Story by Chris Graham

The Beatles coming to America didn’t get the press that SRI International received when the Silicon Valley founder announced that it was setting up shop in Virginia.

OK, so that might be overstating things a tiny bit - but for economic-development news, anyway, SRI was the biggest thing, to hear people talking about it, to happen in the Old Dominion in years.

“The establishment of SRI International’s Center for Advanced Drug Research in the Shenandoah Valley is an enormous win for Virginia,” Gov. Tim Kaine said at the December press conference in Richmond where the news was made public.

For the record, that one was the first of the two press conferences held to herald the arrival of SRI - the second was held that afternoon in Harrisonburg, where the research-and-development nonprofit is partnering with James Madison University on the drug-research center project, also known as CADRE, and several other joint projects that are already under way.

Kaine and state and local leaders feted SRI International like they will Queen Elizabeth when she comes across the pond later this spring to mark the 400th anniversary of the founding of Jamestown.

“This groundbreaking project is about so much more than the number of jobs and the salaries,” Kaine said at the December news conference welcoming SRI to the Commonwealth. “It will transform Virginia’s research efforts at not just James Madison University, but numerous universities - and enable us to realize our potential in attracting grants and developing new products and valuable techniques that can be commercialized and put to market.

“The benefits of this unique project will be felt statewide,” Kaine said. “CADRE’s presence in Virginia will catapult the Commonwealth’s position as a biotech powerhouse.”

“I’m pleased to support this groundbreaking project,” state Sen. Emmett Hanger, R-Mount Solon, said. “The collaboration leading up to this announcement has been impressive, and the continuing partnership that will result between SRI and Virginia’s institutions of higher education is sure to transform our economy and elevate Virginia’s standing in the research-and-development field.”

“Fostering an environment in Virginia that’s even more conducive to research is important because R&D expands the base of human knowledge, which is arguably the most important form of capital in the Information Age,” said Bill Howell, R-Stafford, the speaker of the Virginia House of Delegates.

“Having a world-leading company like SRI International choose to expand in Virginia is a great win for us and yet another vote of confidence in our forward-looking efforts to spread more research, technology and job opportunities throughout our Commonwealth,” Howell said.

“Winning this project is important for the Shenandoah Valley and for the Commonwealth as a whole,” Del. Steve Landes, R-Weyers Cave, said. “Research and development is a crucial part of Virginia’s livelihood, and I look forward to working in a bipartisan manner with Gov. Kaine to ensure this project receives the General Assembly’s full support.”

***

This is big talk - and big talk regarding a supposedly transformative economic-development project will make some people more than a little suspicious.

“Like most people,” Harrisonburg-based blogger Brent Finnegan wrote on his hburgnews.com website after the SRI news was made public, “I’m glad to hear the news that SRI will be creating new, high-quality job opportunities locally. According to local officials, it seems likely that some other high-tech firms would see the state’s incentives, and at least look into opening a facility or office, or expanding their operations here. In fact, the SRI story overshadowed Merck’s announcement that they will expand their operations in Elkton, so things seem to be moving in that direction. The SRI partnership with JMU will undoubtedly mean many good things for the area.

“Since I’m in favor of this move, you can’t really call me a naysayer. However, I’m a skeptic by nature, which means I get suspicious when everyone is in total agreement that this is the best thing ever to happen to the Valley,” Finnegan wrote.

“I am also somewhat skeptical. I think as a city we are obligated to explore what the downsides might be,” Valley blogger David Troyer wrote in the wake of the SRI announcement.

“I am not an economic-developmental planner and have no answers; but are these questions even being raised? More importantly, are they being asked to people who might actually know, and not just some politician?” Troyer wrote.

***

To get to the bottom of the SRI story, we have to go back to the beginning - to when SRI International was founded as the Stanford Research Institute by the trustees of Stanford University back in 1946.

This was before anyone in California or anywhere else had ever dreamed of a Silicon Valley - though the university did have high hopes with its new project.

