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November 28, 2014

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Vegas wants a tech industry, but it’s slow going

What’s missing: Critical mass in education, venture capital

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Sam Morris

Electronics research engineer Glenn Mercier works on a project to test LED lighting displays in the engineering department at UNLV, which is making a bigger push to teach skills involved in starting tech businesses.

Las Vegas this week plays host to the largest trade show in the world for professional techno-geeks.

Yet precious few of them work here.

More than 3,000 businesses are expected to show their newest wares at the International Consumer Electronics Show. But only 11 are from Nevada (and only a few of them are genuine tech companies, as opposed to, say, businesses offering shipping services or manufacturing TV-watching chairs).

The technology landscape here is slowly developing expanding beyond gaming-related technologies and into telecommunications, biotech, video game software and other areas.

But it has a long way to go, say entrepreneurs and investors who are pushing hard to cultivate the industry.

“I have four children, and I’d like them to have every opportunity to work in every kind of industry, and not feel like they have to move to the Silicon Valley or Seattle to work in technology,” said Mike Ballard, a Las Vegas-based entrepreneur who founded an Ethernet company, 1Velocity, and invests in local startups.

“We just don’t have critical mass here.”

While the Nevada Development Authority urges any and all companies to relocate to Nevada’s low-tax environs, industry groups such as the Technology Business Alliance of Nevada and the Nevada Center for Entrepreneurship and Technology each less than 10 years old are specifically targeting the tech industry through networking events and recruiting conferences that attract out-of-state investors.

And increasingly key are efforts by academia.

Rama Venkat, a professor of electrical and computer engineering at UNLV, will launch a minor in technology commercialization this spring, funded by a $1 million grant from Las Vegas Paving owner Robert Mendenhall. To complete the minor, students will be required to take two extra courses a new business school class in “applied entrepreneurship” covering the basics of starting a business and a new engineering school class that teaches the steps toward commercializing technology.

Students will also have to draw up a business plan for their final design project, and they can win thousands of dollars to get their business started.

The idea, Venkat said, is to help build the technology industry here so the 150 UNLV engineering students who graduate each year can find jobs in Nevada. About half of computing students and 40 percent of mechanical engineering students leave the state for lack of technology jobs here, Venkat said.

Entrepreneurship is also a new focus of UNLV’s College of Business, which will launch its own minor in entrepreneurship this spring.

“There’s a number of different projects that students and professors are working on, and they haven’t had a mechanism to help them transition and commercialize that, and there’s a recognition we need to make a much stronger effort in that regard,” said Janet Runge, director of UNLV’s Center for Entrepreneurship.

A tech industry is typically nurtured by the transfer of academic research to commercial application, said National Venture Capital Association President Mark Heesen. The synergy attracts entrepreneurs and investors witness the growth of technology communities around Raleigh, N.C. (near Duke and the University of North Carolina); Cambridge, Mass. (Harvard and MIT); and California’s Silicon Valley (Stanford University).

Nevada, on the other hand, is nowhere near that level.

UNLV, for example, has had just four patents approved, according to the university, although 20 more are pending. UNR has 16 patents and the Desert Research Institute has six patents. Major research universities such as Duke and Stanford typically hold hundreds of patents.

The state also battles the perception, accurate or not, that it lacks talent in key areas.

That’s a concern of Mark Glazier, who was recently recruited to Carson City from Connecticut to become president of Wisdom Audio, a stereo speaker company showing at the Consumer Electronics Show.

“We need people in manufacturing, engineering, quality control, customer support, and electrical technicians that have the peculiar training for our industry, which is audio as opposed to computers; and I do have some concerns about that,” Glazier said. “Not having personal income taxes is a great thing as long as you’re living in a place where people can still get a good education.”

For many technology companies here, the solution is to have satellite offices in other places.

Don Brady, CEO of Las Vegas startup Impact Sports, hired a group of engineers in San Diego because he wasn’t confident he could find experts here in the particular type of electrical engineering needed for his product, a heart rate monitor for runners.

“Growing a tech industry isn’t something that happens overnight,” Brady said. “You have to have the university as an incubator, the entrepreneurs and the businesses that will keep people here.”

Another necessary ingredient: investors who will take risks to fund new ideas. Venture capital funding has only trickled into Nevada, and the one group of venture capital investors that maintained an office here has left.

Last year through September, $25 million in venture capital was invested in Nevada companies, according to PricewaterhouseCoopers. Utah ($165.2 million), Arizona ($163.1 million) and New Mexico ($115.1 million) each received more than four times as much funding from venture capital companies in 2007.

Four years ago, a group of local investors formed the Vegas Valley Angels to evaluate proposals and write checks to local startups they deem worthy. In Las Vegas, $10 million to $20 million is invested by local “angels” in technology startups, estimated Ballard, who leads the group.

The angels organization also will teach a course at UNLV’s business school on how to obtain financing for technology ventures.

But one challenge here is that, unlike in other markets, angel investors can’t assume that good investments will be followed up with big venture capital infusions that will allow their companies time to grow. As a result, angels often embrace more modest ideas that will start making money or get acquired by other companies relatively quickly.

“The high-tech deal flow here could be better,” said Bill Payne, a member of the Vegas Valley Angels and a consultant for the Kaufman Foundation, which supports entrepreneurship. “I think we are starting to have a lot of the components that make up an entrepreneur-friendly city, including a new cancer center and a relatively strong science and engineering group at the university. I’d like to see more entrepreneur centers that serve as incubators and accelerators of ideas. That’s an area where we’re weak, but the situation is improving, especially at UNLV.”

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