Incubating the future: The role of business incubators in the growth of the bioeconomy

April 1st, 2008

By Rebecca Kaufman

Published March 2008 Business incubation is designed to help start-up companies increase their chances for success by providing valuable resources at reduced or no cost.

Although the resources– and industry focus– of individual incubators vary, the common goal is for start-ups to mature to the point where they are financially viable and capable of meeting their needs independently.

Incubation has grown in popularity in recent years. In 1980, there were only about 12 business incubators operating in the United States. The most recent statistics available from the National Business Incubation Association (NBIA) indicate that this number has grown to more than 1,100. Most (>90%) are nonprofit organizations focused on economic development.

Nationally, about half are “mixed-use” facilities assisting a range of early-stage companies. About one third focus their efforts on technology-based companies. Life sciences companies, while considered technology based, typically require specialized facilities like wet labs.

The resources provided generally include some combination of sub-market rental space, common equipment and administrative services. Some also provide mentoring or management coaching, either through professional staff or members of the larger entrepreneurial and financial communities or some combination of both.

Business incubation has played an important role in the growth of the Southeastern bioeconomy, through facilities that vary in focus and resources.

FLORIDA

Florida is home to one of the first life sciences incubators in the United States, the University of Florida’s Sid Martin Biotechnology Incubator. Authorized by the Florida legislature in 1990, the incubator opened for business in 1995 on property purchased by the University in Alachua, FL– about 20 minutes from the main campus. The incubator’s goal is to foster the development of new commercial ventures related to University of Florida (UF) research across the life sciences spectrum, including medicine, agriculture, and the chemical and environmental sciences.

The Sid Martin incubator covers 40,000 square feet and features 22 wet labs, a million dollars worth of shared equipment, an animal facility, fermentation facilities, and a climate controlled greenhouse. The incubator also provides basic business services and introductions to potential management and investors. “Bioscience companies face enormous challenges,” observes David Day, Sid Martin’s Director.

“We help them meet these challenges with our strong emphasis on early recruitment of experienced management and building relationships with VC and angel groups.” In this effort, the incubator relies on a Biotech Advisory Committee (BAC), drawn from academic, industry and financial sectors, including venture funds active in the region such as HIG Ventures and Quaker BioVentures.

The state’s $11 million investment in building Sid Martin has paid off. Between 2005 and 2007, Sid Martin companies and graduates raised more than $200 million in funding, primarily from venture capitalists but also through angels, founders and corporate sources.

Current venture-backed occupants include Pasteuria, Axogen, Bikam, St Charles Pharmaceuticals and BioEnergy. A recent study found that 16% of all Florida’s biotech and bio-medical device companies are current or former Sid Martin Biotech Incubator companies.

A number of former residents have taken up residence in Alachua County including Regeneration Technologies Inc., Oragenics, and AGTC. With its headquarters now located in private space, AGTC, a venture-capital backed gene therapy company, still maintains significant ties to the University of Florida.

The company’s laboratory facilities are housed at the University’s Center of Excellence in Regenerative Health Biotechnology (CERHB) and access the Human Applications Lab, funded by the University, which manufactures gene therapy products for use in human clinical trials, including AGTC’s Phase I clinical material.

UF recently announced plans to build two large lab/office buildings on the UF campus (up to 160,000 square feet) to house biotech and related startup companies. The new facility, to be known as The Innovation Center, will be developed by Alexandria Real Estate Equities, the largest dedicated life science property and innovation specialist worldwide.

The intent, according to Day, is to build on the success of the Sid Martin incubator, where space limitations have meant wait lists for prospective companies and a shortage of “next-stage space” for companies that grow too big for the Alachua facility.

The two facilities will offer different resources and environments, notes Day. More importantly, Alexandria’s presence will bring more attention to UF’s commercialization efforts, thereby attracting more capital and talent to the area. It has been suggested that the plans include a committed biosciences venture capital fund, which would be an important new development for the UF community, where local venture capital is limited.

Central Florida is home to a number of other technology and bio-focused incubators. The University of Central Florida operates the UCF Technology Incubator in the Central Florida Research Park, a mixed-use facility that provides tenant companies with an array of resources including business development services to help accelerate growth.

The facility, in operation since 1999, includes more than 60,000 square feet of space that currently houses 46 companies including a number of life sciences companies. The facility does not offer traditional wet lab space, however.

