Startups should know what differentiates their product from others. Building around an unique strength, a facet that’s difficult to emulate, offers small companies a chance to gain critical mass. New companies should focus on a strength and own one particular piece of their market. Startups that fail to do this can quickly become commodities.
The same can be said for cities and regions looking to make themselves into destinations for tech. Simply trying to emulate the Bay Area and its vast net of tech-related disciplines makes for an impossible task. As I wrote about Chicago and its tech ecosystem recently, there’s more to getting true traction than simply giving startups places to work. Just as a startup needs to do one thing exceedingly well before it tackles other missions, cities should take the same tack and concentrate on one sector of tech to make their own.
I recently was in St. Louis and, while there, I talked to some of its VCs, startups and people who run its incubator and accelerator spaces. Just like anywhere, there exist startups doing all sorts of things in the St. Louis area, but many of the most interesting companies have coalesced around the bioscience space. This isn’t by chance. The city’s tech players have seized on some of the area’s inherent strengths in healthcare and biotech. Washington University, which has one of the top medical schools in the country, is constantly throwing off ideas and graduates who have new ideas in the space. DuPont’s bioscience arm is based here, as is Monsanto, the king of engineered macro-crops. And perhaps most important in all of this, St. Louis was the site of a major set of layoffs by Pfizer in 2010.
The hazard: If the St. Louis community couldn’t find jobs for these people, they would be forced to leave the area, depriving the metro of elite brains that Midwestern cities like St. Louis can sometimes struggle to attract. The opportunity, as Gulve saw it: “These people had been in biotech for years and had great ideas, far better than first-time entrepreneurs coming from outside the industry.”
Gulve asked Pfizer if, before the last day of work, he could come in and present to employees about what working a startup is like and what the landscape was like for funding and founders. Pfizer, which wanted to find new roles for its employees as much as Gulve did, said yes. Gulve came in and gave his presentation to Pfizer employees on-site, and then took five in-person meetings the same day. Biogenerator ended up funding four groups from those meetings, one of which turned into Confluence Life Sciences, which now employs 35 in St. Louis.
At the same time, Gulve was hustling to complete a new building and set of labs for Biogenerator. He wanted it ready to catch some fo the fallout of the Pfizer layoffs. A pilot set of labs opened in the fall of 2010, just a few months after Pfizer made its cuts. The 5,600-square-feet of space was filled within 18 months. Biogenerator used that success to raise a total of $145 million and fund 54 companies that have attracted another $250 million in outside capital. The incubator, part of the Cortex Innovation Community, has also added another 12,400 square feet of lab space.
“If you have layoffs in a city and you don’t have this kind of infrastructure in place, you’re not able to take advantage,” explains David Smoller, a partner at St. Louis’ Cultivation Capital who holds a Ph.D. in molecular biology and has been part of several biotech exits. “A lot of the best intellect in the area is now at these biotech startups.”
The lab space is free for Biogenerator companies—and many of them stay there for years after their initial funding, even after finding traction and hiring a significant number of employees. Lab equipment—stuff like mass spectrometers and automated robotic arms for preparing large numbers of samples—is expensive. Small companies can’t afford to finance a lab all their own—but they also don’t need the lab every hour of the day. This allows several startups to easily share the same lab equipment. It’s a unique infrastructure for rearing biotech companies for which St. Louis has found a niche.
The city may have a chance to repeat the feat with 2,600 global layoffs just announced at Monsanto. It’s unclear where exactly those job cuts will take place around the world, but it’s likely that a few hundred will be in St. Louis. “Hopefully a subset of those people won’t want to retire,” says Sam Fiorello, chief operating officer of the Donald Danforth Plant Science Center. “They know the ag space in and out and we need to be ready to provide them support.”
Danforth has multiple missions, including the pursuit of agricultural solutions to mitigate hunger and disease across the world, but it’s also one the U.S. hubs for new companies focusing on the ag tech space. With labs, office space, mentors and a complete talent network, companies here can stay focused on their product.
Fiorello, who was the chief of staff for Henrik Verfaillie when the latter was Monsanto’s CEO, has been grinding to create a complete program for nurturing ag tech companies and, just as important, a base of employees who can easily be plugged into growing ag ventures. “You can’t just build lab space and expect people to come,” he says. “It’s not a real estate play.”
The biggest pain point for Danforth’s companies has been finding skilled workers for the lab. To that end, Fiorello has worked with St. Louis Community College to create a plant science training program that now boasts a 98% job placement—the remaining 2% go on to get bachelor’s degrees. Danforth, now with two buildings and attracing ag-tech from around the world—including multinational companies from Germany and Israel—now houses 575 people with an addition on its main building that will make room for another 100.
The next project for Fiorello is yet another new building for Danforth that can help him catch Monsanto refugees. One company already using Danforth’s resources, Arvegenix, was founded by three former Monsanto employees who are developing hearty strains of Pennycress, a winter annual plant, as a revenue crop for during what’s normally a dormant period for North American farmers. The plant will provide animal feed as well as oil that can be used in biofuels. Arvigenix has raised $9 million and is now using the core lab at Danforth to develop its seed. Arvegenix has set up shop in St. Louis’ Helix Center biotech incubator, yet another local platform aimed at the space.
St. Louis, like Chicago, has a lot of work left to achieve its goals as a destination and long-term home for tech, but it has made the shrewd choice of identifying sectors where its infrastructure and intellectual capital already had a head start.
Article is courtesy Christoper Steiner at Forbes.com. See the original article here.