In 2007 Dr. Ken Yang, an engineering professor at the University of Rhode Island, filed an application with the United States Patent and Trademark Office. Thus was the beginning of technology that would springboard VeloBit, a computer software company aimed at providing companies with speedier information processing capabilities, or in other words, faster access to data on their servers such as customer records and payroll information. Officially founded in 2010, VeloBit epitomizes a successful startup; a good idea, fast growth, and a pot of gold at the end. However the story of VeloBit is a two-sided fable. The first, certainly, is a story of innovation. The second, meanwhile, is the caricature of a state unable to harness innovation and spur economic rebound.

Ken Yang straddles the line between academia and the startup world. He has been teaching at URI since 1988 in the disciplines of electrical, computer and biomedical engineering. His Ph.D. students have gone on to work for premiere technology companies including Intel and EMC. He keeps busy outside the classroom, too, having started four companies and received ten patents during his time at URI. Those accomplishments include VeloBit, and its foundational algorithm, which improves the performance of solid state drives, a data storage component of computers. Solid state drives are increasingly popular, but at times slow. Yang’s software helped fix the problem, and did so at speeds triple that of its competitors while maintaining an affordable price tag. Ken Yang had a cash cow.

In 2010, a mutual friend introduced Yang to Duncan McCallum, a Boston-based startup guru with degrees from M.I.T. and Harvard Business School who specializes in taking small tech startups, growing them, and selling them to large technology companies. McCallum was won over during a lab demonstration where Yang proved his ability to accelerate information access using an all-software solution. The software eliminates the need for traditional more expensive hardware serving the same function, and as an added bonus, can be downloaded directly by customers via the Internet in under a minute. By the end of fall 2010 VeloBit was off and running, headquartered in Lincoln, MA with a small handful of employees including one of Yang’s former graduate students. McCallum took the helm as CEO, while Yang served as the firm’s technical backbone in the role of Chief Technology Officer.

In the spring of 2011, VeloBit landed financial backing from two Boston area venture capital firms, Longworth Venture Partners and Fairhaven Capital. Both firms focus in the area of high growth technology companies. In what is known as Round A Financing, or the first round of financing following start-up capital, McCallum stated that VeloBit received a “fairly typical A Round”  sum, which often falls somewhere in the single-digit millions. With capital in hand, the small firm began to excel, and was a dubbed a 2012 Storage Product of the Year by Storage Magazine. VeloBit’s “HyperCache” software was judged on criteria including innovation and performance. A TechTarget article noted that VeloBit was fast becoming a stand-out product in its market, despite tough competition. Growth followed. By the second quarter of 2013, VeloBit was in use across five continents with nearly 400 installations.

Amid its successes VeloBit approached bankers at Wells Fargo, and asked them to help identify firms interested in acquiring the feisty start-up. There turned out to be several. However Western Digital, the Fortune 500 computer hardware firm with the recognizable blue and white logo, was the winning suitor. On July 10, 2013, an official press release emerged from Western Digital stating that VeloBit had been purchased, and would be integrated into the Western Digital storage subsidiary, HGST. The sum was undisclosed. However an article the following day by The Register did some guesswork, concluding that the sum was likely “less than $50m and could be around $25m assuming a 5X payout on a guesstimated $5m A-round. But we could be out by a factor of two, or even more.” McCallum has stated that sale “produced good returns for investors and significant wealth for founders.”

Velobit, the brainchild of a University of Rhode Island engineering professor, is in its own right a startup Cinderella story.  Research was commercialized, contributed to society in a meaningful way, and monetized. However just as Cinderella’s stepsisters did not fit the glass slipper, there is a loser in this story too, and it is Rhode Island. The state’s beleaguered economy has long been a topic of concern among citizens and legislators. And The Great Recession did no favors. The state’s unemployment rate rocketed to 11.3% during 2009, up from 5% just two years earlier. Only recently has Rhode Island ended its nine year reign as having the highest unemployment rate in New England, while still sitting a lofty half percentage point above the national average, at 5.5%. The state has recovered only 80% of jobs wiped out during the Recession. In stark contrast, the United States as a whole has regained all lost jobs and reached that milestone nearly two years ago.

However even before the Recession, things weren’t pretty for Rhode Island. Sprawling, shuttered factories have long served as wistful and unsettling reminders of the state’s once fearsome manufacturing prowess. Business friendliness surveys are continually abysmal. For many young Rhode Islanders, this is the only setting they’ve ever seen. What heyday?  Obviously, businesspeople and policymakers have been tasked with the tough problem of how to grow business in Rhode Island. VeloBit is far from the center of the problem, but it is an apt microcosm of the state’s inability to capture a good idea and create growth. And it warrants questioning. How and why did a hot tech startup, born in a lab at the state’s sole land-grant university, sneak out the back door to Massachusetts?

In 2012, University of California, Berkeley economist Enrico Moretti wrote The New Geography of Jobs. He highlighted research showing that one high-tech job, such as a software engineer (like the ones at VeloBit), has the potential to create five more non high-tech jobs in the same city, such as waitresses or cab drivers. If the multiplier does exist, even at a multiple of less than five, it makes the Massachusetts headquartering of a tech company like VeloBit particularly painful for Rhode Island. Though VeloBit is owned by Western Digital, it is still located in, MA, now employs close to twenty people, and is growing. What if VeloBit was instead founded in Rhode Island, and currently staffing twenty people in a Providence office? Moretti’s multiplier suggests the potential for an additional hundred jobs, and Rhode Island could sorely use them.

In exchange for research support, the University of Rhode Island held a partial-ownership stake in VeloBit, and presumably realized financial gains from its sale. Though any sum can be argued a pittance relative to the potential for a successful, Rhode Island-based, job-generating company. So why exactly was VeloBit founded in Massachusetts? The answer, according to Yang, is pretty simple. Duncan McCallum was running the commercial operations of the firm, and he lives in Boston; not rocket science. As many entrepreneurs are aware, venture capitalists don’t stroll down the street doling out wads of cash to techies. Yang was fortunate enough to be introduced to a venture capitalist—someone who could help him commercialize his research and make an impact—and he wasn’t going to complain where they were based. “If the partner is here, we can do it here” Yang said of Rhode Island. “I would like to do it in Rhode Island.”

Innovative ideas should not be confined to certain geographies, nor should the money and brainpower to propel them. Today, VeloBit is a Massachusetts company, and that’s fine. However, to spur growth in the future, Rhode Island needs to do two things.  First, the state should realize that VeloBit and companies like it can be valuable assets in helping to repair a battered, sluggish economy. Say it, out loud. Second, get proactive. A culture needs to be forged, where, when someone has a good idea, there is willing partnership within the state, especially in the private sector, to help them achieve it. There have surely been other instances in Rhode Island similar to VeloBit. At this rate, there will surely be more. Where there is smoke, there is fire. We need to put it out. “We have the talent, we have the people” said Yang. “Rhode Island can be a great state to grow business.”