As New York state and city redevelopment officials debate the use of the 16-acre World Trade Center site, practically everyone else is forming an opinion on what the area should be used for. The latest suggestion came from Hillary Clinton Sen. (D-N.Y.) last week. She called for a research institute that would focus on biotechnology, software and information technology.
While using Ground Zero as the placement for a research center is a new idea, Clinton says that she wants to bring more health care companies into New York to diversify the city’s revenue stream.
One group is even willing to help with the cost. The New York Investment Fund (NYIF), a New York-based fund that co-invests with VCs in companies that will economically benefit the city, is willing to put up $3 million to $5 million.
Furthermore, local VCs say Clinton’s idea is a good one. Alan Patricof, chairman of Apax Partners Inc., says “With all these schools, we should have more health-oriented companies around the city. There has always been talk about more biotech here, and now it can be done [at Ground Zero.] It will bring back jobs and it is an appropriate use of the space.”
Patricof went on to say that a lot of biotech companies are formed in Manhattan, but then flee because the city that has just about everything doesn’t have the proper facilities needed to nurture such companies, like enough lab space.
Additionally, with New York University and Columbia University, among hundreds of other educational institutions in the area, there is a viable argument for putting a research facility into the New York mix.
Kathryn Wylde, the president and CEO of the NYIF, says it’s crucial for New York City to reinforce its position in the 21st century as a biosciences leader. “We have eight top medical research institutions and it doesn’t successfully translate into commercial activity here,” she says. “We need to organize the industry and create some space for these companies.”
However, the lack of such a center may not be the only thing that is keeping companies away from the area. Simone Lee, a partner at Baker Capital, a New York-based firm in the midst of putting its $1.1 billion Fund II to work, says that while he feels a research center in Manhattan a is great idea, it will be difficult to keep companies from relocating to less expensive areas. “We have key intellectual points and a lot of financial institutions, a research function would be a fantastic addition,” Lee says. “But turning the research into companies in New York will not be easy. Rents are too expensive for a startup, and that’s a major problem.”
According to Wylde, an appropriate sized space for a bioscience startup in the city costs about $70 a square foot. However, a startup on average is only prepared to pay $35 per square foot.
But, for every problem there is a solution. “New York could offer incentives,” argues Darryl Wash, founder of Ascend Ventures, a New York-based firm that focuses on early stage businesses that leverage emerging technologies. “New companies usually locate to where the founder is most comfortable living, the resources are good and the area is economical,” he says. “If the city could provide space at low cost and the other necessities, like good shipping services and computer hookup services, people might migrate. They might even stay long term if the infrastructure was right.”
Wylde agrees. “The only research lab we have is 150,000 square feet and there’s a waiting list to get in there. The city has to build something bigger and offer incentives to make up for the cost gap,” she says.
Nevertheless, such a facility could take years to build and an enormous amount of money, which the struggling city doesn’t have. However,
NYIF is willing to invest in the center and hopes to eventually be able to put up to $1 million into some of its offspring. “This could be an opportunity to partner with VCs and undertake a project that will make it so they don’t have to get an airplane to do business,” says Wylde, adding that the city could also put some of its economic recovery money to work to defray the cost of building a facility.
It is unclear whether VC firms would be willing to invest in the center because details of the plan are still to be developed, but the more talk there is the more excited the VCs seem to get. Patricof says, “I’m glad [Clinton] brought this issue to the forefront,” Patricof says. “In fact, the more I think about it, the sooner this happens, the better.”
Contact Danielle Fugazy at Danielle.Fugazy@tfn.com