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Year of surprises for anti-terrorism company
By Justin Pope, Associated Press
WALTHAM, Mass. — Watching two jetliners crash into the World Trade Center, David Fine knew that life for his anti-terrorism technology company, CyTerra, would change dramatically in the coming year.
It did, but not at all how he expected.
The Army accelerated CyTerra's contract for a new radar-based landmine detector for use in Afghanistan, but to Fine's astonishment, research grants for homeland security projects dried up.
Congress is spending money, and plans to spend more. But for now, Fine says, everything is in flux. The government is so preoccupied rushing existing technology into service that it hasn't gotten around to dolling out dollars for projects that could pay off down the road.
"Our whole business model was to use the federal government as our venture partner, taking very high risks on some new technology," said Fine, whose company is a spinoff of the research arm of Thermo Electron Corp. "But there's almost no government money in any security area, almost a contradiction of what one would expect."
CyTerra's story complicates the conventional wisdom in which new, post-Sept. 11 priorities offered big opportunities for well-positioned companies. Those opportunities are real, but so are some unexpected challenges that came with them.
Of the 12,500 responses the Pentagon received to its Oct. 23 call for private companies and academics to develop anti-terrorism technology, just 10 have been funded, for a total of $5 million.
And at the Transportation Security Administration's Atlantic City, N.J. research laboratory, director Susan Hallowell acknowledges "triage" has been a higher priority so far than funding long-term research.
"Clearly this year was one where we had to go in and do what we had to do," she said. "Even our own in-house people are eager to get back and look to the future."
In a way, CyTerra is right where Fine expected it to be before the attacks. The accelerated Army contract and the drop-off in grants basically canceled each other out. Revenue is expected to be between $18 million and $20 million, about what he anticipated. Employment, as he'd planned, has increased from 14 to about 30 about people since 2000.
But CyTerra is a very different company, and Fine is doing the last thing in the world he expected to be doing after Sept. 11: seeking private venture capital to finish projects. They include devices that could detect explosives on people or biochemical agents in the air, offering warning of an attack well before victims would begin appearing in hospitals.
"If Sept. 11 hadn't happened we'd be going on our way merrily doing a lot more development than we're doing right now," Fine said with a shrug.
Congress is expected to fund a record increase in federal research and development grants when it returns next month to an all-time high of as much as $116 billion next year. But the Senate, House and White House haven't agreed on how to divide the money between agencies, or even how agencies will be organized and related to the new Homeland Security department.
The Senate wants to create a new research agency for homeland security, modeled on the Pentagon's Defense Advanced Research Projects Agency. Its portfolio would include a $200 million "acceleration" research fund.
Hallowell, whose lab was taken over by TSA from the Federal Aviation Administration, got $50 million last year plus $20 million from the Defense Department. This year it has put in for $130 million, money she says "will certainly take care of a lot of CyTerras of the world."
She said TSA is eager to once again be able to focus on the longer-term projects.
"This is definitely on the radar screen," she said. "We know we have to implement now, but we also know we can't eat our seed corn."
Despite matchmaking events such as the Senate's Small Business Homeland Security Expos in Washington last month, getting such funds from Washington into pipelines in high-tech hubs like the Boston suburb of Waltham hasn't proved easy.
Chris Anderson, president of the Massachusetts High Technology Council, an industry group, says the federal government's organizational revolution since Sept. 11 has been nothing short of remarkable.
But he says if the end result isn't a better-oiled research machine, the talents of small technology companies could be squandered.
"You may see foreign-based companies be far more successful at getting new technologies that address these new concerns out the door if we fall into a typical bureaucratic pattern of overburdening the private sector," he said.
After Sept. 11, Fine waited for a call from the government, which had sought out his help after the TWA Flight 800 crash in 1996 and the bombing of the World Trade Center in 1993.
But the phone has yet to ring.
Shortly after the attacks, CyTerra wrote some detailed homeland security proposals and mailed them to government officials. Finally, after receiving no response, Fine called, only to learn the proposals had been destroyed by mail shredders during the anthrax scare.
It was frustratingly representative of his experience in the last year.
"It's surprisingly different, and it took us about six months to recognize how much the shift was in Washington," he said. "It's a very different world."