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MORE LAB SPACE FOR STARTUPS | Several proposals are in the works Entrepreneurs and civic leaders push for better facilities to aid fledgling concerns. The Kansas City Star “The building is the least important part of an incubation program. At the end of the day it is more about the services you provide that allow a startup company to concentrate on the business.” A handful of laboratories inside a squat brick building from the 1950s is the epicenter for Kansas City’s biotechnology startups. Young life sciences companies in the region with big ideas but little cash have had few acceptable options in recent years other than finding space in the Biotechnology Development Center, on a side street in the shadow of the University of Kansas Medical Center. Although small and lacking scientific frills, the center, overseen by the KU Medical Center Research Institute, is a service-able operation. The now-thriving Xenotech in Lenexa and Proteon Therapeutics, bustling with a fresh batch of venture capital, both started there. Now, however, Kansas City’s biotechnology backers are confronting a milestone moment. “There is quite a bit of demand for wet-lab space,” said Joel Wiggins, president and chief executive officer of the Enterprise Center of Johnson County. “It largely is a question of community will in terms of getting it done.” Years of talk in the Kansas City area about the dearth of labs equipped for biotech research has suddenly produced several incubator proposals, though each remains in an early planning stage or is little more than a floated idea. Should at least one or two of the proposals become a building, the Kansas City region might find it to be a critical catalyst. Wet-lab incubators have been key contributors to the strong or emerging biotechnology sectors in other communities, said Walt Plosila, vice president of the Technology Partnership Practice for Battelle Memorial Institute of Columbus, Ohio. Kansas City has no shortage of inspiration for how to set up a lab and office complex for biotech startups. The 114 life sciences incubators in 43 states vary widely in the specific services they offer and in how they were established, Plosila said. A fundamental element is office space and so-called wet labs, facilities with clean water and air supplies where researchers can run biological experiments and work with various chemicals and drugs. Pricey scientific equipment and conference rooms that can be shared by incubator tenants are other common features. Many startups are strapped for cash, leaving them unable to build their own laboratories or pay pricey rents. Even when the young companies have been successful in raising money, their investors want most of the cash directed toward scientific research and product development rather than construction of a building. An emerging trend is for the incubator facilities to provide commercialization services and business advice as well. This can be important for scientist-entrepreneurs who may be brilliant in a laboratory but have a lot to learn about raising investment backing and running a new company. Successful incubators shepherd the most promising ventures in a region until they have sufficient momentum to go off on their own. “You have to have a farm club of new enterprises,” Plosila said. “That is what the incubator does.” “When people start complaining about not finding wet-lab space, it’s a good sign,” Plosila said. “It means you are starting to get some entrepreneurship happening.” Indeed, the Kansas City region is experiencing a surge in research activity, an important precursor to forming startups and other commercial ventures. Organizers for leading wet-lab incubators in St. Louis, Madison, Wis., and West Lafayette, Ind., near Purdue University, were aiming to capitalize on the commercial potential of research in their communities. “In the early days it was all about what do we do with the intellectual property coming out of Purdue,” said Joseph Hornett, a Purdue Research Foundation executive who oversees an incubator called the Purdue Technology Center. “More and more of our faculty had an entrepreneurial bug.” The foundation invested about $37 million in the Purdue Research Park and facilities there, including the initial incubator built in 1999. The technology center and a cluster of additional incubator facilities built since have plenty of high-tech flourishes, but Hornett contends that that is not the sole source of their strength. “The building is the least important part of an incubation program,” Hornett said. “At the end of the day it is more about the services you provide that allow a startup company to concentrate on the business.” The Purdue program emphasizes a menu of more than 100 services, including below-market rental rates, flexible leases, human resources guidance, special leasing programs for scientific equipment and even seed-stage investment funding. Early on with the program, leaders felt pressure to fill highly sought empty spaces in the incubator. They were patient, however, remaining selective in allowing only the strongest companies to become tenants, Hornett said. “If you wind up taking anything that walks in the door, you will basically have a multitenant facility that has little to do with job creation and economic development,” he said. The incubator at University Research