“The Silicon Valley, as it’s known now, it was a rural farming community at the time, in the ’40s, and we were established by Stanford to try to stimulate economic growth,” says Leonard Polizzotto, the vice president of business development at SRI International.

“Our job was to blend in with the agricultural community - and it was a nice relationship. Everybody respected each other - and it just grew,” Polizzotto says.

The institute initiated research projects that spurred the development of the Internet, the computer mouse, liquid-crystal-display televisions and a new letter-sorting system for the United States Postal Service, among other things.

Silicon Valley grew up around the institute - which became independent of Stanford University in the 1970s.

On the other side of the continent, government and business leaders in Virginia began in the 1990s to look toward what they would need to do to try to create something along the lines of California’s Silicon Valley here in the Old Dominion.

The first person that I heard personally talk along these lines was Bob Goodlatte, who represents the Sixth District that runs from Harrisonburg down Interstate 81 to Roanoke in the United States House of Representatives.

Goodlatte, who has tech-world bona fides - he is the co-chair of the House Internet Caucus and the chair of the House Republican High Technology Working Group - sees R&D firms like SRI International as being the future of economic development in the Shenandoah Valley.

“With the new technology that’s available in rural areas, it is more possible to bring tech companies to those areas - because you now can live in a beautiful place like the Shenandoah Valley and do work that you used to have to do in a major urban area or attached to a location inside the Beltway or on Wall Street,” Goodlatte says.

The benefit to the Shenandoah Valley of having high-tech companies coming to the area is that “it’s a perfect matchup for preservationists and the economic-development folks,” says Keith Boswell, a senior manager at the Virginia Economic Development Partnership in Richmond.

“These are the kinds of businesses that are clean businesses, they’re intellectually based businesses, I can’t imagine that they pollute. You’re using a lot of infrastructure that’s already there, you’ve got great broadband capability, you’ve got good power, you’ve got resiliency. So there’s not going to be the case where you need to bring in something that you don’t already have,” Boswell says.

“A lot of these businesses that are technology-savvy businesses - and I’ll use that term in the broadest stroke possible - they don’t employ a lot of people. It’s not thousands of people - they might get to a couple of hundred,” Boswell says.

“The big guys - like Northrop Grumman, Lockheed Martin, General Dynamics, SAIC, CSC, all those big alphabet names that you see in Northern Virginia that specifically work in the government space or the defense space or the homeland-security space - those guys are huge. We’re talking about hundreds of thousands of workers - but they’re spread out all over the world. But most technology businesses are relatively small compared to those big behemoths,” Boswell says.

“This is the kind of growth that in my mind is the perfect marriage for the folks up in the Valley. I don’t see it any other way,” Boswell says.

***

So Virginia has been looking at what it can do to get a high-tech R&D firm to settle here for the past decade or more.

Which brings us to the part of the story where Robin Sullenberger was visiting Dynamic Aviation in Bridgewater one day a couple of years ago when he bumped into somebody from SRI International who himself was visiting from a regional office up in Northern Virginia.

“We were introduced - and had a very casual conversation about their plans to formalize an East Coast R&D facility. They were considering several different options - and we sort of threw the idea out there, Well, why not put JMU and the Valley into the mix?” says Sullenberger, the executive director of the Shenandoah Valley Partnership, an economic-development entity that provides marketing and business assistance to localities in the Central Shenandoah Valley.

The timing of the chance meeting couldn’t have been better.

“One of my strategies has been to increase our R&D operations on the East Coast - simply because most of our clients are right here on the East Coast, and a lot of our clients prefer to be closer to where the work is being done,” SRI vice president Leonard Polizzotto says.

“We wanted to be 100 miles from D.C. - that’s a good distance, close enough, but far enough. And we wanted to be close to the universities - and Harrisonburg is a half-hour from UVa., right by James Madison, so it’s a perfect location, because we like to collaborate with universities,” Polizzotto says.

