CEO Roundtable: NoCo’s bioscience companies trying to find funding from the coasts

FORT COLLINS — The top two challenges for bioscience companies in the region are figuring out how to translate science into a startup and getting the attention of venture capital investors, according to a group of academic and business leaders in Northern Colorado.

The group of seven executives spoke at BizWest’s Life Sciences CEO Roundtable Tuesday morning on regional efforts to get new discoveries from university laboratories to the market, trying to raise early funding and what it’ll take for large venture capital firms to take Colorado companies more seriously. 

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From professor to entrepreneur

University professors have traditionally opposed trying to take discoveries produced in their labs to the commercial realm themselves. However, younger faculty members have shown more of an interest in spinning their research off into a company, said Terry Opgenorth, executive director of CSU Ventures’ Launchpad program.

“The campus is sort of bipolar in that there are some who still hate it, saying the word is bad and we shouldn’t even think about profits,” he said. “That stereotype still exists to some degree, but I think that has changed because our world has changed with the economy, the digital economy and all sorts of new inventions that have changed how we live.”

But the skills that make for an excellent researcher don’t always transfer over to the skills needed to run a startup. Brian Heinze, research and development director at OptiEnz Sensors, joined the company as a post-doctorate in 2010. While the technology it was producing was wide-ranging, investors wanted to see a smaller number of applications that could meet the specific needs of pharmaceutical customers.

“For a few years, we really acted like a university lab,” he said. “We were on campus, we were looking at making sensors for different compounds and not focused at all on the market… It started that we needed to bring in investment, and that’s when things started to transition.”

Dave Frisbie, director of the CSU Translational Medicine Institute and co-founder of stem cell company Advanced Regenerative Therapies, said programs such as CSU Launchpad and other professor-to-entrepreneur programs are particularly effective because they put the professors in a position to think about at what point they should hand over the reins to someone better suited to grow the company.

“They beat it into everyone’s head that you as the inventor at some point need to get out, because that’s the health of what’s going to make this grow, and it’s just a normal thing,” he said.

Little interest from coastal VC firms

Although Boulder County is home to high-capital bioscience companies such as BioDesix Inc., ArcherDX Inc. and PanTheryx Inc., PhotonPharma Inc. CEO Jon Weston said the divide in funding isn’t between Boulder and Northern Colorado; it’s between Colorado and the coasts.

Weston believes this comes down to the tight-knit investment relationships formed over years of technology investors and their local companies, along with the ability to easily meet with startup owners looking for cash.

“If you’re in the Bay Area or Palo Alto, invest down the street and you can get their knickers every day,” he said. “In Colorado, you gotta fly out here.”

More than 75 percent of venture firm investments in the life sciences sector flow to companies in California, Massachusetts and New York, Innosphere life sciences program director Ben Walker said.

One Innosphere fund offers relatively small pre-seed stage investments to its cohort companies, which Walker believes is effective in getting those companies to a point where they’re more attractive to heavy investors. However, if those local companies land a multi-million dollar investment, they may be forced to leave Colorado.

“If someone gets acquired, they say now you have a choice to move to the East Coast or the West Coast because they want to watch the money they’ve invested in the company,” he said. “I think if we can get more investors here and keep the companies here, I think it’s good for the state.”

To Opgenorth, getting the attention of large investors is somewhat of a catch-22: investment firms don’t show a lot of interest in regions where there aren’t many deals to begin with because it’s more efficient to search for multiple companies to fund in hotspots.

“Without significant investment, it’s almost impossible for these companies to do anything significant,” he said. “They’re going to crawl along, patching a little bit of funding here or there from SBIR grants or other kinds of funding, even if it’s friends or family. It’s not often enough to really accelerate into growth mode.”

Anchor companies coming and going

“We don’t have a lot of those, so attracting or growing those to where you have a critical mass of talent and the money to go find that talent is pretty significant,” Opgenorth said.

That’s a statewide problem, he argues, further deepened by a revolving door of major pharmaceutical companies entering and leaving Boulder County. Amgen Inc. (NASDAQ: AMGN) left its two plants in Boulder and Longmont in 2015. AstraZeneca PLC (NYSE: AZN) bought those buildings only to shut down operations there in 2019.

The Longmont plant is now owned by gene therapy maker AveXis Inc., while the Boulder site is apparently a target for a $100 million project by an unnamed Japanese contract pharmaceutical maker.

But the successful startups built in the region don’t get the opportunity to become anchor companies because they are often snapped up by giants, as is the case when Pfizer Inc. (NYSE: PFE) bought Boulder’s Array Biopharma for more than $11 billion last summer.

John Pawlikowski, CEO of water testing device maker In-Situ, said that lack of heavy financial interest creates a problem at his company that is both the same as what almost every other business in a low-unemployment climate is dealing with, yet completely opposite.

“In lower-level positions, we’ve done pretty well bringing in our hourly workers. Where we find it a bit more difficult is at the technical and the senior level,” he said, saying that the company is currently hiring a new vice president from the United Kingdom and recruiting for a manager in Chicago. “We looked here and we weren’t able to find somebody local.

BizWest CEO Roundtables are sponsored by Plante Moran, Flood & Peterson and Elevations Credit Union.