Park in Madison now enjoys positive cash flow, but it struggled at the start, said Mark Bugher, the park’s director. “This is not a quick-buck kind of investment,” Bugher said. “You have to be in it for the long haul.” In the overall park, which includes the incubator tenants, 110 companies employ 4,000 employees who earn an average of $60,000 a year, about double the statewide average, Bugher said. A region will not reap these sorts of rewards if too many startups stall when hindered by a lack of space and other obstacles. ConjuGon Inc. has raised $4.5 million in investment backing and is preparing to start preclinical tests of its therapy for fighting drug-resistant bacterial infections. The University of Wisconsin spinout might not have made it this far without finding such a nurturing home in the research park’s incubator, said Sal Braico, chief operating officer. At the start, the company did not have the money to buy autoclaves or other critically important scientific tools carrying $50,000 price tags, Braico said. Much of that equipment was available at the incubator. “Those are things we could just not afford to buy on our own,” Braico said. “It is invaluable for a company when they first begin. From a pure cost-savings point of view, you can’t beat this.” Other benefits of operating in an incubator might not show up on a cash flow statement, but they are highly valuable nonetheless. Informal collaboration is a common activity at the Madison incubator. Entrepreneurs often meet with their peers to bounce ideas around or chat about common problems. Scientists can tap colleagues down the hall when troubleshooting a research roadblock. “If we had a problem with one area, we can go to a few of the other companies we know here,” Braico said. F. Nicholas Franano has been one of the Kansas City entrepreneurs calling attention to the need for more incubator space in the area. Proteon Therapeutics, the company he founded in 2001, could have benefited from access to more expansive space. The company resorted to keeping a business office near the Country Club Plaza that was separate from its labs at the KU medical center incubator. Franano said he was appreciative that the area did have at least a modest incubator that provided lab space initially for his company and that the Kansas City Economic Development Corp. had found a way to address Proteon’s space needs with a new project. The company’s leaders wish, however, that they had not had to spend so much time shuttling between two facilities at a critical early stage of their business while the community pondered the need for incubators. “We did get caught,” said Franano, who now serves as the chief scientific officer of the company, which is seeking to develop a new drug. “It had a big impact.” Other communities serious about the biotech economy have adopted creative approaches to easing the way for startups. During a recent trip to Boston, Franano saw an incubator with labs and flexible short-term leases touting itself as a biotech hotel. “You literally turn the key and walk in,” Franano said. “Kansas City has the biotech build-your-own-house. It’s such a barrier to get started.” Key leaders of the region’s biotechnology sector have received the message from Franano and other area entrepreneurs. Evidence that the community is moving beyond the talking stage includes active proposals for incubators involving the Kansas City Area Life Sciences Institute, a joint project involving Kansas State University and Olathe, a new facility at the KU Medical Center and another project involving Midwest Research Institute and the University of Missouri-Kansas City. “Kansas City needs to step up and be aggressive in this area,” said Jeff Kaczmarek, president and chief executive officer of the economic development corporation. “We want to provide the fertile infrastructure in Kansas City to support that life sciences growth.” A typical approach to expanding the region’s economy has included a heavy emphasis on recruiting established companies, but pursuit of life sciences growth also requires meeting the needs of younger businesses, said Bob Marcusse, president and chief executive of the Kansas City Area Development Council. Wet-lab incubators will be critically important in meeting these needs, he said. “Historically, we have dealt with mature companies, but it is clear to me we will be doing more and more work with early-stage companies,” Marcusse said. “Kansas City needs to have the same infrastructure available to an early-stage company.” The life sciences institute has obtained a $60,000 federal government grant to plan a “regional flagship” incubator in a location that has yet to be determined, said Bill Duncan, the institute’s chief executive. Officials are also optimistic about obtaining additional federal money to help build the facility, estimated to cost $15 million to $18 million, he said. “We are starting to see startup companies evolve and emerge,” Duncan said. “We have to have some place to put them. If we don’t get something done here in the next couple years, we are going to be on the borderline of missing out.” National growth Incubation ideas
Reproduced with permission of The Kansas City Star © Copyright 2006 The Kansas City Star. All rights reserved. Format differs from original publication. Not an endorsement. |
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