It's getting kind of ugly

There's certainly no love lost between the Pawlenty Administration and the University of Minnesota.

First, there's the usual budget spats. And then DEED Commissioner Dan McElroy's threat earlier this year to wage "budget jihad" against the U if a planned start-up based on university research in regenerative medicine leaves the state.

But now Governor and would-be presidential candidate Tim Pawlenty has waded directly into the fray. During a keynote speech Wednesday to The Collaborative's annual venture capital conference, Pawlenty chided the U for lacking a risk taking, entrepreneurial culture and not working well with outside companies, according to sources.

He also helpfully suggested the U should exclusively license its technology to local companies, even if it means the school has to "take a haircut." Then Pawlenty cracked his usual joke about teachers and tenure- that the only place to find job security without merit is government and the university.

Pawlenty's shots at the U are nothing new. Critics frequently say the same things about the state's only research university. They're not without total merit, given its poor record in tech transfer. But the U has made progress- licensing income is up and the school has spun off six companies since 2006 with several more on the way.

But what Pawlenty said is almost besides the point. It's where he said it that really pisses off U officials. Ripping the U at a conference designed to generate investor interest in local start-ups seems counterproductive, especially at a time when the state is trying jump start a weak economy.

After all, what good could come from rehashing tired old grievances?

In an e-mail, Pawlenty spokesman Brian McClung sounded a more helpful tone.

"Governor Pawlenty appreciates the significant contributions the University makes to Minnesota's business community," McClung wrote. "The U has played an important role in a number of industries and their strategic focus on areas such as the biosciences is something the Governor has strongly encouraged and supported. With any large institution, the speed and flexibility needed for start-ups can sometimes be a challenge."

That David Reamer, CEO of university spin-off Ascir Inc., presented to investors immediately after Pawlenty's remarks only made the situation more awkward.

Given the context and venue, Pawlenty's remarks "were a little odd," said Joy Lindsay, president of StarTec Investments, an angel firm in Bloomington.

The governor's suggestion about university licensing is also noteworthy. Republicans are supposed stand for business, of free market capitalism. The U granting sweetheart deals to local firms because they're local doesn't sound very free market to me. It sounds protectionist and parochial.

Does anyone know in Minnesota know how venture capital works? Money, not necessarily geography, drives start-ups. If a start-up can't find money in Minnesota, then it will go somewhere else.That's what VitalMedix, another U spin-off, did when it moved to Hudson, Wisconsin. A company starving for cash will not say: "It's Minnesota or Bust." And even if a spin-off moves out of state, any money from a sale or IPO will flow directly back to the U.

If Pawlenty doesn't think much of the U, then the feeling is quite mutual. U officials say the school an convenient scapegoat for politicians who can't do simple things like pass an angel investment tax credit. (Pawlenty says he supports such credits and is optimistic that they will pass in 2010. Glad to know that seven years of futility hasn't dampened his optimism.)

In a previous interview, U vice president of research Tim Mulcahy says he's tired of politicians blaming the school for the state's economic woes. The school can only do so much in absence of a comprehensive strategy and financial resources, he said.

"We would love to keep technology in Minnesota," Mulcahy said. "I hope the state will come up with something that will allow it to happen.Technology obviously does better when a company is located near its inventor. Having said that, sometimes there are not enough interested parties and we have to look outside the state."

The back and forth bickering is why we look like chumps compared to Wisconsin. (Check out my recent two-part series on Wisconsin biotech). Minnesota will never improve its situation if the governor and the state's top research university can't get it together.

"I don't think we're quite on par with what's happening in Wisconsin," said Mulcahy, an observation that wins my vote for Understatement of the Year.