The Tampa Bay Technology Incubator (TBTI) has announced plans to increase in size from 60,000 to 100,000 square feet. TBTI is part of USF CONNECT, an economic development program at the University of South Florida that provides office and laboratory space to life sciences companies.

A number of new life sciences incubators are under development in South Florida. The University of Miami has announced plans for a 60,000 square foot incubator to be known as the Miami Bio-Science Technology Center.

The Technology Business Incubator (TBI), a 12,000 square foot technology incubator located in Florida Atlantic University’s (FAU) Research & Development Park, does not presently offer wet lab space but has entered into an agreement with Florida’s Blood Centers (FBC) to provide wet lab space to emerging companies in Palm Beach County at FBC’s facility in Lake Park.

The location is convenient to the new permanent Scripps Florida facility on the FAU Jupiter campus. Scripps Florida is an expansion of the Scripps Research Institute, the world’s largest, private non-profit biomedical research facility, and activity at the new Florida location is expected to only increase demand for wet lab space in the area. A second 40,000-square-foot lab space is under development in Jupiter by Alexandria.

Georgia

Atlanta is home to one of the nation’s oldest university-based incubators, the Georgia Institute of Technology’s Advanced Technology Development Center (ATDC). Formed in 1980 to stimulate growth in Georgia’s technology business base, ATDC now has locations in Atlanta, Savannah and Warner Robins. Since 1999, ATDC companies have raised more than $1 billion in venture capital.

Historically, ATDC has been technology-focused, with a particular emphasis on software companies. As such, only 16% of that $1 billion in venture capital went to companies classified as life science. Yet, the life sciences are increasingly a focus for ATDC, which operates the ATDC Biosciences Center in Georgia Tech’s Ford Environmental Science & Technology Building, providing both office and wet lab space. Current venture-backed companies include Biofisica, Inc., Stheno Corporation, AerovectRx, Inc., Celtaxsys, Inc. and Tikvah Therapeutics, Inc. CardioMems, Inc., which recently completed a $33 million series E financing, is a high profile ATDC graduate.

Founded in 2000 as a bio-focused incubator, Atlanta-based Emtech Biotechnology Development, Inc. (Emtech Bio) offers laboratory space and use of scientific equipment to start-up and early-stage life sciences companies.

EmTech is a partnership between Emory University and Georgia Institute of Technology, with funding for the facility and much of the scientific equipment provided by the state of Georgia through the Georgia Research Alliance. In addition to space and business support, Emtech Bio also sponsors a competitive grant program for Emory and Georgia Tech faculty. Current incubator companies include Geovax, NeurOp, Inc., and Design Science, Inc.

Also in Atlanta, Georgia State University’s CollabTech Biotechnology Development Center provides space and facilities for biotech startup companies to foster collaboration between academic faculty and industrial scientists and offers opportunities for graduate students to work for biotech firms.

The facility currently is comprised of 5,000 square feet of wet lab and office space, but is being expanded to approximately 20,000 square feet currently under construction with expected completion in May 2008. CollabTech has four tenants focused in different areas within the life sciences: Zygogen, Inc. offers a proprietary transgenic Zebrafish technology for use in the pharmaceutical industry; GeneCure, Inc. is developing gene-based technology to treat human diseases; KPS Technologies produces dyes used for protein labeling and DNA sequencing; and Ana-Gen Technologies, Inc. which is focused on the emerging field of pharmacogenetics.

In Athens, the Georgia BioBusiness Center and the Center for Applied Genetic Technologies (University of Georgia) is home to several emerging companies including Abeome, AviGenics, and Bacterial Barcodes. Affiliated companies include rPeptide, Oncose, Molecular Therapeutics
and Applied PhytoGenetics, Inc.

Augusta is home to the Life Sciences Business Development Center and Innovation Center on the campus of the Medical College of Georgia (MCG). The MCG incubator is one of six Innovation Centers established in Georgia under an economic development program launched by Governor Sonny Purdue in 2003 and managed by the Georgia Department of Economic Development, with funding from the OneGeorgia Authority, and the only Center devoted to life sciences.

It offers office and wet lab space, shared scientific equipment and other business resources including mentoring services for tenant companies.

The Georgia Research Alliance (GRA), a public-private partnership with a mission to grow Georgia’s technology economy, has played an important role in fostering the development of many of the state’s life sciences incubators. “Incubators are a vital piece of our commercialization ecosystem in Georgia,” says Susan Shows, Vice President of GRA.