A more formal meeting involving SRI, the Shenandoah Valley Partnership, Harrisonburg and Rockingham County and JMU was set up not long afterward - “and the first thing that struck me was the attitude and the culture at James Madison University, which was absolutely phenomenal. They’re an extremely team-oriented, collaborative, interdisciplinary type of university - which is rare in academia,” Polizzotto says.

“And then the cooperation of the county, the city and everybody - and then the Virginia economic-development folks got involved. It just all fell into place - with everybody saying this is terrific,” Polizzotto says.

And so it was that things were set into motion toward bringing SRI International here.

The governor and the General Assembly collaborated on a $22 million incentive package to grease the skids from the state perspective. The city and county, meanwhile, did what was necessary to land SRI in the new Rockingham Technology Park.

***

The immediate impact of SRI International’s decision to locate in the Shenandoah Valley is the easiest part of this to break down - the Center for Advanced Drug Research will bring 100 jobs to the Valley at an average annual compensation of $85,000 a year.

Beyond that, it’s all speculation - and it seems to be sport in America to let speculation run rampant.

“SRI, being a technology-based company, doing research, they don’t really make anything, but they solve problems - that’s what they do. But what they also do is once they solve a problem, they usually start a company out of it - and that company usually locates in and around where their campus is. So I think this is a tremendous opportunity for the Valley,” the Virginia Economic Development Partnership’s Keith Boswell says.

“SRI has a history of spinning off companies at a rate of about one every five years - so they continue to bring jobs, both direct and indirect jobs, to the areas where they are located. And usually those spinoffs do stay in the general area. We’re excited about that track record - and we hope that holds true in the future, and we think it will,” says Brian Shull, the director of economic development in Harrisonburg.
“We think there will be a lot of firms that will follow SRI’s lead and will also want to look at the Valley as a great location,” Shull says.

That right there is where all the hubbub originates - not in the 100 jobs averaging $85,000 a year, not even in the track record that has SRI spinning off a new business every five years. It’s in the idea that the presence of SRI in the Valley economy will attract other Silicon Valley R&Ds here to bring their 100 jobs averaging $85,000 a year and spin off a new business every so often.

“If you like the Silicon Valley model, what you need as an anchor tenant is a big research institution. And that’s what SRI will be,” Boswell says.

“Now, I don’t pretend to think that this is going to be a San Francisco-to-San Jose Valley. I don’t even know if we really want that. We may - but time will tell if we really do. What is going to happen is you’re going to get an anchor tenant for the newest types of jobs that your students from JMU are going to want and your sons and daughters are going to want - and that will keep these kids around. People like the Valley for the great quality of life - and I think you’re just going to have more opportunity for that with these types of jobs,” Boswell says.

Leaders in communities up and down the Valley are hoping to see something in the way of trickle-down.

“We strongly feel that anything that happens in any community in the Valley has the potential to be a benefit to any other community in the Valley,” says David Kleppinger, the executive director of The Rockbridge Partnership.

“When an institution of the magnitude and prestige of SRI decides they’re going to locate in the Valley, the one thing first and foremost that it does is it puts the Shenandoah Valley on the map. We become a legitimate place for companies to consider when they’re looking for new locations for their R&D or technology concerns - and we in Rockbridge are in that footprint,” Kleppinger says.

“It also provides local-government leaders and citizens at large who might think that communities in the Shenandoah Valley have no chance of attracting companies like this that that is just not true - that it can happen. We can say to them, Well, at one time, there wasn’t a single technology company in the Silicon Valley - and look at what it is now,” Kleppinger says.

Kleppinger, of note, has a personal story to tell about how this phenomenon has already come to fruition in his own dealings. The Rockbridge Partnership had seen its efforts to try to get Virginia Military Institute in Lexington to work with the partnership to create a VMI technology park stall out two years ago.

“Since the SRI announcement, those conversations, which had been sort of suspended, at VMI’s initiation, they have reignited the concept - and they’re looking at it very carefully,” Kleppinger says.

