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San Diego’s Scientist-Entrepreneurs Look to “Virtual Incubator” to Help Life Sciences Startups

Xconomy San Diego — 

A grassroots group of local life sciences entrepreneurs—frustrated by their inability to get the resources they need to start new companies—has formed a working group to develop a “virtual incubator” to help seed-stage biotech startups get established in San Diego.

Scott Struthers, a co-founder of the San Diego Entrepreneurs Exchange (SDEE), which was formed by rank-and-file biotech researchers earlier this year, says their idea for a virtual incubator is akin to “letting a friend sleep on your couch.” The idea is to use LinkedIn and related networking tools to help match startup founders with unused laboratory space and other things they need, such as loaner laboratory instruments that would be too costly to lease or buy.

A lot of scientist-entrepreneurs are trying to get the technical data they need to reach a “proof of concept” threshold required for seed funding—or even a Small Business Innovation Research grant—without having to buy capital equipment or sign a long-term lease for laboratory space, says David Pearson, a consultant who provides life sciences management services in San Diego. If they do the proof of concept research where they’re working—if they are working—they’ll lose their intellectual property, Pearson says.

“The biggest problem we have as small companies is that you can’t rent 1,000 square feet of lab space,” says Struthers, who founded Crinetics Pharmaceuticals after leaving San Diego’s Neurocrine Biosciences (NASDAQ: NBIX) at the end of 2008. “You can rent 20,000 square feet, but you can’t rent 1,000 square feet.”

The real significance of the effort, though, might be in the way it shows how San Diego’s scientist-entrepreneurs are coping with new economic realities, including a scarcity of startup capital for life sciences companies. At a time when a new spirit of frugality pervades many VC firms and credit seems as elusive as water on the moon (we know it’s there—somewhere), the fast-growing membership of the SDEE have been coming together to learn how to adapt and improvise.

“The SDEE represents the under-funded and the under-employed,” says Scott Thatcher, a SDEE co-founder who heads Orphagen Pharmaceuticals, another early stage startup.

SDEE’s concept for a virtual incubator is similar in principle to certain types of agricultural co-ops formed by large numbers of small farmers to overcome what is sometimes called “the curse of smallness.” A family farm’s production might be too small to justify the purchase of expensive harvesting machinery, or a farm might lack the transportation needed to get its crops to market—or the clout to negotiate acceptable terms with freight-haulers.

As an example, Struthers says he used the SDEE membership network on LinkedIn to buy a used laboratory microscope for $10,000 that might have cost as much as $30,000 to buy new.

Struthers and other members of the incubator working group say their goal is to find host biotech companies in San Diego that are willing to share or sub-lease their unused lab space. If successful, the group hopes to eventually explore other suggestions, such as developing a physical incubator facility.

SDEE organizers outlined their proposal last month during a meeting on “how to obtain seed-stage funding” that drew 180 people from San Diego’s life sciences workforce. Among those listening in the audience was John Cashman, the founder and president of the Human BioMolecular Research Institute, who later told the crowd he had some available lab space in his facility.

In preparation for the meeting, Pearson identified a number of incubators in the San Diego area, including several that have only been proposed. Life sciences startups, however, usually require space for “wet labs,” so I winnowed his list down to these:

EvoNexus, a free high-tech incubator established by CommNexus, the San Diego wireless industry group, recently moved into free office space in University City. The arrangement was made possible by a partnership agreement between CommNexus and the Irvine Company, the privately held developer based in Newport Beach, CA. So far, two medical device startups (Crisi Medical Systems and MediPacs) are based there.

—The Johnson & Johnson Pharmaceutical Research & Development. The concept of hosting a biotech incubator in the J&J facility atop Torrey Pines mesa was suggested earlier this year by Diego Miralles, who heads J&J’s San Diego-based operations.

—The Sanford-Burnham Medical Research Institute. Spokeswoman Andrea Moser says a biopharma incubator “is being discussed but I can’t confirm at this time.”

—The SDSU BioScience Center is intended to house 10 to 12 San Diego State University faculty researchers who are focused on heart disease and obesity. It is unclear whether the facility also could be used as a seed-stage incubator.