If You Build It, Will They Come?

 If You Build It, Will They Come?

GETTING BIOTECH VENTURE CAPITAL INTO HOUSTON

 By Graham Randall, PhD

When it comes to transforming Houston’s promising biotechnology into marketable products, the number and size of venture capital deals has been the hardest metric to improve. The typical VC investor looks for companies with strategic business plans driven by strong management teams. And there’s the rub. The nation’s fourth largest city, boasts billion-dollar Texas Medical Center, an abundance of ripe-for-the-picking technology and an envious quality of life. But isn’t attracting VC money thanks to the short supply of multi-discipline startup entrepreneurs with an understanding of how the bioscience industry functions. Changing this dynamic means recruiting talented entrepreneurs, often from beyond state lines — it’s an uphill battle once seemed impossible, but that perception is changing.

The Texas Medical Center, under the leadership of president and CEO Dr. Robert C. Robbins, hopes to convert its research funding into big business and raise Houston’s profile as a globally competitive life sciences cluster. The newly established TMC Innovation Institute, with the TMCx business accelerator at its core, is a brilliant step in the right direction. Through TMCx, rather than recruiting individual talent, Robbins aims to entice promising companies to move to Houston to participate in the free six-month program with sessions and workshops to help overcome commercialization hurdles. Other accelerators have similar course offerings, but what differentiates TMCx is its unequaled access to dozens of best-in-class institutions and health care decision makers in the medical center.

The strategy seems to be working. In the TMCx inaugural class of 22 companies, almost half came from out of state, including German-born Adhesys Medical. The company originally came to Houston for the money — having earned top prize and $500,000 in the 2014 Rice Business Plan Competition — but stayed for the support provided by the startup ecosystem. Within this system, in addition to TMCx, Johnson & Johnson Innovation opened its fifth JLABS business incubator — JLABS @ TMC — in March with an initial batch of 22 clients, half of which came from out of state. JLABS companies pay a monthly fee for access to laboratory equipment, workspace, a pool of resources and valuable connections to TMC customers. Addressing digital health, the new AT&T Foundry for Connected Health focuses on helping technology innovators accelerate connected health care solutions that improve quality of life. Industry leaders anticipate the Johnson & Johnson and AT&T brands will help attract VC investors to Houston.

Further building on the quick success of the TMC Innovation Institute, the Texas Medical Center has outlined plans for the “TMC3 Innovation Campus,” a new 28-acre research and recreation campus designed to foster collaboration among a set of anchor institutions. The $1.5 billion project is still in the conceptual stage.

Despite the rarity of big VC deals here, Texas is flush with foundations and private wealth, generous towards companies, programs and buildings. The state-backed Cancer Prevention and Research Institute of Texas (CPRIT), an initiative launched in 2009, has to date awarded $1.57 billion in awards and has brought more than 100 distinguished researchers to the state. Most recently, CPRIT awarded $18.69 million to formerly Utah-based Salarius Pharmaceuticals, which promptly moved its operations to Houston and has joined on as a JLABS @ TMC client. With just two employees, the company plans to expand its workforce with 18 more employees in the coming years.

Efforts to recruit biotechnology companies to relocate and accelerate in Houston are on the upswing. This success can be attributed in large part to the Texas Medical Center’s latest activities, coupled with the city’s competitive economic advantage. The real test will be whether the skilled leaders behind these companies remain in the life science ecosystem after reaching a successful exit. Ten years ago, the city witnessed Genentech’s acquisition of biotechnology company Tanox for approximately $919 million. Along with co-founder Nancy Chang, a biochemist and former Baylor College of Medicine associate professor, many of Tanox’s 200 employees moved to Genentech’s headquarters in San Francisco. Their successful exit, in other words, was Houston’s loss.

In the meantime, however, Houston’s bioscience leaders have been working to restock the pond. To increase and preserve Houston’s startup saavy scientific workforce, Fannin Innovation Studio, an early-stage life sciences commercialization firm, provides aspiring entrepreneurs with hands-on development experience in its portfolio companies. The legacy of Fannin’s apprenticeship programming is seen in the many “graduates” who have gone on to hold CEO positions with the city’s leading startups such as OrthoAccel, Procyrion and Noninvasix. With the growing interest in entrepreneurism, area universities are offering new curricula that further expose students with an interest in business to a broader career path, one that supports Houston innovation. The University of Texas Medical Branch in Galveston, in collaboration with UT’s McCombs School of Business, Rice University’s Bioengineering Department and business leaders in the biomedical field, launched the Collaborative Innovation & Entrepreneurship Program. Courses provide a deeper understanding of creating successful biotech ventures and navigating the commercialization pathway. Rice University’s Entrepreneurship Initiative, founded just last year, is designed to combine top tier engineering and sciences with its business school to prepare students to create and lead new products and ventures. At the University of Houston, the Bauer College of Business opened Red Labs accelerator, complete with business training and mentors for students interested in starting new businesses.

Houston has long been considered the Energy Capital of the World, but momentum in the biotechnology innovation space is palpable. From digital health and nanotechnology to medical devices and pharmaceuticals, those who want to play a leading role in the life sciences should pay close attention to Houston. Where venture groups, entrepreneurs and big pharma have been concentrating their money and their attention in a few key places, straying from the beaten path could present interesting options for realizing biotechnology’s potential.

A native Californian, serial startup entrepreneur Graham Randall, PhD left Silicon Valley for Texas’ greener pastures. He currently serves as CEO of Houston-based Noninvasix, Inc., developers of a noninvasive brain oxygenation monitoring system for the NICU.

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