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In 2010, Dr. Jeffrey Yu, a radiologist working at Queen’s Medical Center, embarked on a technology treasure hunt.
Yu’s boss, Queen’s Chief Executive Arthur Ushijima, asked him to look at research being conducted at the hospital and find what had commercial potential.
Yu discovered something promising: technology invented in collaboration with the University of Hawaii to make images from medical scan tests such as MRIs more clear.
Seven years later, Yu’s company, KinetiCor Motion Correction Technologies, is a model for successful Hawaii startups.
In March the company landed a $7.5 million investment from Hendale Capital, a Hong Kong venture fund.
KinetiCor, which pays Queen’s and UH a royalty to use the technology, now has nine full-time employees and is hiring another person almost every week, said Yu, KinetiCor’s president and chief executive officer. Siemens is using the technology in the next generation of MRI machines it produces.
Yu chalks up his success in part to good fortune: It just so happened that he’s a radiologist who could quickly see technology’s commercial potential.
“I’m a very lucky individual, I think,” said Yu.
But his story is about more than luck. It’s about skills that economic development boosters say are essential to the state’s entrepreneurial ecosystem: an ability to assess technology with commercial potential and to guide startups through the often-tough early years.
If KinetiCor is a poster child for a successful startup, then Yu is a model startup executive.
Policymakers have been working for years to nurture an innovation sector to develop the Hawaii economy beyond tourism and the military. In 2011, for instance, the Hawaii Strategic Development Corp. launched its HI Growth Initiative with a $13 million grant from the U.S. Treasury Department.
“How can you find CEOs who have been serial entrepreneurs, who have done this before in their lives, and who can take the company to the next level?” — Vasillis Syrmos, UH
HSDC has worked with private parties to establish business accelerators, workspaces for entrepreneurs and investment funds. A 2016 study by the University of Hawaii Economic Research Organization estimated the initiative has leveraged at least $11.49 in private money for each public dollar spent.
During its last session the Legislature passed measures to make it easier for university faculty, staff and students to build companies around innovative ideas developed at UH. The bills are awaiting Gov. David Ige’s signature.
But legal structures, investment money, business accelerators and the like are just part of the equation. KinetiCor’s success story illustrates another essential ingredient: a talented manager.
“People like Jeff are very hard to find in the state of Hawaii,” said Vasillis Syrmos, UH vice president for research innovation. “The next big push is, how can you find CEOs who have been serial entrepreneurs, who have done this before in their lives, and who can take the company to the next level?”
Leigh-Ann Miyasato, KinetiCor’s vice president and general counsel, agreed with Syrmos.
“These CEOs are very difficult to find,” said Miyasato, formerly a UH technology transfer officer. “We got very lucky with Jeff. But how many Jeffs do we have out there?”
Soojin Jun, a UH professor who invented a device that can cool foods to temperatures below zero without ice crystals forming, has been looking for someone to help commercialize his technology.
“I don’t have a CEO yet,” he said.
Jun said his technology keeps foods like ahi, beef and fruit fresh for weeks without suffering the degrading effects of freezing and thawing.
Despite the potential commercial appeal, Jun said he hasn’t found the right person to run Jun Innovations. He met some candidates, but they weren’t the right fit.
A professor in UH’s Department of Human Nutrition, Food and Animal Sciences, Jun said his former graduate students understand the technology, but many have left the islands, and it’s not easy to get someone to move back to work for the small salary plus equity that is typical compensation for a startup.
Even if Jun could find someone who understood the technology, he said that person might not be cut out to run a business.
What about running it himself?
“I don’t think I’m qualified to be CEO,” Jun said.
Jeffrey Yu, by contrast, has a rare combination of technical skills and business experience. KinetiCor is actually the second company he has run. His previous firm, OneMedNet Corp., commercialized technology that enables doctors to transfer medical images electronically. The company now has partnerships with giants like GE Healthcare and McKesson Corp.
In 2010, after Yu had stepped down as chief executive of OneMedNet, he was working for Queen’s as a radiologist. Ushijima, the Queen’s chief executive, asked Yu to assess technology being developed at the medical center.
Among the most promising, Ushijima said, was the imaging technology, which helps correct the slight movements people make when getting tested to create a clearer picture. The medical center had built a lab for Dr. Linda Chang and Thomas Ernst, two researchers from UH’s John A. Burns School of Medicine, who were working on the MRI technology, and Ushijima thought it had commercial promise.
Yu agreed. He formed KinetiCor and stepped down from his position at Queen’s, although he maintains a relationship with the medical center. The motion technology is owned by a consortium that includes Queen’s and UH, which both participate in KinetiCor as investors and recipients of royalties the company pays to use the technology.
The company got its funding jumpstart from the HSDC’s UPSIDE Fund and nurturing from XLR8UH, a UH business accelerator. The company’s chairman is Barry Weinman, co-founder and former managing director of Allegis Capital, a $700 million venture fund.
The right talent can make or break a startup, said Chris Somogyi, a managing partner with Reef Capital Ventures, a Honolulu venture fund.
“You can put a pile of cash in front of people who aren’t on their game at that moment, and they can fail,” says Somogyi. “Or you can have an OK idea that’s undercapitalized, and they can do some amazing things.”
The key is having the right traits: drive, skill, and cleverness.
“In the early days of startups,” he said, “it’s just making it to the next day alive.”
Yu puts it this way: “Like Mark Cuban will say on ‘Shark Tank,’ there’s an amount of luck that goes with it – and an amount of pain. And it takes perseverance. How do you claw through all the thorns to find a path to success?”
Finding people with endurance and brains isn’t impossible, Somogyi said. University business students, senior executives looking for something new, serial entrepreneurs between gigs — those sorts of people can guide startups through their early days before the companies can get venture funding.
If they’re not in Hawaii, they can be recruited from elsewhere, he said.
Hawaii has no shortage of innovative ideas. The UH in 2016 executed 12 licensing deals for intellectual property, which generated $408,000 in royalties and licensing fees. But just one startup was created that year using the licensed UH technology, said Syrmos, The rest of the licenses were acquired by existing companies, in Hawaii or the mainland, he said.
Still, Syrmos sees that as a sign that the university is creating technology with commercial potential. Maybe, he said, Hawaii could have had 11 more startups.
“The question is, ‘Where do you find the people to make this happen?’”