“I think everybody, whether you’re a local-government economic developer, or you’re a college or a university such as VMI, sees that there might be some real potential benefit to the fact that SRI has sort of broken the ice in a very dramatic way,” Kleppinger says.

***

But these are all people that you would expect to say nice things - and using blogger David Troyer’s questions, “Are these questions even being raised? More importantly, are they being asked to people who might actually know, and not just some politician?,” as guidance, I tried to find people who fit that general description to offer their insight on the news regarding SRI.

I tried to keep things basic - starting off every conversation with, “Tell me what you think of the news that SRI International is coming to the Valley.”

First to answer is John Eckman, the executive director of the Staunton-based Valley Conservation Council.

“Certainly, the way that this SRI development is coming in slower waves and slower phases than a large-scale industrial plant will allow the community more time to prepare for the growth that’s going to happen. And certainly the pace of growth will be the type that could be accommodated more easily. But we still need a strong definition of where we want to grow, and where we want to conserve - and we need strong ordinances to make sure that those areas are flexibly developed,” Eckman says.

Next up is Megan Gallagher, the executive director of the Shenandoah Valley Network, which links organizations up and down the Shenandoah Valley interested in preserving the local way of life.

“The strength in the numbers in the spinoffs means that your workforce is not tied to the fortunes of one or two major employers,” Gallagher says.

“There’s still a degree of sensitivity in Rockingham because Merck did have layoffs. And that’s an important employer with a number of good-paying jobs. Now, that was an adjustment within their business - it wasn’t that they were closing the plant and leaving,” Gallagher says.

“So when you have SRI coming in, and another satellite, and another one, the workforce isn’t depending on just one. There might be scalebacks at individual locations, but they’re not going to hurt a whole lot of people at one time,” Gallagher says.

Last we have Kim Sandum, the president of the Rockingham County-based Community Alliance for Preservation.

“I think it’s compatible for several reasons. It’s the scale and the environmental quality of a company that the Valley is looking for. It’s not the Augusta County megasite. It’s a business that will grow. And it complements what’s already here - and nicely, I think,” Sandum says.
“It’s not the kind of thing that’s going to come with 2,000 jobs instantaneously like the megasite was supposed to do - where you have to have everything up and running right away for the business to be successful. You can’t phase in things for an automotive manufacturer. You have to have all the pieces running at the beginning,” Sandum says.
“Another thing that I think they’ve done well is that they’ve put it in a place where the county has said, We have plans for development here. Instead of saying, You know, we found this great piece of farmland out here - no roads, no water, no sewer - and we want you to provide all that for us, and then we’ll come, they put it in a place that’s been planned for technology,” Sandum says.
“It seems like they’ve done a whole lot of things right on this issue. And I think that’s why you don’t hear a bunch of concern from the community - because I think that’s what people are looking for. Not that they’re saying, Please never bring us another business in the Shenandoah Valley. I think they’re saying, Let’s do it well. And I think this is an example of doing it well,” Sandum says.

***

I should note here that not all of the people that you would think you’d get 100-percent-positive answers from did as you would have supposed.

“I think it’s more evolutionary than revolutionary - the big selling point being the educational opportunities, what educational institutions provide to research and technology companies, coupled with that high quality of life,” Sixth District Congressman Bob Goodlatte says.

“There have been people who have asked the question, What is the potential for the Shenandoah Valley to become the Silicon Valley of the East? That’s not the way we’re looking at this at all,” the Shenandoah Valley Partnership’s Robin Sullenberger says.

“At this point in time, it’s very real - but it’s not well-organized. So the potential is there. But that’s all we can say at this point,” Sullenberger says.

Even SRI International’s Leonard Polizzotto is being cautious in terms of offering prognostications at this point.

“We’re considered the soul of Silicon Valley. And the hope - who knows, I’ll let you know in 10 years - is that we can do similar things in the Shenandoah Valley,” Polizzotto says.

“Call me back in 10 years, and we’ll see how far we’ve gotten,” Polizzotto says.

Filed under: 7-April 2007 Issue