Topspin Joins With Accelerate LI to Back Local Biotech Startups
When Accelerate Long Island came together in late 2011, its plan was to start up 10 local life sciences and tech companies with the help of about $1.25 million. Unfortunately, that’s peanuts in the biotech world—which is why it’s called on the area’s biggest VC firm to help.
Accelerate LI, the broad non-profit organization looking to help commercialize the research out of Long Island, NY’s major research institutions, is announcing an alliance today with Long Island’s largest VC firm, Topspin Partners. Through the deal, Topspin’s founder and CEO, Leo Guthart, and managing director Steve Winick, will both join Accelerate LI’s board of directors. The non-profit will also get an office at Topspin’s headquarters in Roslyn, NY.
Just as importantly, though, the alliance will give the startups coming through the Accelerate LI pipeline an avenue to potentially access the type of cash that can really get them going with a Series A, not just seed them with enough cash to get started.
“We are just capital starved out here. We just do not have sources of capital—particularly early-stage capital—in really any amount,” says Accelerate LI executive director Mark Lesko. “Topspin is the 800 pound gorilla, and the notion was why don’t we combine forces with them, and see if we could source some deals on a non-exclusive basis, and try to create companies that have a real chance for success?”
Accelerate LI was formed in late 2011 by presidents of Stonybrook University, Hofstra University, Brookhaven National Laboratory, Cold Spring Harbor Laboratory, and several others, with the idea of creating an overarching, non-profit, regionally-focused organization that could help commercialize the area’s research and spur the development of an entrepreneurial biotech ecosystem on Long Island.
As such, Accelerate LI’s role is meant to be broad: it wants to seed fund startups, mentor prospective entrepreneurs and put them in contact with successful company creators, and bring the entrepreneurial community together with periodic meetings and events. It was backed by a $500,000 grant from the state of New York and a private, $750,000 seed fund started by VC firm Canrock Partners managing director Mark Fasciano called the Long Island Emerging Technologies Fund.
The idea, initially, was for Accelerate LI and the LIETF to each put up matching amounts, up to $100,000 combined, to seed each startup they invested in, and see if that money, in turn, could attract more dollars from local angel investors to syndicate an angel round. Accelerate LI wouldn’t take any equity for the grant money it would give to a startup, but that cash would convert to debt if a startup were to leave New York state. Any private investor cash, on the other hand, would be at the cost of equity in the startup.
As Lesko explains, however, the thinking has changed a bit. After meeting with more than 150 Long Island startups over the past year, Accelerate LI found that 70 percent of the ones it views as investment candidates have been life sciences companies. That’s problematic, because compared to tech startups, biotechs need a lot more cash to get going, tend to take far longer to generate returns, and as such, are best suited for certain specific types of investors with experience in the sector. While $100,000 might do wonders for a social media startup, for instance, it’s not going to amount to a whole lot for a biotech, Lesko says.
Even though Accelerate LI does have a smaller VC presence—Dave Calone, CEO of local VC firm Jove Equity Partners, is also on its board, as is Canrock’s Fasciano—it needed some big dollars, and a firm with a focus on life sciences to get these companies off the ground. So it engaged Topspin, a $213 million venture capital and private equity firm that with a history of investing in biotech startups not just nationally, but also those coming out of Long Island. Topspin, for instance, originally started out with a regional focus, calling itself the Long Island Venture Fund. Lesko says the firm didn’t get the deal flow it wanted, though, so it shifted gears, changed its name to Topspin, and began growing and investing in companies all over the world. Even so, Topsin doesn’t ignore its roots: it recently poured cash into Certerra and Mirimus, two life sciences spinouts from Cold Spring Harbor.
When Lesko and others first talked about putting Accelerate LI together, it tried to get Topspin on board. The VC firm balked, though, looking back on its unsuccessful regionally-focused start.
“[Guthart] wasn’t confident we would succeed based upon his experience,” Lesko says. “He kind of adopted a wait-and-see attitude.”
Lesko stayed in touch, however, and ran deal proposals by Topspin and pitched potential companies to him as Accelerate LI got going. He says that Topspin eventually became interested because of the number of companies coming through Accelerate LI, and the quality of ideas they were presenting. This has coincided with recent efforts by Cold Spring, Stonybrook, and others, who have been bringing in new people to help jumpstart their technology transfer programs.
“That, combined with Topspin’s willingness to engage, is massive. It’s really huge for the region,” Lesko says.
Now Accelerate LI has to turn that alliance, and its grant money, into startups with a future. Lesko says some news is on the way, with a series of announcements potentially coming over the next several weeks when the first batch of startups with Accelerate LI seed funding emerge. Topspin is currently evaluating deals, and a majority of them are life sciences, biotech, and medical device-type companies, according to Lesko.
“We can’t make promises, we can’t say we have any particular quota or anything like that, but suffice it to say we now have real money sitting at the table so for the right idea, with the right team, we have some players in place that can actually move the needle,” he says.