New York City Struggles To Compete With Cambridge and Bay Area for Life Science Startup Support

August 9, 2016 (Last Updated: August 10, 2016, 5:30 a.m. PT)
By Mark Terry, BioSpace.com Breaking News Staff

In the U.S., when thinking of biotech startup centers, Cambridge, Massachusetts and San Francisco and the Bay Area come to mind. New York City, not so much. Despite being an area with strong life science academic institutions and plenty of financial investors, biotech startups that launch in the Big Apple often transplant elsewhere—often Cambridge or the Bay Area—once they outgrow their incubator sites.

An example, profiled in Crain’s New York Business, is Mount Sinai Medical School assistant professor, Ravi Sachidanandam, who founded a startup in 2013 at the Harlem Biospace incubator. The small company, named Girihlet, focuses on technology that can profile and monitor T-cells, a type of immune cell.

Recently Girihlet picked up $2.5 million in funding from a Silicon Valley investment company and has five employees. It plans to hire five more. Nonetheless, as the company outgrew its space at the Harlem Biospace incubator, Sachidanandam found it difficult finding New York-based funding and larger laboratory space. “We were at our wits’ end,” he told Crain’s. “This ecosystem is too small.”

Which isn’t to say that New York City isn’t trying. As Crain’s writes, “That reality is shifting now, as efforts that began with the Bloomberg administration have begun bearing fruit. The Alexandria Center on First Avenue, which opened the first of its two buildings in 2010, is now a gleaming life-sciences hub that has helped persuade out-of-town investors to open up shop here.”

But unlike Cambridge and San Francisco, many people in the life science community believe New York City doesn’t offer enough resources to early-stage biotech startups. “That’s one of the gaps,” Maria Gotsch, head of the Partnership Fund for New York City told Crain’s. “There’s not enough space for those kinds of companies.”

Both Cambridge and San Francisco have their challenges as well. The price of real estate is high and there isn’t much room to grow. Nonetheless, there is proximity to major universities and research institutions that roll out top talent. BioMed Realty is a real estate firm that focuses on solutions for the life science community. Founded in 2004, it currently has 18 million square feet of rental space worldwide, with major holdings in the San Francisco Bay Area, Cambridge, and the U.K.

Scott Altick, vice president and market lead for San Francisco for BioMed Realty, told BioSpace that although these areas are expensive, there are advantages. “Creating highly amenetized environments does cost a bit more, but also allows companies to be more efficient within their space by leveraging usable amenity areas such as a café fitness center and conferencing facilities outside of their leased space. While tenants may pay more on a per square foot basis for their leased space, they can lease less space and leverage amenity areas within the project.”

And the state of New York has created a number of public-private partnerships with life science companies. Earlier this year, New York invested $225 million in a 300,000-square-foot manufacturing facility for Buffalo, NY-based Athenex, which will also provide $1.62 billion in labor, materials and supplies over the next 10 years. It’s expected to create 1,400 new direct and indirect jobs, 500 in Buffalo and 900 in Dunkirk.

New York’s also investing $25 million to expand and refurbish the sixth floor of the Conventus Building on the Buffalo Niagara Medical Campus. These and others are part of the Buffalo Billion plan, including SolarCity’s “gigafactory” in South Buffalo and the 1366 Technologies facility in Genesee County to build solar wafers.

But New York City apparently has its own unique problems in terms of growing startups into businesses that stay in the city. The Harlem Biospace is small, 2,500 square feet, which can accommodate 20 early-stage startups. The company’s co-founder, Samuel Sia, told Crain’s that about of the 36 companies that have gone through the incubator, about a quarter have become businesses, but half of that group has left the city.

“If you start your company in Silicon Valley, chances are you’ll stay there,” Sia told Crain’s. “Short of doing a $5 million Series A round, which does happen, it’s not clear where a lot of these companies would go after Harlem Biospace.”

It’s probably not a situation unique to New York City, either. There are numerous locations around the company that have very strong life science research institutions—Ann Arbor and East Lansing, Michigan, Dallas and Austin, Texas, San Diego, Iowa City, Iowa, Minneapolis and Rochester, Minnesota, just to name a few.

In New York, efforts continue to provide an ecosystem that supports life science startups. The Alexandria Center announced in June that it was developing LaunchLabs, a 15,000-square-foot facility that will provide inexpensive lab space for up to 25 seed-stage companies. It’s expected to open next summer. The companies there will also have “preferred access” to a seed fund ranging from $10 to $25 million.

“New York has the capacity to be on par with San Francisco and Boston, which will mean dozens of companies created and funded every year,” Johannes Fruehauf, chief executive officer of BioLabs told Crain’s. “We will be playing a major role in this transformation.”