Accelerator Looks to Expand, With an Eye on the Big Apple

6/1/12Follow @xconomy

Accelerator, the venture-backed biotech startup machine, has made its name over the past decade as a hotspot for financing life sciences companies in Seattle with big dreams and potential. Now it’s considering expanding its model for starting biotech companies in other life science clusters around the world, including New York.

Plans are still in the exploratory stage, but the idea is that Accelerator would remain headquartered in Seattle and build a network of satellite labs in four or five other locations around the world, says Carl Weissman, the co-founder and CEO of Accelerator. Accelerator’s existing venture backers, and some potential new investors, have expressed interest in a more far-reaching version of Accelerator, Weissman says.

“We are looking into expanding Accelerator into other geographies, and New York is certainly one which would have the characteristics we are looking for,” Weissman says. “We would likely avoid San Francisco and Boston because there’s already plenty of early stage biotech venture capital being invested in those locations. We’d look for places without quite as much venture capital, but still a critical mass of great science and technology development.”

Carl Weissman

Accelerator got its start in 2003, and has put about $45 million of venture capital to work in 12 early stage companies. The operation started when the prominent biotech entrepreneur Leroy Hood of the Institute for Systems Biology joined with Alexandria Real Estate Equities and a trio of biotech venture capital firms who wanted the inside track on promising startup ideas that weren’t yet ready for traditional VC investment.

The model was set up to handle a lot of basic needs most biotech companies have. The concept was that companies would rely on the venture firms for cash, the Institute for Systems Biology and its collaborators for expert advice, and Alexandria for fully equipped lab space for tenants. Accelerator staff handle key business activities and infrastructure, leaving the scientific entrepreneurs more time to focus strictly on hitting their milestones necessary for future investment. Four of the 12 Accelerator companies—Allozyne, VLST, Theraclone Sciences, and Integrated Diagnostics—have gone on to “graduate” from their original incubator space, raising more than $211 million in combined follow-on financing.

Still, Accelerator’s bets take many years to pay off, if they ever do, and its alumni have not yet delivered home-run returns for the venture investors in the form of an IPO or a big acquisition. A couple of investors have left the syndicate over the years as biotech startup investment has declined. But Accelerator still has its backers, including Amgen Ventures, Arch Venture Partners, OVP Venture Partners, WRF Capital, Alexandria Real Estate Equities, and the Institute for Systems Biology.

Accelerator raised its last fund, worth $22.5 million, back in 2007, and has put most of it to work in six companies, consistent with its plan, Weissman says. The task now in front of Accelerator is to raise a fourth fund with a similar investment template—$20-$25 million spread among six startup companies. Accelerator hopes to get to work on formal fundraising in the fall, Weissman says.

Accelerator has always sought to find the best life science startup ideas from around the world, and discovered one of its recent companies—Acylin Therapeutics—in Boston. But Seattle has always been its headquarters. That will remain the same in the fourth Accelerator, but Weissman says he believes there’s potential to find more promising companies by having satellite offices in other areas that are staffed with people skilled in business development, operations, and science. “You could have more ears on the ground,” to find ideas for new companies, Weissman says, while leaning on the Seattle headquarters more for administrative work, to keep costs down.

Weissman is frequently asked to describe the Accelerator model to economic development types from various regions of the world, who are all looking to spark growth of the biotech industry, usually with limited success. Weissman didn’t name any other locations Accelerator is considering other than New York. He also didn’t say whether any of the regions are offering economic incentives to lure Accelerator, although he downplayed government incentives as a factor in expansion plans.

“I think it is largely incompatible with our primary goal to generate returns for our investors because it always comes with constraints and regulations,” Weissman says. The more important thing a place like New York has to offer is proximity to the top researchers and clinicians, he says. Even with that advantage, he says he needs analyze whether that benefit is worth the the higher cost of doing business in Manhattan.

As Accelerator has floated the basics of this idea to some potential investors, the response has been mixed. Some people have said they love it, while other VCs have said it sounds similar to what they already do, Weissman says.

If Accelerator does build a national or international model, it won’t come at the expense of the company’s Seattle operation, Weissman says. “We won’t do it if it looks like it will diminish Seattle,” he says.

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