Tech is our answer to a tough business climate: Michael Harrington, IMPACT chairman

Years after the depth of the financial collapse, Michael Harrington says today might be the worst economic moment yet.

“We’re facing the most difficult general business climate that we’ve ever faced,” said Harrington, a corporate lawyer in the Exton offices of Fox Rothschild. So the technology industry and its early-stage community is finding its own path.

It’s one of the reasons why Harrington says he’s also the chairman of the 20th anniversary IMPACT 2013 Venture Summit, which kicks off tomorrow and has grown into one of the region’s largest established networking conferences between institutional investors and business.

Michael Harrington, of Fox Rothschild

Find a list of the participating companies here, which includes firms in healthcare, life sciences, medical devices and more in mobile and the enterprise than in the past. Entrepreneurs, get a special $200 discounted ticket here.

“Nationwide, we made it from 2008 to 2011. Everyone played bob and weave to keep their business alive, but now we’re facing higher taxes and healthcare issues and slow growth and hesitation in taking on what is new,” said Harrington, 43, long a staple of lawyerly tech communities in the region. “Entrepreneurs have hunkered down, and that’s the challenge. The hunkering down has become the new normal.”

That’s another of the big reasons why there’s so much interest in scalable early-stage tech companies because, as Harrington puts it “they’re fundamentally different.” With venture backing, equity-based staff and a low tax burden, there can be movement in technology communities in a way that isn’t happening elsewhere.

In 20 years, this year is the first time ever that IMPACT includes a fully-fledged early stage track, highlighting 15 primarily pre-revenue, beta-stage firms. That’s as clear an example as ever at how the country and Philadelphia too is changing its focus.

But what about the location of that change?

Famously, Philly tech in the 1990s was dominated by the Route 202 corridor near suburban Wayne and the Safeguard Scientifics campus. Though there’s more excitement in the city than in the past, as of 2011, Philadelphia proper was a smaller player in accounting for regional investment than its suburban counterparts, where 84 percent of regional deals got done, making this region a stark outlier when compared to other big U.S. regions that had moved to an urban tech lead.

Should we be concerned and working to a big change?

“You’re asking the wrong guy: I’m a suburban boy, so I think it’s great we have done it differently,” said Harrington, a Lansdale native who now lives Glenmore, Chester County. “I think we will see the trend that’s happening elsewhere and that’s going to bring even more balance, but you won’t see Philadelphia dominate as opposed to the suburbs.”

That’s because the business climate and strong suburban network here have incubated so many great companies outside of the city, said Harrington.

“Great Valley is not going to change,” he said, alluding to the Chester County corridor that includes the Eagleview Corporate Center in Exton, which houses or is near to infrastructure software company Bentley Systems, space flight software business Analytical Graphics and medical device shop Kensey Nash. The Great Valley, which to many stretches to King of Prussia, also plays home to satellite offices to many Center City law firms, including Fox, Pepper Hamilton in Berwyn and Saul Ewing in Chesterbrook.

“So I think you might someday see a 50/50 split between the city and the suburbs, but the city would only come to dominate if things were drying up in the suburbs with massive demographic movement, and I don’t see those factors happening here any time soon,” he said. “We’ve got beautiful corporate office parks, and there are people who would prefer not to go to the city. It’s hard to see that moving too quickly.”

Harrington has been around the IMPACT conference (through name changes) for 15 years and has served on the steering committee for the last four, before becoming chairman this year. He’s practiced law in the region since 1994, so he watched the first dot com bubble grow in Philadelphia and he’s watching today’s growth.

In the age old question of whether Philadelphia needs an influx of risk-tolerant money or risk-tolerant entrepreneurs first, Harrington points to the money.

“It is 100 percent capital. We need a culture of a lot more risk, so our success rate goes up. You either want satellite offices from 15 big Silicon Valley firms or have brand new funds to do $200,000 investment in a beta stage company,” he said. “In Philadelphia, it is tougher to raise $200k to $300k raise than it is for me to make a few calls and get a few meetings to get $1 million to $10 million on the table.”

It’s a goal he hopes to achieve with IMPACT and other work.

“I would love to see significant more risk tolerance in the region, where we bet on a lot more companies to get a whole lot going. At the end of the day that spurs activity. That’s called a trickle up effect, to get people at bigger companies to see that fervor of innovation and want to best it.”