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Expansion of Incubator Network, Seed Fund Among QB3 Priorities for 2011

By Alex Philippidis

NEW YORK (GenomeWeb News) – The California Institute for Quantitative Biosciences, or QB3, plans to expand its incubator network and space leased to startup companies in 2011, as well as grow its fund created to support startups.

The QB3 Mission Bay Incubator Network now consists of 37 startups in three locations — the original 2,500-square-foot QB3 "Garage" at the University of California, San Francisco's Mission Bay campus; a 10,000-square-foot block of space catty-corner to the campus at the headquarters of FibroGen; and an incubator space opened earlier this year at UC Berkeley.

"Those three facilities are completely full, and so now the big challenge for us in 2011 is to expand our capacity," Douglas Crawford, QB3's director of industry alliances and associate executive director, told GenomeWeb Daily News. "We're filling and growing 10,000 to 15,000 square feet a year. I don't know what the ceiling of that is. We couldn't get to a million square feet this way, but by no means have we sated our current interest. Certainly, I think I'd like to add 10,000 or 15,000 square feet, if not 20,000 or 25,000 square feet more in 2011."

That additional space is likely to be created, he added, on the East Bay side where the incubator space at UC Berkeley opened, rather than within the Peninsula side where the two Mission Bay facilities are.

"My phone rings at a consistent pace of one to four new companies a week, and we're closing 2, 2-1/2 new leases a month, and that doesn't seem to vary with time," said Crawford. "So it's not pent up demand. This opportunity … is enabling. These entrepreneurs file SBIR grants, look for seed stage financing, [and] try to pull the pieces together. If it wasn't for this sort of a space they wouldn't get started."

QB3 — which includes the University of California's San Francisco, Berkeley, and Santa Cruz campuses — has also sought to support early-stage life-sci companies based on UC discoveries through the seed venture fund it established last year, Mission Bay Capital LLC. This year Mission Bay Capital has invested in three companies, not all of them seed stage, however:

Those firms include Redwood Bioscience of Burlingame, Calif., a biotherapeutics company using "aldehyde tagging" technology joins smaller drug molecules with larger proteins. The technology was licensed from UC Berkeley. It also includes Calithera Biosciences, a UCSF spinout that converts caspaces, enzymes that carry out programmed cell death, from inactive to being capable of killing cancer cells; and iPerian, formerly iZumi Bio, a biopharma company that applies cellular reprogramming and directed differentiation to patient-derived induced pluripotent stem cells for drug discovery.

"We're right now in three therapeutics programs. I would love to expand that to involve diagnostics and research tools and medical devices, and we're keenly interested in doing that," Crawford said.

Investing in a variety of stages of funding diversifies the portfolio of Mission Bay Capital, reducing the risk inherent in funding an all-startup portfolio. It also links the fund to more successful startups and offers valuable education in bringing venture capital expertise inside the UC system, Crawford said. It has helped, he added, that Mission Bay Capital has built relationships with venture capitalists, allowing for multiple-investor funding rounds.

"We'd love to help bring more attention from the venture community to university programs. By being an active member of that community, by participating with them in later [stage] things, and larger things that they're doing, and inviting them to look at and play in our seed-stage round, we will increase the total activity out of the university," Crawford said.

Mission Bay Capital is also in process of increasing its capital under management from the current $10 million. The size of the additional investment will be announced after another limited partner closes on an investment, something expected to occur by year's end, Crawford said.

The expansion is in line with the goal Crawford expressed a year ago. Speaking with GWDN, Crawford said the fund would "love to get somewhere between $10 million to $15 million."

The fund began with eight limited partners raising $7.5 million in two 2009 offerings, then rose to $8.5 million in February 2010 after Zcube, the research corporate venture of Italian pharmaceutical leader Zambon Co., invested $1 million to join Mission Bay Capital.

"We have some very exciting projects that we hope to be able to make investments in soon, maybe even one more this year in 2010. Certainly, the first quarter next year will be a very active quarter," Crawford said.

On the research side, according to Crawford, QB3 will continue its ongoing five-year-old collaboration with UCSF and GE Healthcare in developing new imaging techniques to track real-time changes in tissue, using hyperpolarized C13 intended to increase the sensitivity of MRIs for cancer diagnostics.

Late last month, QB3 announced the collaboration produced its first results in humans of a new real-time metabolic imaging technology designed to quickly assess the presence and aggressiveness of prostate tumors. Data on the first four patients was presented Dec. 2 at the Radiology Society of North America's annual conference.

Crawford also noted that QB3 plans to grow its new masters program in translational medicine, launched this year with 14 students after former Intel CEO Andy Grove pledged $1.5 million to UCSF and UC Berkeley.

In addition, he said that QB3 expects to remain at $5 million a year in state funding, despite California's financial difficulties.