Florida Building a Biotech Hub: Importing Silicon Valley?

Those of you familiar with some of my papers will note my interest in the emerging triple helix in the State of Florida, which has focused on biotechnology.  This is especially interesting as a government has decided to attract a science-based  industry and build a knowledge-based biotechnology hub from scratch. In the big picture it is attempting to import Silicon Valley.  The effort is more than creating wealth, high paying jobs, and economic development. Its also about education for the young in Florida, catalyzing more interest in science, and solving big medical problems that effect many, including the elderly and the poor. Its a very important story, and one that I have been following, studying, thinking and writing about now for 8 years. Its relevant to institutions and people all over the world — governments and their economic development agenices trying to grow their innovation regions, to universities seeking to exploit their research and technologies, to entrepreneurs seeking new opportunities or to grow their current businesses, to angel and venture capital investors, to institutional investors who put their money to work in a variety of asset classes, and to you, I, and our families.  For instance, the Scripps Research Institute in Florida has a funded research project to understand better what is going in the brain with alcoholism, and the  long term result of such knowledge could be a drug that cures alcoholism, a disease that most of us have painfully experienced either ourselves or through our friends or relatives at some point in our life.

Good Medicine but Not Biotech Innovation and the Attraction of “R”

While there has always been good medicine — hospitals and surgeons — in Florida, and some decent research facilities, such as the Miami Eye Institute, an innovative biotechnology industry per se did not exist. Few biotech start-ups emerged over the years, especially in comparison to a region such as San Diego. Influential people in the State wanted to change the State’s image from that of a sunny place for tourists, and the consequential low wage structure that evolved. Instead, science was the way to go, it was decided. The State decided to start with the “R” part of the equation — Research.

To do this, the State launched this effort  of building good “R” with the attraction of the leading institute for biotechnology research in the world — The Scripps Research Institute .  Essentially, Scripps was out of room to expand in San Diego and saw this as a good opportunity, and Florida wanted a world-leading brand for a research institute. (The history of this deal is one of a “power play” and quite interesting). A $500 million plus deal was put together, and Scripps opened an “arm” in Southeast Florida — both Palm Beach County and the City of Jupiter assisted with funds and the center opened in Jupiter, Florida in 2003.

Since that time Palm Beach has attracted other research institutes, such as the Miami Eye Institute, from a little further south in Miami, and the Max Plank Institute, from Germany, which was a huge win. Recently this institute stole its CEO from Duke University, Dr. Michael D. Ehlers. A huge win on top of a huge win. In addition, the County has been able to attract a variety of companies.  Other developments are in the pipeline, such as an innovative nursing home / cutting edge medical research institute to be built near the Scripps Florida headquarters.

Risk Capital Crucial to Regional Development in the Knowledge Economy

However, like a lot of regions trying to develop a knowledge-based economy through innovation and entrepreneurial activity, Florida, and especially Southeast Florida, is undersupplied with risk capital.  Time and time again on my interviews during my last research stint in the region, this issue was raised as the “missing ingrediant” to, in the words of Steve Jobs, “boom”. There is but one true professional venture capital fund in the region currently. The town of Jupiter, which is sensitive to the issue and is also sitting on a wad of cash from local real estate taxes, recently started a $3 million venture capital fund. This is a good start, for seeding companies, in additon to a small amount of angel capital that has been flowing into the region, some of it from the Research Triangle region in North Carolina. However, this is not nearly enough.  Big venture capital is needed, especailly for those new ventures in medicine should they be medical equipment, biotechnology, or genomics type ventures. One big fund is not enough either; there must be multiple funds so that competition ensues, as I’ve blogged about earlier posts and have written and talked about elsewhere.

Scotland, Pittsburgh, Others and the Shortage of Risk Capital Curtails Innovation

So, similar to the situation in Scotland, or, Pittsburgh, Pennsylvania for that matter, a shortage of venture capital curtails innovation, new company creation and growth.  Plenty of regions in the world face the same issue.  The danger for Florida is that the outputs of the “R” side that could lead to innovation and new firm creation and growth are either a) lost or b) exploited by some other region. In this case, that would be most likely San Diego, where Scripps is headquartered and where a healthy supply of biotech venture capital can be found, Boston, which is an East Coast neighbor, or Silicon Valley, where the brunt of biotechnology research, development, innovation and venture capital sits.

Migration of Venture Capital?

However, at least the economic development agency of Palm Beach admits this weakness, and is aims to lure venture capital away from other regions such as Silicon Valley, Boston, the Reserch Triangle or Austin, Texas. We are still in the early stages of this game. For years Florida was the centre of migration for citizens of the US, and other countries such as Cuba. However, will venture capitalists migrate to its sunny surrounds?

So more questions follow:

• How might the State of Florida, Town of Jupiter, or County of Palm Beach (or combination of all 3) lure venture capital away from other regions?

• What about the strategy of not luring firms away, but rather encouraging them to raise new funds and open up new branches in Florida? How might institutional investors be enticed to invest in newly formed funds to be located in Florida?

• Should the State/County/Town invest in a Supraregional or SupraState fund-of-funds that would invest in newly created or expanded 3rd party venture capital funds? Is this a good use of public monies? Is it justified? If it is not done, and a) and b) fail, does the initial investment in “R” thus go to waste? If such fund-of-funds are created, how should they be managed, and what limitations / rules should be put around them and their operations and why?

• Finally, and this is a big question: What else is needed in terms of infrasctructure to facilitate and grow an innovative, entrepreneurial environment in Florida?

We’ll be revisiting the growing biotechnology hub in Florida in later blog posts. And hopefully grappling with these questions further.

Advertisement