Coming off of a large project that kept me from blogging for a bit there, I was thinking more about how great some of the incubators I've recently visited are both for the companies they house and for the regions that host them. The energy you feel in these places, and the enthusiasm that the incubator directors display is infectious and makes you smile from seeing their passion and love for what they do. So I'm a big fan of incubators (the well-run ones, that is).
As more states, cities and regions struggle to find ways to encourage and support more innovation and entrepreneurialism, one idea that is starting to catch on and make some progress is incubators. These have been around for manufacturers and tech companies for years, and several incubators for software and e-companies came and went during the late 90s. More and more incubators are now popping up that are either exclusively for life science companies or that house some life science companies among other tech companies. These can be critical for the very early-stage companies, before they get the larger rounds of funding.
Smaller states, like Rhode Island, have seen rather successful incubators that are specifically for life science companies. While every state and region is trying to grab a piece of the life science industry pie, there are clearly some areas that are ahead of others or that have more money and resources to throw at new companies. Other areas and regions do not have those funds, but are using incubators to try to jumpstart their economy. While not free by any means, incubators are great way to let companies have a place to start and to show those companies that the area really wants to support them. In regions that are not yet South San Francisco or Route 128, this moral/emotional support can be extremely important and putting an incubator or support system in place can be significant leverage for states that want to retain talented entrepreneurs.
One particular need for many companies who are developing their own potential drugs/devices/treatments is lab space. This can come at a very high premium, and often the early-stage companies would prefer to use investor money in hiring on critical employees rather than money-intensive outlays like lab space. More and more incubators recognize this and are finding ways to offer labs in addition to traditional office and meeting space. In St. Louis, MO, an entrepreneurial incubator, CORTEX, has recently committed a building to be constructed for wet labs and office space that will be near the office/meeting space already available to its clients. In Southwestern Idaho, Boise State University has created the BSU TECenter, which houses life science and other tech companies, and also offers sufficient space to house light manufacturing and wet labs. These incubators may end up being some of the great catalysts for the budding life science industries in these areas, which are not currently known as life science hubs (but you have to start somewhere, and each area has terrific resources to build on).
There are incubators that provide special support for life science companies now, wherever you turn. These range from areas that are better known for life sciences like the Bay Area’s TriValley Technology Enterprise Center in Livermore, CA, which has also hosted a life science conference each year for the last couple years to those in emerging life science corridors like the Genesis Technology Incubator, an effort of the University of Arkansas.
Statistics are not yet readily available to find out what the ROI is on each of the incubators mentioned here or that are springing up around the country. But as the incubators themselves get more sophisticated and provide better quality services and become savvier to the needs of life science companies (like better, bigger lab and research space), the ROI is sure to increase tremendously for the incubators and the areas in which they are found.
At my prior job (a corporate group in a national law firm), I ran into the Slater Center for Biotechnology (the RI sponsored incubator) on several occasions. Overall, I was very impressed with the way it was run (the current and former directors are top notch people who go to great lengths to help early stage companies).
A couple of thoughts, though:
(1) Since many of the incubators are creatures of state law, you never known when the legislature is going to change its mind, or when a particular lobby group (anti-embryonic stem cell folks, animal rights folks, etc.) will pop up and lobby to restrict grants.
(2) In addition to space, some of them (like Slater) make investments in the form of convertible debt. It's a good instrument for the job, but usually there is a caveat that the company can't leave the state. For small states like RI, this can be a challenge, as I've seen more than one entrepreneur relocate to be near investment capital. In former versions of some of the investment documents, the company could pay off the loan and "skip town". Current versions of the investment documents, I believe, require corporate residency for a fixed period even if the loan is paid off. (Query whether that is enforceable!)
Posted by: Jeff Donohue | November 30, 2004 at 07:46 AM