The victorious seven, chosen from a pool of 88 applicants for the first round of Accelerator funding, represent a diverse cross-section of the Massachusetts life sciences industry cluster:
- Oncology drug company Eutropics Pharmaceuticals;
- Tissue engineering biotech InVivo Therapeutics;
- Molecular diagnostics company Good Start Genetics (a prize winner in Harvard Business School’s 2008 business plan competition;
- Device companies Pluromed and Wadsworth Technologies; and
- Biotech/pharma tools and services companies Spectra Analysis and Wolfe Laboratories.
The good news here is that the Life Sciences Initiative is actually beginning to put money directly into the hands of deserving startups. Governor Patrick’s announcement of the initiative, made at the 2007 Bio International convention in Boston, had inspired a high level of excitement in the startup community, excitement that gradually dissipated and turned, in some quarters, into cynicism as the actual composition and distribution of the $ billion “pot” began to take shape: too little truly new money (fully half was repackaging of existing programs); too much for pure research rather than enterprise development; too much locked into State university structures and too little in the hands of early stage entrepreneurs. Most importantly, it was unclear how any of the monies would be used to meet a problem acknowledged by the Governor and weighing heavily on startups – how to navigate the “valley of death” between academic grants and private sector investment.
The Accelerator Program loans are an imperfect solution to bridging the structural funding gap that so bedevils so many life science startups. They’d be “less imperfect” if there were more of them, if they were larger, and if they could be made earlier in the enterprise life cycle. But I think it is essential to acknowledge both the positive contribution the current loans can make, and the considerations that direct program monies to well-established startups – while maintaining the search for tools to address the still unmet needs of potentially valuable but still fragile very early stage enterprises.
Among the defensible reasons for MLSC not making grants or loans to the earliest stage companies, I’d focus first on the fact that MLSC lacks competence to make objective and intelligent decisions about the relative worth/potential of the earliest stage applicants. That is not a knock on the MLSC staff, and it is not something that can be fixed. No public agency will have the resources to evaluate the fundamental scientific underpinnings of a nascent life sciences enterprise – that’s the NIH’s bailiwick; no public agency can have the broad analytical capability to evaluate the market potential of a wide range of product concepts – that’s what VCs do, and if they could do it for the earliest stage companies they would be making more early stage investments; and no public agency can evaluate the capabilities of an untried and unproven management team – VCs know how to do that, and they do it by assuming that untried means not competent.
Second, I’d remember that MLSC is looking to leverage the funding it provides into economic growth – i.e. it needs to show a return on investment for the state economy. While a successful very early stage investment will have a higher rate of return than a later stage investment, that higher rate of return needs to be discounted by the markedly lower chances of success for the earliest stage investments. MLSC’s responsibility to the taxpayers demands that it do what it can to minimize its investment risk while remaining true to its mission. Avoiding the earliest and least predictable investment opportunities is one tool to accomplish this; partnering with private sector investors with proven track records for making good choices is another.
Third, there is something to be said for allowing natural selection to thin the enterprise herd before placing a financial bet. We want to support new enterprises lead by first-time entrepreneurs if their ideas are sound and they have the ability to execute. Trial by fire isn’t kind, or pretty, but it can be effective. An entrepreneur who has the commitment and competence to get his/her fledgling company far enough along to allow objective analysis of its chances for success, who is able to take the first critical steps into and across the funding valley of death, is actively demonstrating the most critical qualities required to gain private funding and take the company to the next stage.
I’m not advocating abandoning all efforts to support the earliest stage entrepreneurs. There are many things other than direct financial grants that can be done, and/or are already being done, to assist them. State initiatives like M2D2 at the University of Massachusetts (technical component at U. Mass. Lowell, clinical component at U. Mass. Worcester) and the Mass Technology Transfer Center (MTTC), multi-institutional cooperatives like CIMIT, university-based programs like MIT’s Venture Mentoring Service and Boston University’s Office of Technology Development, as well as private industry initiatives like MassMEDIC’s MedTech IGNITE program are part of an extraordinarily rich Massachusetts ecosystem of support for new enterprises in the life sciences.