- Texas is quickly rising as a hub for life science startups.
- The state offers a $4 billion taxpayer-funded grant program for oncology, among other incentives.
- Houston’s giant academic, research and clinical medical complex, Texas Medical Center, is a draw for startups looking for access to a broad and diverse population.
Beyond the firm’s splashy magazine covers, biotech startup Volumetric is developing synthetic organs with a vascular architecture that mimics those inside the human body. Volumetric’s tech is promising enough that healthcare giant 3D Systems recently scooped up the startup in a deal worth up to $400 million.
Interestingly, this research, development, and deal-making didn’t go down in one of America’s two major life science hubs: Silicon Valley or Boston-Cambridge. It happened in Texas, specifically Houston, a rising center for life science startups. Houston’s healthcare sector is surging, fed by a boom in lab space, research dollars, talent and funding.
And talent is following. A good example is Fiona Mack, Head of Johnson & Johnson Innovation - JLABS at the Texas Medical Center, a 34,000 square foot startup accelerator and biotech incubator space. Mack, like many other Texas biotech stars, isn’t a native to Texas; she moved from the NYC metro area two years ago. “I was impressed by the talent in Texas and certainly the possibilities that exist in the life sciences here,” says Mack. Here’s why Mack, and many others, are choosing the Lone Star state.
1. Incubator opportunities are opening up
Texas tends to go big. And you wouldn’t argue with the statement once you’ve seen the Texas Medical Center (TMC), a medical complex in Houston that serves 10 million patients a year and has $3 billion worth of construction projects underway. One of its tenants is JLABS, where oncology, pharmaceuticals and medical device-related startups utilize wet lab space and other hardware. Startups also benefit from all the nearby brainpower.
“Every founder that comes into JLABS is paired with a mentor within Johnson & Johnson, who gives them access to the entire enterprise of expertise that would come with such a large pharma presence. We also make introductions to our investor community,” says Mack.
JLABS is not the only incubator in Houston. Nearby, the year-old K2bio hosts nearly 30,000 square feet of space for early-stage life science startups with wet lab space and an onsite vivarium capable of hosting 6,000 mice. Co-Founder Andrew Strong says the idea is to help drug developers stretch their arms as they develop preclinical studies and conduct process and analytical activities.
“They can use our office, our dedicated lab space, and our high-end pharmacodynamic imaging, process development and analytical equipment. We handle the supply chain. We're letting these companies focus more on their science, and less on the logistics.”
Houston doesn’t hold a monopoly on incubator space. Up north in Dallas, BioLabs recently opened a 37,000-square-foot flexible life science facility with space for 35 startups. And on San Antonio’s east side, the two-year-old VelocityTx hosts 17,000 square feet of collaborative space for biotech innovators, with expansion plans to create an innovation district. In Austin, UT Austin’s Dell Medical School runs CoLab, a launchpad for health innovations aimed at easing the path to market.
Strong says that each of the big Texas cities has become a hotspot of health innovation. “In Houston, you see a lot of work in cell therapies, cancer and infectious diseases. In Dallas, you see rare genetic and brain, and CNS diseases. And in Austin and San Antonio, you see a lot of device and med tech innovation. You’re starting to see these centers of excellence grow.”
"There are a lot of different tools and levers that makes Texas unique. Not that other states aren't doing unique things, but I think Texas does well by luring companies here, then finding ways to continue supporting them."
2. Strong incentives, especially in oncology
Startups and established companies are moving to Texas for several reasons: The taxes are lower, the regulations are fewer and housing, in much of the state, costs less than in most of California. A lesser-known motivation is the growing pool of incentives aimed at biotech innovators. The largest grant programs come from the Cancer Prevention and Research Institute of Texas (CPRIT). It’s the largest state cancer research investment in the history of the US. CPRIT has doled out $3 billion to research institutions, early-stage companies and more, all focused on oncology, and has another $3 billion to spend.
“It’s a unique program,” says Mack. “It does two things. One, for companies that started in Texas, it provides some guidance for their next funding milestones. And two, it also attracts talent from all across the country, whether it’s funding the product development of a therapeutic device or bringing in academic researchers to a campus. These are the types of folks that have the entrepreneurial spirit to start the companies that might change the fight against cancer.”
While CPRIT is focused solely on oncology, the number of grants for life science startups across the board is also growing. Take for example the Texas Medical Center’s Venture Fund, a $50 million initiative to fund early-stage companies developing therapeutics, medical devices, and more; the Cancer Focus Fund, another $75 million in committed capital and expertise, and philanthropies like the Lyda Hill, aimed at early-stage discovery science.
“There are a lot of different tools and levers that make Texas unique. Not that other states aren't doing unique things, but I think Texas does well by luring companies here, then finding ways to continue supporting them,” says Strong. For example, New York has a collection of state tax incentive programs that can make it a very desirable location for an LSHC founder.
3. A steady stream of life science grads
“In terms of talent pool, it’s definitely here,” says Mack. Texas boasts fifteen medical universities, including Rice University, The University of Texas and Texas A&M, all partners in the TMC3 collaborative research campus at the Texas Medical Center. “Innovators are starting companies here, attracted by the translational research that’s possible” at the TMC behemoth, says Mack. A steady flow of 18,000 statewide healthcare and life science graduates per year helps. The total industry workforce nears 100,000, the fifth-largest biotech workforce in the country.
Strong says he’s seen a sea change in career growth here. “Texas is at a stage of the development story where, when a life science company goes under, its talent gets quickly reabsorbed into new companies, and they become the next leaders. That happens all the time in Boston and San Francisco. But we're seeing it now in Texas: When companies turn over, executives are staying here.”
4. Growing investment opportunities
While Texas may not be considered in the same tier as the Bay Area or Boston in terms of VC funding, Texas is catching up. VC firms savvy to the state’s booming tech scene are honing in, such as Live Oak Venture Partners, an Austin-based, early-stage focused firm that recently announced a $210 million fund targeting Texas founders, and S3 Ventures, which announced a $250 million, Texas-focused fund last month. Austin-based Santé Ventures is also a big player, recently closing their $260 million fund IV, for healthcare and life science. And that’s just a start.
5. A broad patient population
Texas is an R&D powerhouse, as evidenced by its first-in-the-country ranking for clinical trials; there were 30,000 trials underway in 2020, besting both California and New York. “What’s also quite distinguishing about Texas, and especially Houston, is that it has a truly highly diverse population,” says Mack. “If you’re thinking about developing drugs and developing devices in an institution that is driven from a clinical, translational medicine approach, that’s a powerful thing.”
Strong concurs. “Every company in oncology wants access to MD Anderson's patient population. They see every type of cancer in the world, and 130,000 patients at any one time, total. The biggest challenge for a clinical stage oncology company is lining up the right patient, the right drug, and the right time. Here, that’s entirely possible to do.”
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