“From the university’s perspective, incubators close to campus allow faculty to tend to their start-up activities without impairing their academic responsibilities, and they give students ready access to meaningful employment opportunities in the life sciences industry.”

From the start-up’s perspective, she adds, such incubators “offer access to specialized resources and equipment these companies could not afford otherwise, and create a neighborhood where entrepreneurs can get acquainted with each other and benefit from the shared knowledge, ideas, and experience.”

Atlanta is also home to several for-profit medical device incubators. The Innovation Factory offers experienced early stage management consulting as well as affiliated capital through a established consortium of three well known venture funds; Accuitive Medical Ventures, Versant Ventures and SV Life Sciences. Hatch Medical, L.L.C. is a medical device technology brokerage which also incubates young companies when a given device opportunity is sufficiently promising.

Hatch provides expertise in a variety of areas, including engineering, business development, marketing and related services, and particularly targets physician entrepreneurs/inventors.

SOUTH CAROLINA

Greenwood, SC is home the South Carolina Biotechnology Incubation Facility, which opened in 2002. The facility houses six laboratory modules, a library, a conference center, offices, and support space and is operated by a Board of Governors in cooperation with the Greenwood County Economic Alliance with State appropriated funds. A five-hundred acre research park, the Greenwood Biotechnology Park, is in development nearby to provide facilities for graduate companies.

The University of South Carolina operates a technology incubator in downtown Columbia, with 43,000 square feet including offices and potential laboratories managed by the USC Research Foundation. Current tenants include several life sciences companies.

NORTH CAROLINA

North Carolina offers biosciences incubators in several locations throughout the state. In Raleigh-Durham, the traditional life sciences stronghold, the First Flight Venture Center is a 16,000 square foot facility offering flexible leases, shared business services, technology support services, and management guidance and counseling for up to 25 emerging technology companies, including life sciences companies. John Draper, an attorney with over 25 years of experience as an entrepreneur and private equity investor, serves as President of the Center.

The NC State Technology Incubator is a mix-used incubator that provides an additional 10 wet lab suites on the Centennial campus in Raleigh. The start-up company must have ties to NCSU or wish to establish ties to NCSU research and development.

RTP is also home to several for-profit life sciences incubators, including the Becton Dickinson (BD) Bioventure Center, which provides space, equipment and support services for companies developing technology of strategic importance to BD, including drug and vaccine delivery; biosensors; information technology and cellular and tissue engineering.

To be considered, the candidate company must have a research collaboration in place with BD. The BD facility provides a 2 year maximum stay. Fourteen companies have participated in the program to date.

Outside of the RTP area, the North Carolina Research Campus under development in Kannapolis will include an incubator for start-up firms which will have access to shared scientific equipment and facilities. In Greenville, East Carolina University provides the 17,000 square foot Eastern Carolina Technology Center which includes wet lab space.

In Winston-Salem, Piedmont Triad Research Park’s Wet Lab LaunchPad provides short-term wet lab space to attract biotechnology startups. The space, often referred to as a wet-lab “hotel” is offered at sub-markets rates and lease durations. In December 2007, the first tenants were announced and include Carolina Liquid Chemistries Corp (CLC), a company headquartered in California, and Tengion, a venture-capital backed regenerative medicine company.

Wake Forest, a key backer of Wet Lab Launch Pad, also offers incubator type consulting services to high growth companies through its Babcock Demon Incubator, which operates under the Angell Center for Entrepreneurship at Wake Forest’s Babcock Graduate School of Management.

Despite these offerings, the need for incubators remains, notes Ken Tindall, Senior Vice President of Science and Business Development with the North Carolina Biotechnology Center.

Tindall describes the most significant need as reasonably priced short term space for the earliest of companies. “These are not companies that can sign twelve or even six month leases,” he says. Instead, they are companies that are struggling day to day to move the technology forward and attract financing.

TENNESSEE

In Nashville, Cumberland Emerging Technologies, Inc. (CET) provides incubation through its Life Sciences Center. The facility, in close proximity to Vanderbilt University, offers wet lab space, office space, equipment and resources to emerging life sciences companies. CET is a joint initiative between Cumberland Pharmaceuticals, Vanderbilt University and the Tennessee Technology Development Corporation.

