Willmar finds a way to innovate

In this city of 19,000 in west-central Minnesota, a former state psychiatric hospital has morphed into a laboratory of innovation in the biosciences.

The Renaissance and Spanish Colonial-style buildings that used to house some of the state's most mentally disturbed patients today anchor the 110-acre MinnWest Technology Campus, which bills itself as the largest privately owned technology campus in the United States. Its mission: to lure start-ups and top-notch talent to Willmar, a city known more for its turkeys than software.

Rural communities have long tried to reinvent themselves as high-tech incubators. Willmar, drawing upon its deep agricultural expertise, is making progress. The campus is already home to Life-Science Innovations, (LSI) an animal sciences conglomerate that makes everything from E. coli vaccines to robotics equipment that can help covert waste into energy. MinnWest recently notched a deal with the University of Minnesota to host a new biosciences center where students can assist companies with research and engineering.

"As the [campus'] name states, we are looking for technology ... anyone on the R&D side who can build a company based on a higher level of technology that the U would be connected with," said James Sieben, MinnWest president and general manager of Nova-Tech Engineering, a subsidiary of LSI.

Experts say real estate alone doesn't guarantee economic development. Cities and towns across the country have tried to lure or create high-tech industries with limited success. Willmar also suffers from its rural location: It's not clear whether a high-flying entrepreneur or researcher would want to live in a town more than two hours from the Twin Cities. Plus, Minnesota lacks a crucial ingredient to the survival of start-up companies: early stage venture capital.

"Minnesota's incubators are generally real estate-focused," a recent report by the BioBusiness Alliance of Minnesota and Deloitte Consulting says. "They lack key management, technical, and financial assistance needed to support start-up companies."

But MinnWest is not starting from scratch. The incubator's anchor tenant, Life-Science Innovations, is a major force in animal science.

LSI's flagship business, Willmar Poultry Co., is one of the country's largest independent producers of turkey poults, producing about 30 million of the day-old poults (chicks) a year for customers like Sara Lee and Cargill.

Turkeys to humans

Over the years, Willmar Poultry has used its expertise to spin off high-tech companies like Epitopix, an animal vaccine maker that's awaiting Food and Drug Administration approval for the country's first vaccine against a deadly strain of E. coli bacteria, and Nova-Tech, which manufactures robotics equipment that uses lasers and microwaves to treat the beaks and feet of turkeys. Nova-Tech is also expanding into biomass energy. In 2005, top executives at Willmar Poultry formed LSI to serve as an umbrella organization for these businesses.

"We were changing directions somewhat from being just a hatchery to a more technology-oriented and innovation-oriented company," said Ted Huisinga, CEO of LSI. "Why are we doing this? That's life. Being opportunistic. We have a team of people that enjoy this thing and they attract other people who like this thing. This is the fun part of the business."

Joe Shaw, CEO of St. Paul-based Syntiron, another Life-Science Innovations affiliate, said he typically has no interest in rural communities like Willmar but came away impressed. Using technology pioneered at Epitopix, Syntiron is developing a human vaccine against bubonic plague and anthrax. The company won a $3.8 million Defense Department contract in November to help combat those bioterrorism-related diseases.

"Every state and province thinks they got a piece of the biotech wagon," said Shaw, former senior executive at Johnson & Johnson who has led several medical and biotechnology firms. "But that's a false assumption. But [Willmar] has got a nice niche. They really do. They got something no one else has. They got the key [talent], and that is essential."

Yet just a few years ago, LSI was looking to move some of its technology businesses out of Willmar, possibly to South Dakota or Canada.

"Willmar wasn't doing a better job in attracting more technical businesses," Sieben said. "We were looking for engineering and Ph.D. people. We were just about the only game in town. We were concerned about how this whole community was fostering companies."

The city then offered LSI an intriguing idea: Turn the 40 or so buildings located on the east side of Willmar Lake into a technology campus. Originally built in 1907 as treatment center for drug and alcohol addicts, the facility eventually housed the mentally ill as the Asylum for the Insane at Willmar. But over the years, patient numbers dwindled thanks to better drugs and a new emphasis on treatment in smaller group-home style care.

In 2006, LSI and Nova-Tech purchased the land, including 400,000 square feet of office and research space, for a bargain price of $1 million. Since then, the two companies have invested $10 million in renovations and expect to chip in another $15 million to $20 million into the project.

Sieben hopes MinnWest can build upon LSI's success and lure companies with related technologies in energy, biotechnology, agriculture, and even medical devices.

"If we have our druthers in this, they will be linked to us," Sieben said. "What the companies are doing, they will connect with us."

The report by the BioBusiness Alliance wholeheartedly approves of this type of strategy.

"Minnesota has private-sector strength in human health industries such as devices, and great strength in animal health industries," the report says. "The differences in strengths give the state the opportunity for synergistic development between the two industries. Our research indicated much of the skill and expertise needed to work in this area is transportable between animal and human applications."

But the report also noted a severe shortage of qualified workers, particular in the animal health industry.

U supports efforts

Said LSI's Huisinga: "The prime reason that we were pulled into doing this was that we couldn't hire the tech people to come out to the boonies. Time after time, they say, 'Is there another opportunity if [the job] didn't work out?'"

Last October, MinnWest received a $1.25 million state grant to create the Mid-Central Biosciences Center. The U will operate the center, scheduled to open in the summer or fall. The idea is to provide MinnWest companies with students and faculty who can assist in research and development projects, said university Senior Vice President Robert Jones.

While the U already operates bioscience facilities in Rochester and St. Paul, the Mid-Central Center will be the first center where students and faculty work so closely with companies, he said.

The center "will be a training site for students to interface with highly successful businesses," Jones said. "Willmar is a very vibrant community in the biosciences. They are doing some innovative work. And maybe we can change the minds of people who are reluctant to go to a small community."

Thomas Lee • 612-673-7744