The post was written by Deniz Temelli, Business Analyst at TechAlliance
Within the start-up space, one of the many buzz words thrown around is “incubator.” An incubator is a program that is designed to support entrepreneurial ventures by offering numerous resources, assistance and, in most cases, some sort of funding. It usually involves a group of companies moving into the incubator building together for a short period of time in order to foster an entrepreneurial community, helping to push the companies towards the milestone of developing a product and associated business model that is ready for launch.
One of the largest incubators is Y Combinator, and every day I read of numerous Y Combinator graduates securing large VC funds (TechCruch is a great source for this type of news). There are other incubators out there that all seem to have the right model to produce successful companies.
But as I work primarily within the life science space, I can’t help but notice that all of these high profile incubators focus solely on ICT and digital media companies. Where are all the biotech incubators? Although there are a few out there, such as the Sid Martin Biotechnology Incubator, Bioinspire, and the Stiller Centre here in London, these incubators are nowhere near in size and number to the digital media focused ones. But why? I think the answer lies in the clear differences between the life cycles of biotech and digital media companies.
First, the development timeline for apps or websites is in the order of weeks because, in general, the tools are readily available to build the product, and it doesn’t take all that long to do so. Also, the digital media space is really a first-to-market kind of game; if you’re not in the app store as soon as possible, it’s likely that someone else will get there first.
On the opposite end of the spectrum, the development timeline for a biotech company is more likely to take months, even years. This is a function of the nature of the product; since it will likely be used on or in a human, the rigor needed in design and testing is very high and, of course, there are all of the regulatory requirements. So the incubator model with programs of 3-4 months in length is not feasible.
One of the main reasons the incubator model works for digital media companies is that those companies can operate from anywhere; all they need is a computer and the Internet. It is easy to bring a group of companies together as the infrastructure needed is minimal.
On the other hand, capital costs for biotech companies can be quite high. And, more importantly, the equipment needs are not uniform. Wet labs may have commonly used items, but the equipment needed by a company developing a therapeutic drug and that needed by a company with a biomechanical device are very different. Therefore, the capital costs needed at the outset to start a biotech incubator may be prohibitive.
Both of these reasons contribute to probably the biggest reason for the lack of biotech incubators: the large difference in capital needed to get a company to the point of product launch.
For a website or an app, the development time is short, and little infrastructure is needed. Therefore, the founders put in a lot of sweat equity to get their product out the door and into the market place.
For a biotech product, the R&D, manufacturing, regulatory, IP, and more makes it very difficult to fully fund a company enough to get it to a point where VCs would be interested in it.
All that being said, it is possible to get over these hurdles. By having a strict selection process for intake companies, a biotech incubator could focus on one specific section area in order to take advantage of common equipment. Also, working with devices with lower regulatory requirements would decrease the capital cost and time to market. But as with any industry where the current offering and business model does not work very well, there is definitely room in this space for a disruption.
Through analysis of the differences listed above and a little bit of innovation, I hope that somewhere a new biotech incubator model will emerge to launch a new generation of biotech start-ups, similar to the way Y Combinator has done for the digital media space.
