business infrastructure, with plenty of accountants and lawyers and bankers and real estate specialists. An airport. Shopping. A cultural core, with an opera and a symphony and a live professional theater.

    "Virginia Tech understands perfectly that for them to attract top talent ... lifestyle and culture is a huge thing," Tuttle said. "Roanoke provides culture. ... Blacksburg is a college town and Roanoke is a grown-up town."

    Just as important to Tech, especially in these days of budget wrangling, is Roanoke's relative political clout in Richmond.

    "Roanoke is the center of political gravity for Western Virginia," Virginia Tech spokesman Larry Hincker said. "Funding is a political activity."

    Ray Smoot, Virginia Tech's vice president for administration and treasurer, agreed. "It's hard to circle one wagon," he said. Alone, the New River Valley speaks with a fairly quiet voice in Richmond. But when the two valleys combine forces, their legislative strength increases, he said.

    Virginia Tech also can benefit from stronger relationships with Roanoke-area businesses. In 1997, when Steger was the school's vice president for development, he wrote a paper on the importance of strategic partnerships to Tech's future.

    "Successful merging of university strengths with emerging economic sectors depends on comprehensive working relationships with the private sector," he wrote. "Both need to create partnerships that leverage value in a world aware of resource limitations in the face of unlimited needs and opportunities."

    Earlier this spring, Steger said the need for such partnerships has only increased.

    "Even before the current shortfall ... I think we appreciated that the state could be considered only one of many sources of support," he said recently. "We have always looked toward diversifying the sources of support."

    Steger and others believe that Roanoke-based Carilion can play a key role in unlocking the Top 30 to Virginia Tech. Of the schools currently listed in the Top 30, 25 have medical schools. Virginia Tech doesn't, and so lacks access to millions of dollars in funding available for medical research.

    But through the Carilion Biomedical Institute, as well as through its partnerships with Johns Hopkins and Wake Forest universities and the recent announcement of a school of osteopathy in Blacksburg, Virginia Tech is creating what Dennis Fisher calls a "distributed medical school."

    Fisher, president and chief executive of the Carilion Biomedical Institute, believes the nstitute will allow Tech to capture grants from funding juggernauts such as the National Institutes of Health.

    "I don't think we've even scratched the surface yet, as far as meaningful connections," he said.

    Novozymes, which employs a handful of Virginia Tech graduates, is one Roanoke Valley company that has a history of sponsoring research at Tech and hiring Tech graduates. Research has included the creation of microorganisms to prevent fungal disease and work on a technology to preserve microbes for shipping.

    Melnik believes few Roanoke Valley businesses take full advantage of Virginia Tech's resources.

    "The businesses here do need to conduct research at Tech," he said. "We need to do our part."

    Tom Caruso agrees wholeheartedly. Caruso is a program development manager in Tech's research division who has spent years building relationships between Tech's researchers and industry. He believes that local businesses, especially those in Roanoke, don't seem to understand what Tech can offer.

    He thinks many business owners and top managers, especially those in the manufacturing sector, simply don't have any experience with university collaboration.

    He'd like to see Roanoke-area companies start looking for projects to invest in. "Even if it's something that's three years down the road, even if it's something that isn't going to have an immediate impact on their bottom line," he said, it will go a long way toward developing relationships.

    "If the community would like to support that effort, then the community should start looking for ways to integrate what they do into the university," he said. The more involved the region gets in Virginia Tech's research efforts, the more responsive the university can be to the region's needs. "The university will start understanding better the problems that companies in Roanoke have."

2 economic drivers

    All of this depends upon people embracing the idea that the Roanoke and New River valleys comprise one region, said Wayne Strickland, executive director of the Roanoke Valley-Alleghany Regional Commission.

    "Those boundaries - they're human artifacts," he said. "Economy is really regional. You have to look at how the money flows."

    Clark Jones, Tech's vice provost for outreach, agreed. "If we band together and create a broader region ... perhaps we could create competitive advantage," he said.

    Connecting the two valleys could make the entire region more attractive to venture capitalists and prospective employers by creating a critical mass of workers and customers.

    The Fifth Planning District Regional Alliance, formed in the mid-1990s to promote the economic competitiveness of Southwest Virginia, has commissioned an economic development strategy plan to look at issues including links between the two valleys.

    While the geographic area covered by the regional alliance does not include the New River Valley, representatives from Virginia Tech and NRV governments have been participating in the discussions.

    "We definitely take a very regional approach," said Victor Iannello, president of Synchrony Inc. and a co-chair of the study team. The group recognized that the region has two primary economic drivers: the Roanoke metropolitan area and Virginia Tech. "To do at least some of the things we need to do is going to require the participation of New River Valley folks."

    The consulting firm, Eva Klein & Associates of Great Falls, interviewed people in the region on their attitudes about economic development. The data has been compiled, and initiatives will be developed based on the data. Iannello said the initiatives will center on several themes, including leadership development, regional identity and connectivity within the region.

    Other economic development ties already exist. Virginia Tech's economic development director, John Phillips, kept an office in downtown Roanoke. Although Phillips left Virginia Tech last month, Hincker said he expects the position to be filled. Steger himself steps in from time to time to court economic development prospects, as he did with Novozymes.

    In January, the New River Valley Economic Development Alliance and the Roanoke Valley Economic Development Partnership agreed to collaborate in marketing the valleys to economic development prospects.

    The relationship is starting to bear fruit, Sparks said. He recently took a New River Valley prospect on a tour of the Roanoke Valley. In June, the two economic development offices, along with Virginia Tech and the Carilion Biomedical Institute, will collaborate on displays at a biotechnology trade show.

    But completing one of the long-awaited connections between the two valleys, the Smart Road, is no longer a priority for transportation officials. A 1.7-mile Smart Road test bed is being used for transportation-related research, but state officials now say there's no timetable for finishing the 5.7-mile highway that would connect Blacksburg to Interstate 81. A Virginia Department of Transportation engineer last fall said he expects a two-lane Smart Road might be needed in the next eight to 10 years, and a four-lane Smart Road by around 2020.

    Sparks knows that the physical distance between Roanoke and Virginia Tech is keeping more Tech spin offs from locating in the Roanoke Valley.

    He continues to believe that the Smart Road could help.

    "The final connect ... is the Smart Road," he said. Even if it cuts only 10 minutes off the Roanoke-to-Blacksburg drive time, "the perception is tremendous. That's one of the most crucial things we're facing."

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