Houston’s Dearth of Biotech Entrepreneurship

This post comes to us courtesy of Graham Randall, Ph.D., MBA, who has agreed to become a regular contributor to Startup Houston and will write on the topic of biotech, life sciences and entrepreneurship. Graham is a Ph.D. candidate in molecular biophysics at Baylor College of Medicine where he was a fellow of the W.M. Keck Center for Computational Biology and a recipient of the prestigious John J. Trentin Scholarship Award. His research focuses on the effects of DNA topology on protein-DNA interactions. Prior to graduate school, Graham spent eight years in Silicon Valley as a software architect working for several startup companies, including Tellme Networks. He has an MBA from Rice University and a B.A. in applied mathematics from the University of California at Berkeley. Graham also writes two other blogs: Driving While Texan and Two Randalls.

Houston lags the major biotech clusters

A lot of energy has been spent in the last 10 years trying to figure out why Houston, with all the research conducted in its world-class medical center, hadn’t spawned more biotech startups. Houston lagged behind the major biotech clusters-San Francisco, San Diego, and Boston-in the number of biotech employees (~10,000 vs. 30,000-40,000), the number of VC deals (<10 vs. ~100), and the proportion of corporate-sponsored R&D (25% vs. 70-90%). The density of technology companies in Houston was far lower than the leading regions, so we had an underdeveloped infrastructure to support startups and a small pool of startup leaders.

Still, the city’s leaders wanted to see biotechnology become a major driver for growth in Houston’s economy over the next 15-20 years by creating 65,000 to 95,000 jobs and allowing Houston to remain competitive. Two organizations in town, the Houston Technology Center and BioHouston, lead the city’s efforts to encourage growth in the biotechnology sector. These organizations deserve credit for more than doubling the number of life sciences companies in Houston, as well as tripling life sciences employment.

But Houston still lags far behind the major biotech clusters. What is missing? For a while, the prevailing reason was that there just wasn’t enough biotech-savvy venture capital in town. Startups were forced to seek funding on the West or East coasts, and those deals invariably required the startup to move away from Houston.

This is only one piece of the puzzle, however.

Results of a competitive analysis

Last spring, I led a team of Rice EMBA students in an analysis of Houston’s biotech cluster. Our analysis included a look at the best practices of Houston’s competitors with the goal of identifying opportunities. The 20 competitors we considered were a selection of universities, economic development organizations (EDOs), non-profits, startup incubators, and state programs.

For each of the competitors, we examined their organizational philosophy and vision, primary target audience, scale, activities, and fundraising model. For the universities, we found extensive cross-campus programs with strong ties to the local business community. The schools actively promote technology transfer to students, postdocs, and faculty through a variety of cross disciplinary events designed to encourage attendees to think about how research can be commercialized. The integration of technology transfer with research stood out at UCSF, in particular, where the Center for BioEntrepreneurship is officially housed in the Office of Research. Similar initiatives to link academic research and local industry were found at the EDOs, non-profits, and state programs, with the additional focus on developing biotechnology-friendly public policy.

The integration of technology transfer and academic research is critical, and sadly missing from the Texas Medical Center. Commercialization is not a priority to most scientists. Their career advancement depends on publishing new findings and receiving grants to take new directions in research. So far as I know, M.D. Anderson is the only institution in the medical center that recognizes patents as equivalent to publications for evaluating tenure candidates. Faculty members, postdocs, and students need to be trained how to recognize commercial potential in their research and how to direct future research towards commercialization. Academic thinking in the TMC will have to change before we’ll see a radical increase in new companies.

Based on our findings, we recommended that the educational institutions in the medical center should become hubs for the biotech community, reaching out to the local industry and promoting commercialization. We also recommended new educational programs like “Scientist to CEO” and a “Biotechnology Entrepreneurs Bootcamp.”

Conclusion

An opportunity exists today to develop entrepreneurship in the medical center. A FASEB study released last year reports that while the number of newly minted life science PhDs has increased steadily over the last 30 years, the number of tenure track academic positions has remained constant. Additionally, the funding crunch in academic research, resulting from budget cuts at the NIH, is further limiting the research opportunities for young scientists. As a result, most PhD students are forced to find employment after academia in industry. This has fostered increasing interest in biotech and entrepreneurship in the medical center. As evidence of this trend, I noticed last spring that Rice University’s course in Life Sciences Entrepreneurship, which is open to everyone in the medical center, had tripled in enrollment over the prior year because of increasing demand. Now is the time for Houston’s universities and nascent biotechnology industry to seize upon this opportunity, by developing the biotech entrepreneurs who will drive biotechnology commercialization in the Texas Medical Center.

This post is an elaboration on my recent comments at Houston Strategies.

Update: Eric Berger has more thoughts on the matter.