In the Memphis area, Memphis Bioworks is developing the 6.5 acre UT- Baptist Research Park on property donated by Baptist Memorial Health Care. The complete, ten-year development plan includes a six-building research, incubator, and commercial center dedicated to the bioscience industry. Construction has already begun on the first building, a biocontainment laboratory.

The University of Tennessee Research Foundation (UTRF) also owns and operates a technology incubator facility at the Health Science Center in Memphis, which provides office and laboratory space, as well as business development services in conjunction with TriStar Enterprises, for companies associated in some way with UT researchers. UTRF recently opened another facility in Knoxville.

East Tennessee State operates the ETSU Innovation Lab, a full service incubator, in partnership with the Tennessee Small Business Development Center and the ETSU Entrepreneurial Leadership Program.

In Franklin, the Cool Springs Life Sciences Center is a 10-acre life-sciences focused research and development campus, offering facilities to companies at all stages of development, including start ups. Still in development, the three buildings of the CSLSC will provide over 140,000 square feet of space. The first building is now operational, providing over 32,000 square feet of lab and office space, including 8,000 square feet of incubation space.

ALABAMA

In 1983, the University of Alabama established the Office for the Advancement of Developing Industries (OADI) to create a base for new and developing industries in the Birmingham area. Originally located on the UAB campus, the incubator later moved to the UAB Research Park at Oxmoor, where the 67,000-square-foot facility now provides office suites and wet laboratory space (approximately 20,000 square feet) along with shared resources such as conference rooms, an on-site library, and office equipment.

A wide range of professional services are also available, including strategic planning, market strategy, networking, mentoring and seminars.

To date, the incubator has graduated more than 50 companies and currently has 19 tenants. The incubator is mixed-use, with tenants focused in biotechnology, robotics, pharmaceuticals, aerospace design, and computer hardware and software development.

Roughly half of the graduates are considered life sciences companies. BioCryst Pharmaceuticals (NASD: BCRX) is among the incubator’s most well-known graduates. Additional incubator and wet lab space will become available when UAB completes renovation of a 140,000 square foot building that will offer much needed wet lab space.

The newly established HudsonAlpha Institute for Biotechnology (HAIB), an independent, non-profit research organization funded by private and public funds, serves as the cornerstone of the 120-acre Cumming Research Park Biotech Campus in Huntsville and includes more than 270,000 square-feet of laboratory, office and common areas.

Hudson-Alpha is now home to twelve for-profit companies, including Antarus Biotech, Applied Genomics, Inc., CFD Research Corporation, Conversant Healthcare Systems, Expression Genetics, Inc., ExtremoZyme, Inc., Microarrays, Inc., New Century Pharmaceuticals, Inc., Open Biosystems, Inc., Serina Therapeutics, SourceCF and Theragnostix Reference Laboratories. Additional for-profit space is expected to become available in 2008.

BizTech, a 15,000 square food mixed-use incubator, is also located in Huntsville, and offers business and management advice to both resident and non-resident client companies, with biosciences companies including IntelCell, MI Research, Inc. and Pi Proteomics LLC.

Martin Tilson, Managing Partner of Burr & Forman’s Atlanta office, spent several years of his early career helping to develop the UAB Incubator. That experience, he says, left him with a real appreciation of the value of incubators in the early days of an emerging life sciences company.

“In 1986, we had a new 36,000 sq ft wet lab building on the campus of UAB, but there were few comparative incubator business models.

A handful of us from across the country formed the National Incubator Association in order to have peer to peer information sharing. We mostly used West Coast models, fortunately getting good attention from the West Coast and Boston area VCs. It was a creative period, and we learned the three critical elements for success were: adaptable wet lab space; easy access and communication for Venture investors; and the incubator location in close proximity to where University scientists had their own labs.”

Southeast Bio (SEBIO), a regional nonprofit organization that fosters the growth of the life sciences industry in the region, continues to track various economic development initiatives across the Southeast, including incubator development and growth as well as affiliated business counseling and angel funding initiatives. “The growth of the bioeconomy depends in large part on the formation and funding of start up companies,” says Stephanie Adams, Executive Director of SEBIO.

“We provide various programs, such as our annual BIO/Plan competition and Investor Forum, which provide access to mentoring and early funding to complement the important work of the incubators in our region.”

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Incubating the future: The role of business incubators in the growth of the bioeconomy

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