Accelerate LI’s Lofty Goal: Create the Next U.S. Innovation Cluster
When Astellas Pharma shuttered the labs of OSI Pharmaceuticals last week, no one felt that loss as acutely as the residents of Long Island, NY. OSI, famed for its lung cancer drug erlotinib (Tarceva), had shown that it was possible to create a large pharmaceutical company on Long Island. Not only was it the anchor tenant in the Broad Hollow Bioscience Park, a complex on the Farmingdale State College campus that gives prospective startup biotechs a place to conduct experiments, but it was also the backbone of a tiny, evolving cluster known as the Route 110 Bioscience Corridor.
That was all wiped away when Astellas, which acquired OSI for $4 billion in 2010, announced plans to shut it down on May 13. But a group consisting of an ex-politician, a few venture capitalists, and some local research institutions is trying to prove that when one door closes, another opens. They have banded together to form an initiative called Accelerate Long Island, with a big plan in mind—creating an innovation ecosystem on the island.
“You can’t really understate the importance [of OSI],” says Mark Lesko, the executive director of Accelerate. “But you do now have an opportunity to grow companies in that space that could become the next OSI.”
For those unfamiliar, Long Island contains a few of the key elements to bring such a thing together. It has large, well-known research institutions (the Feinstein Institute for Medical Research, Cold Spring Harbor Laboratory, and Stonybrook University) that have produced a number of biotech spinouts, and VC firms (Canrock Partners and Topspin Partners) on its home turf, not to mention a close proximity to the financial muscle of New York City. But OSI, which employed more than 100 at its research center, according to Newsday, was its biotech anchor.
That makes the task all that much harder for Lesko, who has been at the forefront of a movement to spur the innovation in Long Island for some time and became Accelerate LI’s executive director in September. Previously the supervisor of Brookhaven, New York state’s second largest town, Lesko says he, like many other politicians, “pounded the table” several times trying to galvanize an effort to build a Silicon Valley-type cluster in Long Islanders’ backyard.
“As you well know, that is not anywhere close to as easy as it sounds,” he says.
Even so, Lesko is giving it his best shot. While he was still the Brookhaven supervisor, he brought together the main regional business, research, and institutional leaders, hired a bunch of consultants from Silicon Valley, and spent about a year to try to figure out a strategy to develop an innovation-based economy.
The plan they came up with was to create an overarching, non-profit, regionally focused organization that would commercialize the research out of Long Island’s major research institutions, and help the area join the national movement of developing entrepreneurial ecosystems, according to Lesko.
So the presidents of Stonybrook University, Hofstra University, Brookhaven National Laboratory, Cold Spring Harbor Laboratory, the North Shore-Long Island Jewish Health System, CA Technologies, and a local venture firm (Canrock Ventures), law firm (the Farrell Fritz Law Firm), and even a foundation (the Rauch Foundation) and auditing firm (Ernst & Young)] came together in January 2011 and created Accelerate LI.
The number of different players involved reflects the sheer size of Accelerate LI’s undertaking. Lasko and his group are trying to do everything: seed funding the startups without taking an equity stake; mentoring prospective entrepreneurs; bringing the entrepreneurial community together; and getting prospective company creators in contact with the area’s biggest business leaders.
The funding, for example, was its own challenge. One of Accelerate LI’s co-founders, Canrock managing director Mark Fasciano, started a private, $750,000 seed fund called the Long Island Emerging Technologies Fund, and Accelerate LI added to that by securing a $500,000 grant from the state of New York through from one of Governor Cuomo’s Regional Economic Development Councils, public-private partnerships focused on helping grow the state’s economy. The plan is for both funds to put matching amounts, up to $100,000 total, into each startup that they decide to invest in—without grabbing any equity. The companies would use that cash to protect their intellectual property, hire staff, conduct early-stage experiments, or rent out office space, depending on the business model. Those two funds are the first two funds in the history of Long Island targeted towards early-stage technology, according to Lesko.
“The notion behind Accelerate was to create a neutral non-profit whose sole goal would be to service entrepreneurs, not have an economic stake in the company,” he says. “We think that’s important. It’s such an early stage out here that I think it’s really important to have the entrepreneurs see a neutral regionally focused entity so there’s a trust factor.”
With the funding in place, Accelerate’s next goal was to give its entrepreneurs some guidance. So Accelerate LI put together a free program that brings in seasoned executives, or entrepreneurs-in-residence, and business school students to work with startups for a few months to help develop their business plan. The end goal of that program is for the startup to make a pitch to the seed funds. Accelerate LI also has a roster of intellectual property law firms, accounting firms, and corporate law firms willing to help the entrepreneurs file patent applications or help set up payroll (those services require a fee, according to Lesko).
Accelerate then tied things together with a plan to foster the development of a startup culture. Long Island doesn’t have the capability of New York City to put large-scale events together for entrepreneurs to meet up with CEOs and exchange ideas. So Accelerate formed two initiatives: idea camps, which are monthly, self-curated discussions and meetings solely between tech entrepreneurs; and quarterly biotech CEO dinners that bring the most promising CEOs of startup life sciences companies together with seasoned pharmaceutical executives. Accelerate LI had its first such dinner a few weeks ago, according to Lesko.
Accelerate LI has connected with about 100 technology-based startups in the past seven months. The majority of them are IT companies, but a number of life sciences companies are in the mix as well.
The organization is doing due diligence on about six companies so far, has heard pitches from 25, and expects to have had about 35 companies show their wares to the seed funds by the end of the summer. Accelerate LI’s seed funds hope to help start up around 10 to 12 companies before it has to raise more cash, Lesko says.
The most advanced six startups at this point, incidentally, are all biotechs. That is both a blessing and a curse. Biotech is the epitome of a high-risk, high-reward investment, with bets tending to take several years to play out, in contrast to the smaller, quicker hits that tech startups can provide.
“It takes a special type of early-stage investor to have an appetite for that type of investment class,” Lesko says.
So Accelerate LI is trying to give them a push. The non-profit is part of a group that is talking about forming a accelerator in Long Island that would bring upstart biotech companies together under one roof, and build a program around them to help them develop.
Another of Accelerate LI’s plans is to put together a group of researchers, financiers, and industry executives, to try to unearth software solutions for problems facing genomic researchers. The hope is to find some commercial opportunities that can form the basis of a bioinformatics cluster.
“We think the New York City metropolitan region, with Long Island included, has some research assets that put us in a position that we could actually be a leading cluster in this sector,” Lesko says.
For Accelerate LI, the crucial time is right now. Lesko hopes to put the initiative’s cash to work over the next six to 12 months, and see where things stand.
“I think it will be [successful], but you never know until you know,” he says. “This is a good first step.”