- Life sciences startups can save costs on R&D, academic partnerships and more through New York’s tax credit programs.
- These tax incentives can help stretch investment dollars during the costly initial phases.
- New York has access to a flourishing scientific entrepreneurial community, which can bring a wealth of talent and mentorship to your business.
Deep expertise is the core of a life sciences venture. That’s why many founders flock to areas that are historically popular in their field when starting up and recruiting talent. But it’s a mistake to assume that all the best experts are based in places like San Francisco and Cambridge.
New York is home to a vibrant — and growing — life sciences community. Plus, the state is adapting to better support innovators. Although founders used to struggle to secure the right space in this limited market, the state has developed its real estate alongside a range of extra incentives that now make it worth a second look.
New York offers unique opportunities for research and development, specialized expertise, and peer support, which make the state an attractive option to consider for your early phases.
Stretch your early funding farther with R&D tax credits
Launching a life sciences business is a marathon — not a sprint. Although it’s only the first leg of the race, you should get ready for the long-term demands of research and development: substantial capital, talent and time.
New York’s incentives — namely, its competitive tax credits — aim to expand the state’s life sciences innovation presence. For example, the Life Sciences Research and Development Tax Credit Program offers savings for R&D costs, which can help new startups recover more money for the next phase.
New York’s tax credit program features some of the following:
A fully refundable 20% credit for startups with fewer than 10 employees
A fully refundable 15% credit for startups with 10 or more employees
Credit value of up to $500,000 per year
A lifetime credit value of up to $1.5 million over a three-year duration
Startups that take advantage of these savings will need to check the eligibility requirements and qualified expenditures carefully. Not all R&D costs are covered, such as research contracts. However, the credits can apply to a range of equipment, labor and resource expenses.
Keep in mind that these credits can nicely complement other forms of funding to extend your runway — but they are likely not enough to carry your startup through the lengthy and expensive R&D process on their own. These credits may work best alongside grants and venture capital funds.
Tax credits can help startups recover more money for the next phase.
Although these credits are attractive, the flip side is that your administrative burden could rise. From the application paperwork to reporting and accounting, it is advisable to prepare for the requirements by incorporating them into your strategy. Like any government program, the process can be cumbersome. Still, the savings could make the extra hassle worth it.
Because many life sciences business professionals are familiar with similar paperwork, such as federal grant applications, you could choose to delegate the administrative work to an employee or third party. This can allow you to focus on bringing your ideas to life while still benefitting from New York's programs.
Forge partnerships with academic institutions
When you have a concept that you’re ready to pursue, you may consider refining it alongside one of New York’s respected academic facilities or labs. Academic partnerships can be a gateway to high-quality research and top-level talent for your startup. Luckily, you’ll find some of the most highly rated and recognized scientific institutions in America within the state.
As a bonus, New York may let you conduct your business tax-free for up to 10 years. With the START-UP NY program, eligible businesses that fully operate on (or near) certain academic campuses statewide can eliminate portions of their New York state tax liabilities. For example, a startup that splits operations between a university lab and a traditional office could prorate that credit, eliminating a portion of tax liability.
Tax-free operations for an entire decade may sound too good to be true. And yes, there are limitations. But the savings certainly sweeten the deal if you plan to partner with a local college or university.
Go where the right talent is within reach
The state’s Excelsior Jobs Program can offer an extra boost as you tap into the growing life sciences community to gain talent for your startup. This program rewards businesses for generating brand new employment opportunities within the state.
The Excelsior Jobs Program offers an array of up to five credits, including:
Jobs credit: 6.85% of wages per job created or 7.5% of wages per job created for green projects
Investment credit: 2% of investments or 5% of investments for green projects
R&D credit: 50% of the portion of the NYS credit from the Federal Research and Development tax credit, up to 6% of research costs in New York (or up to 8% for green projects)
Real property credit: Credits for businesses located in one of the state’s designated “investment zones” or “regionally significant projects”
Childcare credit: Up to 6% of net new childcare expenses
For life sciences and scientific R&D businesses, the eligibility requirements for this program are to create at least five net new jobs in New York. There are limitations for these credits, however, so due diligence is necessary. Because startups typically only qualify for one of these programs at a time, it is also a good idea to compare the overall benefits of each program in the context of your business plan before moving forward.
Furthermore, building your peer network in New York allows you to tap into a different kind of talent. Whether you are a first-time or serial founder, having fellow entrepreneurs in your corner can be valuable. That’s why Silicon Valley Bank and EisnerAmper take opportunities to foster connections between founders within the innovation ecosystem. Cohorts understand what you are experiencing — and might offer helpful advice along the way.
For example, within the Business Mentor NY program, entrepreneurs are willing to work with founders as formal or informal mentors. In many cases, these entrepreneurs have reached successful exits in their own companies and are looking for new outlets to use the skills they honed in their own journeys.
Efforts to create a more equitable playing field
Moderate funding doesn’t cut it in the life sciences sector. Realistically, only the founders who raise millions of dollars get the chance to chase their passion. Even if the science is strong, slower fundraising could jeopardize the entire business.
In this competitive fundraising environment, some founders worry about not having the “right” background. To get the extensive funding necessary for R&D, there is often pressure to attend a prestigious university, secure a position at a favored lab, speak fluent English and follow a traditional path. But the innovation economy is changing.
Building a business in a hub that emphasizes diversity, equity and inclusion (DEI) initiatives can not only provide reassurance but also equitable leverage. New York is committed to DEI programs, such as the Bridge to Success Loan Program, which offers short-term loans to Minority and Women-owned Business Enterprises (MWBEs).
Beyond state programs, there are also organizations in New York that share a mission to support underserved founder communities. Social equity investors, including angel groups, venture capitalists and private equity funds, are looking for a suitable match locally. At SVB, the Access to Innovation team focuses on introducing founders to such investors — both in New York and beyond — to advance equity and inclusion.
How does New York fit into your strategy?
The growth of life science business within New York speaks to how the state supports founders. Whether putting down roots upstate, in the heart of New York City or elsewhere, you may find unique advantages that help you cut R&D costs, attract talent and grow your business.
Plus, investors could be paying attention to how your starting location will impact your startup’s path to success. The potential benefits in New York can harmonize with your pitch; lower costs and greater access to knowledge can make for compelling advantages.
Running a startup is hard. Visit our Startup Insights for more advice and information on the different stages of your startup’s early life. And, for the latest trends in the life science and healthcare economy, check out our Healthcare Investments & Exits report.
John Pennett is the Partner-in-Charge of the National Technology and Life Sciences Group at EisnerAmper, and he has 35 years of public accounting experience.