Growing an Innovation Ecosystem

Attracting Start-Ups, Growing an Innovation Ecosystem – No Major Metro Region Required
Guest Post by Laura Butcher, Executive Director, Hershey Center for Applied Research

It may sound like the toughest of propositions, but an innovation ecosystem can be built in mostly rural central Pennsylvania. It just takes diligence, patience and focus. At the Hershey Center for Applied Research, where I am the Executive Director, we are committed to keeping our eye on the advantages of the leaner times, staying the course and keeping to our strategy during this downturn. The good news is that healthcare is a sector that is projected to grow, and the life sciences – where much of our energy has been focused — will benefit from that growth. Between 2006 and 2016, according to the Bureau of Labor Statistics’ Occupational Outlook, the health care and social assistance market is expected to grow by 25.4 percent and add 4 million new jobs nationally.

Along those same lines, the most recent PricewaterhouseCoopers MoneyTree report revealed that the life sciences and medical devices sector saw a 10 percent increase in venture funding during the third quarter of 2008, but the professional services firm also acknowledged that a dip in venture investing can be expected for the next several quarters.

While downturns are uncertain times for everyone, there is a silver lining for start-ups, as recently outlined in a BusinessWeek article by Harvard Law fellow Vivek Wadhwa, who points out that a few benefits come out of downturns:

• Less competition and an easier time striking licensing deals with universities
• Lower costs on every negotiation, from real estate, equipment, materials and staff
• Easier time recruiting and keeping talented employees
• Less pressure to expand and so a better chance of quality output

We can’t forget that during the 2001 downturn, as Forbes magazine recently reported, Proctor & Gamble launched Crest WhiteStrips, Apple launched the first iPod, Pfizer Consumer Healthcare rolled out its Pocket-Packs product and a dozen more disruptive developments occurred in the U.S. alone.

Those start-ups that can create the most promising opportunities through their groundbreaking research, while keeping good control over their capital, are the ones that will be most likely to succeed. This is true in any economy, which is why the cost-effective benefits of a research park will continue to be attractive to them.

Research parks are the meeting grounds for collaborations between academia, industry, and government. As such, HCAR is home to several Penn State Milton S. Hershey Medical Center and College of Medicine research departments that work side-by-side with start-up biotechnology and medical device companies.

The Proof Is In the Start-Ups

By way of example, HCAR has attracted several innovative companies, including Apeliotus Vision Science, Glycotek, Apogee Biotechnology Corp., and Better Bowls. Apeliotus Vision Science has recently secured $200,000 in Ben Franklin Technology Partners funding. This important investment will allow the company to build upon its momentum in developing a diagnostic for the early detection of age-related macular degeneration (AMD), the leading cause of adult blindness.

Better Bowls was a recent presenter at the 2009 Angel Venture Fair in Philadelphia on April 7th. Chosen from an initial pool of over 140 applicants, Better Bowls was one of 25 presenters at this meeting which typically attracts more than 100 angel investors from across the region. Launched by food innovation expert Malathy Nair, PhD, Better Bowls is focused on snack products products that use natural ingredients, healthier formulations and convenient packaging to help consumers prevent or manage health issues like obesity, diabetes and high blood pressure.

Glycotek, another promising tenant, is developing an alternative to heparin, a drug used in the treatment of deep vein thrombosis and other blood clot conditions, and also cancer. Currently, heparin must be administered through injection in a hospital setting; Glycotek is working on an oral alternative that can be purchased as a prescription from a pharmacy.

And Apogee, which was HCAR’s first non-academic tenant, is developing chemical compounds that will inhibit the activities of sphingosine kinase, an enzyme known to drive cell proliferation and inflammation. Sphingosine kinase is overactive in several diseases such as cancer, diabetic retinopathy, inflammatory bowel disease, arthritis and atherosclerosis.

Focus, With an Eye on Growth

Our next challenge is to attract companies in somewhat later stages than the start-up. In order to do that, we have been looking at what our strengths are, and promoting those to companies — things like the strengths of the Penn State College of Medicine, including their leadership in diabetic retinopathy treatment, their new cancer institute, and other advantages. Our being only an hour and a half away from Philadelphia, and an hour and a half from Baltimore, help provide a real value proposition for those later stage companies. We believe that attracting later stage companies to our research park will help our start-ups feel more grounded, helping them gain insights into the challenges that companies face as they grow.

Also to our benefit: Pennsylvania is quite competitive in the life sciences industry. In fact, Business Facilities magazine within the last six months named Pennsylvania the number-one state for the biosciences. It also is because of our commonwealth’s commitment to the life sciences industry, a $2.8 billion commitment, and new funding coming online through the federal American Recovery and Reinvestment Act.

Our proximity to Philadelphia together with our relationship to Penn State College of Medicine; our proximity to Washington, DC, the regulatory capital; New York City, the financial capital; access to international markets, proximity to big pharma: these are all adding up to a strong value proposition. And also, the cost is just a bit more attractive here than you’ll find in some of those metro markets.

While we stick closely to our life sciences focus, we are open to branching out to other areas, like green technologies, to help drive innovation. A real ecosystem has diversity of types of companies. This kind of environment is beneficial to a range of innovators, from start-up to later stage companies.

We have had success in attracting start-ups. We look forward to attracting others, while diversifying our environment. We know it can be done. And who doesn’t appreciate a challenge?

Hershey Center for Applied Research