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Company
Town
Yale
wants to turn New Haven into a hotbed of spinoff businesses.
May/June 2009
by Bruce Fellman
Bruce
Fellman is managing editor of this magazine.
On a
dreary afternoon this past March, Jon Soderstrom had a problem. But it was an
excellent problem to have.
Soderstrom
is managing director of the Office of Cooperative Research (OCR), Yale's
technology transfer department, which helps faculty and others who want to
commercialize their research findings. A fledgling water purification company
called Oasys had recently secured $10 million in startup capital, and the
founders wanted to set up shop in New Haven. But Soderstrom had to turn them
away, reluctantly, because New Haven's business incubators were nearly full.
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In the last ten years, Yale has helped start at least 34 new companies in greater New Haven.
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New
Haven has about 500,000 square feet of business incubator space in several
buildings of the old Winchester firearms factory—renamed Science Park and
renovated, beginning in the 1980s, with funding from Yale, the city, the state,
and the Olin Corporation. But most of the available space is currently filled
by more than a dozen startups. Another incubator, downtown at 300 George
Street, also is almost fully occupied, by eight Yale-connected biotech
companies. "I'm back to where I was when I came to Yale in 1996," says
Soderstrom. "We had no space then, either."
Back
then the lack of space wasn't a problem, because OCR wasn't fostering startups.
From its founding in 1982 through the mid-'90s, OCR's job consisted primarily
of helping to license Yale discoveries to existing companies. (The most successful
was an anti-AIDS drug called Zerit, licensed in 1988 to the company now called
Bristol-Myers Squibb.)
But
about the time Soderstrom arrived, OCR received a new mandate. In the last ten
years, Soderstrom says, his office has helped start at least 34 new companies
in New Haven and the surrounding area. The total investment to date in these
endeavors is about $3.3 billion. Most of this—nearly $3.1 billion—has gone to
more-mature biotech companies, such as Alexion Pharmaceuticals, which has
raised about $1 billion; and Vion Pharmaceuticals, whose cancer therapy drug
development program has raised $271 million.
Yale's
research plans seem to guarantee that there will be no lack of spinoffs in the
future. The university is emphasizing nanotech, genomics, environmental
engineering, and other fields that are promising sources of useful products.
And it has recently acquired a huge second campus with state-of-the-art labs,
which, says biologist Michael Donoghue, vice president for West Campus planning,
"should provide the basis for some interesting partnerships."
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Yale companies support only about 800 jobs in New Haven.
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Yale
sees the startups as part of its larger effort to bolster New Haven's economy.
Yet by Soderstrom's estimate, the Yale companies currently operating in New
Haven support only about 800 jobs, a small fraction of the city's employment
base. Moreover, the companies that survive and grow tend to leave. "Business
attraction and retention are big challenges," says Michele Whelley, who heads
the Economic Development Corporation of New Haven, a private nonprofit begun
last year with a $1.6 million grant from Yale. Of the six companies founded in
the past ten years that have gone public, only two—Vion and Achillion—remain in
New Haven. Curagen and Neurogen are based in nearby Branford. The biggest of
the companies, Alexion Pharmaceuticals, which generated nearly $260 million in
revenue last year, is headquartered in Cheshire, 15 miles to the north; its
manufacturing facility is in Rhode Island.
Whelley
points out that growth in the greater New Haven area does benefit the city. But
she wants more companies to stay in town, and she attributes the exodus primarily
to the fact that the surrounding towns can offer less-expensive lab space.
Given
that the Winchester factory complex covers 80 acres, land isn't the problem.
Yale vice president Bruce D. Alexander estimates that Science Park, properly
developed, could hold more than two million square feet of usable space. But
development has been slow. He's working with the Science Park Development
Corporation, the nonprofit that oversees the area, to negotiate with developers.
Currently, a new parking garage is under construction, and another building is
slated for remodeling as office, retail, and apartment space. Downtown, another
incubator is in the works. (Other plans are on hold because of the recession.)
The
biggest economic question is whether the startups will ever have a serious
impact on the employment picture in New Haven. At present, these small
companies mainly require people with advanced research degrees, who mostly move
in from elsewhere. In the long term, if more startups succeed and if they stay
in town, New Haven will see steady growth in jobs for technicians and lab
workers.
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New Haven needs "an educational system aligned with the jobs of tomorrow."
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But
the poorest New Haveners, Soderstrom says, are not getting the training to take
advantage of these jobs. He argues that the city needs to develop "an
educational system aligned with the jobs of tomorrow." In 2007, only 13 percent
of the city's tenth graders exceeded the state's goals for math and science
competence; statewide, the figures were 45 and 44 percent, respectively.
Mayor
John DeStefano Jr. recently suggested that a major overhaul of the public
school system is in the works. For its part, Yale, which has been increasingly
involved in the public schools for the past 15 years, is working with local
school districts on a K-through-12 science program "to create a cohort of
students with real interest in science and technology," and help prepare them
for college and technical school, says Alexander.
It's
possible to discern in all of this activity—Yale's hands-on involvement in city
planning, economic development, and science in the public schools—the outlines
of a large-scale social planning scheme. Since taking office, President Richard
Levin, an economist who studies industrial research and development, has often
spoken admiringly of the relationship between Silicon Valley and Stanford: how
Stanford's computer science research fostered the growth of the valley, and how
the valley's successful entrepreneurs benefited the region's economy. (Many of
those entrepreneurs have also become Stanford donors.)
Yale
missed out on the Internet revolution. But today, it's trying to create the
conditions for a biotech/nanotech boom in south central Connecticut—the
research, the infrastructure, even the workforce. Will a Biotech Valley bloom
in the Northeast? Well, New Haven's terrain is more of a coastal plain. Call it
the Bioshore. |
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