Two powerhouses for biotech startups — StartX and QB3 — are joining forces to open lab space in Palo Alto for as many as 20 life sciences companies.
StartX-QB3 Labs already has a handful of companies that pay $1,500 a month for a five-foot lab bench in the facility’s 2,000 square feet, or less for only a desk. But beyond space, what those companies receive for that money is tough for early-stage biotech companies to find: a startup ecosystem three blocks away from Stanford University, access to vital core lab facilities and two organizations with big-name connections and enviable track records for translating fresh ideas into standalone companies.
The labs are part of a boom in accelerators and incubators in the Bay Area aimed at moving ideas into the marketplace or helping large companies more quickly identify up-and-coming drugs and technologies.
StartX and QB3, or the California Institute for Quantitative Biosciences, are two of the better-recognized of those organizations.
More than 160 companies, most of them created by Stanford faculty, alumni or students, have come through StartX since Cameron Teitelman launched the accelerator in summer 2009. Last fall, it worked with the university and Stanford Hospitals & Clinics to create the Stanford-StartX Fund, which has invested $18 million to date. Some $6.5 million of that amount has gone to 20 StartX Med companies.
QB3, meanwhile, has focused on turning ideas from researchers at the University of California, Berkeley, UCSF and UC Santa Cruz into companies. Within its two on-campus incubators and three other affiliated incubators in Berkeley and San Francisco, it has helped spawn more than 100 companies.
“We want to address early pain points for entrepreneurs,” said Andrew Lee, who in 2012 co-founded StartX Med as a StartX volunteer.
Lee speaks from experience. StartX, which traditionally has had a tech bent, had no lab facilities when Lee and Dr. Joseph Wu and Dr. Robert Robbins started heart disease drug screening company Stem Cell Theranostics Inc. That meant tracking down funding as well as finding a functional lab in Sunnyvale where the company could conduct its research.
It wasn’t until recently, though, that biotech and medical device companies could nab a small amount of space for proof of concept studies or more within the StartX facility. Stanford last fall gave the nonprofit StartX the first installment of a $3.6 million, three-year grant, which the accelerator used for space to rent space from Alexandria Real Estate Equities Inc. on Hanover Street, northwest of Page Mill Road.
The setup couldn’t come at a better time for biotech startups.
The number of venture capital investments in biotech this year is on pace to blow past last year’s numbers — both in the United States and the Bay Area — and the amount invested already has surpassed 2013, according to PitchBook, a private equity and venture capital data company. So far this year, $1.6 billion has been invested by VC funds in 81 U.S. biotech companies, compared to $1.25 billion in 132 companies for all of last year.
In the Bay Area, according to PitchBook, 18 biotechs have won $423 million from VCs, compared to $352 million in 33 companies in 2013.
Still, early-stage companies largely continue to struggle to find investors willing to make a bet early in the lifespan of a company that could burn through $1 billion over 10 years and still not have a drug approved. At the same time, Lee said, budding entrepreneurs are so focused on the science that they don’t know how to raise initial rounds of capital.
“We didn’t know what angel investors were, what a seed round was,” Lee said about Stem Cell Theranostics’ early years. “There’s a general lack of education about how to build a company outside of academia.”
Still, companies springing out of StartX Med have raised $133 million over the past two years, according to figures supplied by the nonprofit. QB3 companies, meanwhile, have raised more than $143 million, according to a 2013 study.
The StartX program, whose backers include Genentech Inc. Merck & Co. and Johnson & Johnson, has been tweaked for StartX Med. For example, the typical three-month session is six months for life sciences companies, which must pass through a three-tier application process.
One of the early companies to see a benefit from StartX Med’s location is Nirmidas Biotech, which is developing a super-sensitive test for detecting disease biomarkers that originated in the Stanford lab of Dr. Hongjie Dai.
The company spun out of Stanford but set up operations at QB3@953, one of QB3’s incubator affiliates in the Dogpatch neighborhood of San Francisco. Being closer to Stanford works better for the company, said CEO Meijie Tang, because of the company’s on-campus collaborations with Dai and others.
“It’s more affordable than renting space ourselves,” Tang said.
Nirmidas earlier this month completed a $2 million round of seed funding.
There are more-intangible benefits for companies with being in the StartX-QB3 facility, said Matthew Cooper, CEO and founder of Carmenta Bioscience Inc.
Carmenta is developing a diagnostic test for preeclampsia, a type of high blood pressure in pregnant women that could kill the mother or the baby. Its scientific backers, who started the company in April 2012, came out of Stanford.
“Being associated with StartX and Stanford opens a lot of doors,” Cooper said.