Jacqueline Northcut, CEO of BioHouston, spent Monday of this week in Sacramento, at the invitation of SARTA Board member Steve Currall, Dean of the UC Davis Graduate School of Management, and spoke with a group of tech sector representatives.
Jacqueline runs both BioHouston and, more recently, the Texas BioAlliance – both are focused on fostering the success of biosciences companies in Texas – and while here she shared her experiences with the evolution of BioHouston (of particular interest to me, given its similarities to SARTA) and, more to the point, the approach she’s leading to develop and support a wealth of fundable companies in Texas.
What on earth is Houston doing working in biosciences, you ask? Isn’t Houston all about oil and gas? What kind of biosciences asset base do they have? Well, simply put, the Texas Medical Center is the largest such facility in the world, with 49 institutions, $1.8bn in annual research funds, nearly 95,000 employees, and commercial square footage larger than the entire city of Cincinnati. So yes, a decent foundation to build on.
And Texas liked the California model for the CIRM – California Institute for Regenerative Medicine, the $3bn bond measure passed in our state in 2004, as Proposition 71 – so much that they copied it (err, rather, “adopted our best practices”) and in 2007 passed a ballot proposition with some striking similarities ($3bn in state bond funds disbursed over 10 years) and some important differences (focus on cancer, not regenerative medicine). We call ours CIRM, they call theirs CPRIT (“si-prit”). One best practice we could all learn from is to come up with acronyms that actually sound like words when you say them.
Jacqueline described the state bond funds as an investment that the people of Texas are making in the future – by way of channeling public funds to support the acceleration of cancer and cancer-related research. But research isn’t the end point. If it’s only about the research, it’s an investment that doesn’t generate the maximum possible returns. So CPRIT funds not only cancer research, but also contracts with the Texas BioAlliance for its work helping to commercialize the results of that cancer research. Jacqueline described it as a means of insuring that the money invested by the people of Texas comes back to them in future economic activity in their state.
A focus on venture funding is one key component of the work that BioHouston and the BioAlliance do. Initially it seemed that the main commercialization “problem” that needed solving was a lack of investment capital in the Houston area. (Just like here. Everybody likes to feel under-funded and under-appreciated by venture investors, it seems. Except of course Silicon Valley.) So BioHouston does a lot of VC match-making and intros, and spends time understanding the VC’s investment priorities and the focus of their portfolios; they bring them to Houston and arrange day-long meetings with multiple researchers, with the volume of meetings during the visit making the trip highly efficient for VCs. In some cases, investors pursue due diligence on up to 80% of the meetings they have while in Houston.
But something was still missing in the Houston area. The high volume of due diligence was not translating into a similar volume of funded companies. Critically, there were other ingredients missing from the Houston eco-system – notably, people. With the right experience. Specifically, experience in product development and management in the biosciences. Not necessarily CEOs, but the regulatory, product design, market assessment, and clinical trial design specialists who could take a discovery and a market opportunity, and craft a product and a product strategy. Again in partnership with CPRIT, the BioAlliance has created a range of programs and services to encourage early-stage research to work with best-in-class consultants to identify credible market opportunities and – just as important – figure out how best to develop the intellectual property so that when it gets to market, it’s what the market wants and needs. Via the BioAlliance, Texas is bringing these world-class consultants in to work with Texas companies in Texas, and is seeding its own ecosystem at the same time.
So if California provided the original kernel of the idea for CPRIT, what can we, in turn, learn from Texas?
- It’s not just about funding research at the institutions. It’s about ensuring there are tools and platforms – and the right people – actively engaged to help speed discoveries into the private sector. Otherwise the investment of public funds will under-perform its potential.
- Those tools and platforms should be provided by the private sector, in partnership with the state and academia, but separate from them, staffed by people who can “talk business to the business community” and translate for them to the public sector – increasing flexibility and nimbleness.
- Funds will follow deal-flow. Where there are fundable companies, the investors will come. To be successful here in Sacramento, we need to connect more innovators earlier to more capable product development people, to vastly increase the number of fundable companies, achieving critical mass to avoid their being pulled away to the Bay Area in their initial funding round.
We have examples of success to point to here in our region. Glue Networks, which raised its Series-A funding round in early 2011, is a shining example of a company that was founded here, funded here, and is staying here to build its world-class organization. Another example, with a multi-year track record of success, is SynapSense, which successfully raised its C round this year as it ramps sales globally, and was founded when UC Davis Innovation Access introduced local investor American River Ventures to a critical research discovery by Professor Raju Pandey, and ARV then brought Intel-alum, entrepreneur, and SynapSense founder Peter Van Deventer into the picture.
We know how to do this. In our region. And we can do more of it. We need to apply Houston’s lessons and identify and address our gaps volume, increase deal-flow, and support our future Glue Networks and SynapSense’s as they multiply.