Talk to anyone involved in the New York biotech ecosystem, and it’s clear what’s missing: startups. The big city is just too expensive, entrepreneurs and their backers say—just try finding an affordable one bedroom apartment in Manhattan, let alone lab space—so a number of promising biotech ideas either stay untapped or get snatched up by investors in other cities.
That’s why, despite consistently posting the third highest total of NIH grant dollars of any state in the country (behind, of course, Massachusetts and California), New York lags far behind in total biotech venture dollars. In 2013, for instance, venture firms invested a total of $135 million in New York biotechs—a fraction of the amounts garnered by life sciences startups in Boston ($933 million) and San Francisco ($1.15 billion), according to the National Venture Capital Association.
In recent years, a concerted effort has gotten underway to give Gotham a fighting chance to keep those companies. New York’s research institutions, partly out of desperation, partly out of changes in leadership, have evolved to embrace the idea of working together and with industry to commercialize the ideas of their scientists and professors. Collaborative efforts have sprung up all over the city, from the New York Genome Center to the Tri-Institutional Therapeutics Discovery Institute, to try to harness the city’s financial and research firepower. Institutions like Rockefeller University and Weill Cornell Medical College have established their own internal funds to give their research a chance to cross the translational gap that dooms so many promising projects. Incubators now exist in West Harlem and Brooklyn.
Seattle’s Accelerator now wants in. The biotech startup incubator, created 11 years ago when Leroy Hood teamed with Alexandria Real Estate Equities and a group of venture firms (MPM Capital, Versant Ventures, and Arch Venture Partners), has put $45 million to work and birthed 12 life sciences companies in Seattle. Perhaps the best known of those companies is Theraclone Sciences, a developer of antibody drugs that has partnerships with Pfizer and Gilead Sciences and almost merged with Annapolis, MD-based PharmAthene last year.
Accelerator has talked for some time about getting people into other cities to find new ideas. New York, with its dearth of early-stage biotech VCs on the ground, has long been at the top of the list. In a 2012 Xconomy report, for instance, former CEO Carl Weissman named New York specifically as having the “characteristics” the Accelerator was looking for as part of its expansion plan. But it took awhile for New York’s research institutions to shed their old ways and really begin to work together and embrace the idea of commercializing their science.
Because of that, the timing hasn’t been right. It is now, says new Accelerator CEO Thong Le.
“Five or 10 years ago, it would’ve been nearly impossible for us to establish a relationship with seven institutions, all of whom are agreeing to the same arrangement that they have with us to help support commercialization,” Le says. “A number of things finally came together that really tipped the scales for us.”
On July 29, Accelerator said it has raised $51.1 million for its fourth fund (Accelerator IV), struck partnerships with those seven New York institutions—Albert Einstein College of Medicine of Yeshiva University, Columbia University, Icahn School of Medicine at Mount Sinai, Memorial Sloan-Kettering Cancer Center, NYU, Rockefeller, and Weill Cornell—to tap into their research, and said it would soon open an office in the Alexandria Center for Life Science on Manhattan’s East Side. The two-tower complex, which houses outlets of Pfizer, Roche, and Eli Lilly and sits next door to NYU’s Langone Medical Center, will provide incubator space for up to four Accelerator startups at a time, according to Le.
Accelerator aims to do about one to three deals per year, in which it’ll form a company, put seed money into it, and incubate it in-house. A little more than half of its new fund will go towards startups in the Big Apple, and the company is in the midst of raising another $15 to $20 million on top of the $51 million it’s already bagged in its latest fund, Le says.
As Accelerator plans its expansion, there’s a lot to prove. Some of its 12 companies have graduated from its Seattle incubator and attracted further venture rounds. Le says three of them have produced exits. One startup, Xori, was sold to an unspecified, publicly-traded biotech. A second, VLST, was sold off in pieces and shut down in 2013. Le adds that Accelerator has completed a “major transaction” for a third company, Acylin Therapeutics, that’ll be announced in the near future. Still, Le, citing confidentiality agreements, wasn’t able to name the buyers of these assets or the size of the deals, so there’s no way to tell what types of returns they’ve brought Accelerator’s investors.
In other words, there isn’t yet a banner sale or IPO that Accelerator can hang its hat on, or a startup that’s evolved into an independent, revenue-generating business. Le, who was on Accelerator’s board for seven years before officially becoming its CEO in early 2014, acknowledges that Accelerator has made its share of mistakes. Its investment strategy, he says, is going to change.
“You’ll see a very different level of discipline and focus around the type of deals we’re going to do,” he says.
So what does Accelerator, New York-style, have to do differently to … Next Page »