Investing in Innovation: Q+A with Michael Helmstetter of TechAccel

Michael Helmstetter, the former head of MRI Global, is now the chief founder of Technology Acceleration Partners, a new company that plans to invest in agricultural, animal health and food ingredient innovations developed right here in the Midwest.

Just the announcement of TechAccel made headlines. Helmstetter’s co-founders are Kansas State University and Bicknell Family Holding Company, and some of the city’s best-known entrepreneurs have invested in the venture.

Helmstetter talked with Thinking Bigger Business about why they formed TechAccel and what it could mean for the Greater Kansas City region.

Why have you started TechAccel?

MH: The demand for high-quality food is increasing significantly, and research and development money to provide the supply to meet that demand isn’t there. The core purpose for forming the company is to fill that research and development gap with agricultural and animal health technologies.

How big is the R&D gap that you’re trying to close?

MH: The demand for food is expected to double by 2050, and the middle class is going to double by 2030. All of those middle-class families are going to want high-quality food and high-protein diets, and they’re going to want companion animals. So it is a massive gap.

All of the major agricultural and animal health companies recognize that the demand is going to be there without the supply as of today. Probably what the general public doesn’t realize is how much innovation is going to have to occur in order for that demand to be met. The estimates are that at least 70 percent of the problem has to be solved through innovation.

What kind of innovative solutions are you pursuing with potential strategic partners?

MH: It could be looking at disease issues in food-production animals. Or it could be related to increasing growth rates in crops. Or it could be related to the latest and greatest vaccine for cats. We can go across all these different areas, and that diversifies us, so that we’re not dependent on a single technology or market. And so our impact will be even bigger.

Why is Kansas City a good place to take on this global challenge, and how will it benefit the economic development of our region?

MH: It can benefit the region significantly, and I think the challenge can be addressed in great part by the Midwest. I mean, farming is what we know. This is what we’ve been doing for 100 years plus. This is what we’re better at than the coasts. And so Kansas City is extremely well prepared, because we’re in the Heartland and also because we have a culture here that is very entrepreneurial and very innovative in matching up to that.

Getting recognized on a national and international scale as a leader in this area can only benefit the region in terms of creation of new companies like mine, relocation of companies and big advances in degree programs and investments. I was just at Kansas State University, and they’re making huge investments in their agricultural research and development program, just phenomenal investments, because of the fact that they want to see things occur in this region.

How difficult is it to find and implement the best technologies?

MH: There is so much excellent technology sitting out there right now, particularly in research universities. And we have this challenge where the researchers at those universities have taken the technology as far as they can with the funding they have. They’ve been able to show it works to a certain level, sort of a proof of concept of that technology. But their funding has expired, because that’s what they were paid to do by the National Institutes of Health or the National Science Foundation or whoever it might be.

And then you’ve got the industry way over on the other side saying, “That technology is not advanced enough for us to take it into our pipeline and take it to the market.” And so that’s the gap that TechAccel fills: We find the technologies, we do the advancement research, and then we hand them off to that strategic partner so they can take it to the global marketplace.

Can you talk about the companion animal piece of your business and why it’s important?

MH: The companion animal piece is a smaller piece relative to the entire market. The animal health market is in the range of about $25 billion per year in sales. And the majority of that is in
food animals—pigs, cows, chickens, etc.

But everybody’s got these companion animals, particularly the BRIC countries (Brazil, Russia, India and China), and as that middle class increases, they’re all going to be getting pets. And that’s going to put a huge demand on the system in terms of health.

You can almost equate it with the population growth in humans and the challenges that it puts on the medical system. Because, as time goes by, you get resistance to antibiotics and other issues expanding in animals, just as you do in humans. So these companies have got to put out products that keep these animals healthy and well-fed.

So it’s another revenue stream?

MH: It is. And, again, it provides that level of diversification. The (companion animal) markets are not as big, but the investors in this company want to have a very diverse portfolio of projects. They want them to be diverse across these market sectors. They want them to be diverse in terms of their risk. And they want them to be diverse in terms of their time to revenue return.

So you might have some singles and doubles that return some revenue quickly. And then you get a home run that might take 12 years to return the revenue, but it’s an order of magnitude larger. So that’s one of the real focuses and really the roles of this board of directors. I’m going to be bringing forward the technologies, the deals. They’re going to help me basically establish a portfolio for the company that keeps us well diversified as we grow the business.

What does it say that TechAccel’s board of directors includes so many local business heavyweights, including Terry Dunn of JE Dunn Construction Group, Greg Graves of Burns & McDonnell and Gary Forsee, formerly of Sprint?

MH: It speaks to their awareness of the facts. One of the investors at our last board meeting said, “You know, this is what we should be doing.” It was just a flat statement that agriculture and this focus area are so important for this region. I think, for them, it’s really about walking the talk in terms of investing in an entrepreneur, pushing innovation and really focusing the region in an area where we really can lead on a national and international scale.

How much have they invested in the company?

MH: I can’t tell you that, because we’re a private capital company and truly because of the visibility of these leaders. What I can tell you is that we are planning to invest in six technologies per year, and the research that we’re going to do on them is going to range anywhere between half a million dollars to $4 million each in research. Those research dollars are shared 50-50 with our strategic partners. And I’ll kind of do the math for you: The capital raised is designed to carry us through the first three years of investments that would then allow the company to be self-sufficient.

Why doesn’t the TechAccel board consist of leaders from agriculture and animal health companies or international scientists?

MH: The reality is that this phase of the company is about how to establish the company, how to fund the company, really how to set it up to be successful going forward. I’m responsible for the science and all those other things that are going to occur. But without good business decisions and good thought going into those business decisions, I can have the best science in the world and we won’t be successful.

Is there a piece of advice that you’ve been given by the board that seems particularly important?

MH: As you can imagine, I’ve gotten quite a bit of very good advice, and I continue to get that. But when I met with Cliff Illig (of Cerner Corporation), we went through the whole model of the business and the projections and what I saw as the differentiators of the business. And we basically got to the end, and he said, “The reality is we need to be smarter than everybody else in this space. We’ve got to be able to see things that other people don’t see. We’ve got to make decisions and move into strategies and investments that are ahead of the curve.”

And he’s really right. There are a lot of people who are in this space. But what we’re saying is we can be a step ahead. We can see those things that are transformative. We can look at 50 technologies and see the one that’s going to make the difference.

Will heading TechAccel be the hardest job so far in your career?

MH: It will absolutely create the greatest challenges, no question about it. And it will absolutely be my hardest job. It’ll also be my most interesting job.