One Size Does Not Fit All with Innovation Models

By Cheryl Campbell, a cancer pharmacologist, lawyer, entrepreneur and a member of the MIT EMBA class of 2015.

One of the most significant hurdles scientists in the life sciences face in developing the next drug or device is raising capital. With several years of research and development required before the creation of a minimum viable product and another several years to market, scientists need significant funding in order to commercialize their scientific discoveries. However, given the long road to commercialization and regulatory hurdles along the way, life sciences investments are often risky, which discourages many investors from this field. Without a revenue-generating product or capital investment, how do scientists fund commercialization of their scientific discoveries?

Biotech/life sciences startups with strong intellectual property portfolios are more successful at gaining access to capital. Given that they cannot generate revenue through product sales, these startups “sell” their intellectual property through mechanisms such as licensing and assignments to other parties for cash. In fact, these companies are successful not because they developed a single blockbuster product, but because they were able to generate a lot of intellectual property assets that they could sell while still enabling them to continue developing their lead product(s) or service(s). Thus, instead of looking at how to find funding, it’s better to understand how to foster innovation.
During GO-Lab (Global Organizations Lab), I had the opportunity to compare innovation models involving biotech incubators. Here are some observations:

The U.S. Approach
Since 2012, biotech incubators have been growing in popularity in the U.S. because they enable startup life sciences companies to save on administrative and building expenses. In addition, incubators provide an open community for scientists and entrepreneurs to share knowledge and ideas with each other, which fosters an innovative ecosystem. So far, U.S. biotech incubators are reporting startup graduation rates of about 70-80%. Startups within these incubators often graduate within 12-18 months of joining the incubator and are able to secure their own funding.

The Boston Model
Boston is home to some of nation’s most vibrant and productive biotech incubators. Located within or near academic institutions such as Harvard and MIT, these biotech incubators mostly provide lab space for spin-offs from academic labs. These labs generate a lot of intellectual property assets that can be licensed or assigned to various startup companies. Often, these startup companies are founded by the academic researchers themselves. By being close to academic institutions, biotech incubators provide a convenient location for academic founders to conduct commercial-level work while still remaining close to their educational labs. This facilitates efficient knowledge-transfer between the academic research laboratories and their startup counterparts. Boston’s biotech incubator model not only enables stronger academic and commercial partnerships but it provides a collaborative platform for academicians and entrepreneurs to generate ideas that can become intellectual property assets.

The West Coast Model
Unlike incubators in Boston, San Jose and San Francisco biotech incubators are concentrated in industrial life sciences research parks. Sponsored mainly by large pharmaceutical and medical device companies, these incubators are driven by developing intellectual property assets for larger corporations. Biotech incubators in this region host resident startups that are more focused on later-stage commercial products rather than establishing spin-offs from academic labs. Nevertheless, these incubators are also designed to provide open areas that enable collaboration amongst the various resident companies and their surrounding ecosystem.
Biotech incubators on the West Coast are much newer than those on the East Coast. They tend to have very strong applicant pools from the region’s biotech startup community, which may be why current biotech incubators are already seeing high startup graduation rates. However, given the limited number of operating biotech incubators in this region, it is still too early to tell if this region will have the same success rates as those in Boston.

The French Model
Biotech incubators on both coasts encourage collaboration, which fosters an innovative culture. On an international scale, this collaborative environment has not taken hold. In France, for example, biotech incubators house resident startups that are secluded from one another. The structure of the biotech incubator building itself is built in such a way that prevents collaboration in that there are no open spaces for members of resident startup companies to interact or share resources with one another. This structure is primarily driven by the cultural preference to work separately, which prevents biotech incubators in this region from building open collaborative areas within their buildings. While there is not enough data to tell if this model is more or less successful than those in the U.S., biotech startups in this region graduate within 3-5 years from their incubators, if at all, and most do not receive venture capital financing. Instead, these startups become more focused on becoming small to medium enterprises.

The Bottom Line
It’s clear that a one-size-fits-all approach to innovation won’t work. Changing the focus to innovation, and then finding ecosystems that support innovation, are the most useful ways for scientists to progress their scientific discoveries.

What is your approach to innovation?