There's a problem in the venture capital world. The amount of venture funding flowing into startups has been reduced by the financial crisis, but VCs are still looking to make money off new technology businesses. Biotech is another story. A mobile application or social networking website can turn to gold far quicker than a biomedical play.
"[Information] technology has faster exits than biomedical," said Dr. Jacob Levin, Assistant Vice Chancellor of Research Development at the UC Irvine Medical Center. "The burden of the FDA approval process isn't there. It can take eight years to get a new technology or treatment approved."
According to Levin, the dreaded "valley of death" — the point at which a startup moves from early stage funding to more serious investment, commercialization, and revenue — for biomedical is "expanding." This is a major challenge in Southern California, where biotech is often viewed as the region's answer to Silicon Valley's tech juggernaut.
Levin and his colleagues at UC Irvine are attempting to change that by setting up TechPortal Orange (Levin is the Executive Director), a biomedical incubator that will provide research space and access to faculty, students, and high-level medical professionals — as well as businesses services — to as many as 14 startups.
TechPortal Orange is a lot like Idealab, a well-known incubator in Pasadena I recently visited. The key difference is that TechPortal Orange is completely oriented toward biomedical startups, where Idealab is working with a more diverse array of small companies, in energy, robotics, technology, and also biotech.
Given what's happening with the larger-scale venture capital scene, incubators are serving a "critical" role, according to Levin. "The companies that wills set up here will have a slow burn rate. They'll use staff only as they need to, and they'll pay for services only as they need to. This is important when that bridge money is so hard to come by."
Ultimately, TechPortal Orange will provide benefits to the university, according to Levin. The UC Irvine School of Medicine has established the incubator to accelerate research and to nurture companies that are basing their technologies on UC Irvine intellectual property.
Why is this so important? Because there's often a gulf between research in university labs and the commercial market. TechPortal Orange wants to encourage companies to leverage research and new technologies to ensure that innovations are properly funded and developed.
The end result is, ideally, healthier people and a competitive new biomedical industry in Southern California.
Biomedical and biotech is a massive, multibillion-dollar enterprise; in California, the only thing that's bigger is information technology (no surprise there). Biotech is actually twice as big as the entertainment industry, according to the California Healthcare Institute. It also remains attractive to VC, even though the funding levels are dropping:
According to the PricewaterhouseCoopers/National Venture Capital Association MoneyTree Report with data provided by Thomson Reuters, California life sciences companies attracted $2.5 billion in venture capital funding in 2010, down from $2.7 billion in 2009 but still more than any other high-tech sector in the state.
There's plenty to work with here. And TechPoral Orange looks like it's ready to help startups make it happen. I'll keep tabs on their progess.