The venture capital pedigree for InCube and San Jose-based start-up guru Mir Imran is unquestionable, and the venture continues to raise money. But is InCube too much of a gamble for the city of San Antonio?
A wide range of news media has recently covered San Antonio’s InCube Labs — a San Jose, California-based biotech venture capital group headed by Mir Imran that has focused on the city of San Antonio as a new biotech hub — and how the venture has successfully raised close to $30 million to fuel new biotech jobs in the city, as well as several relocations of biotech companies from California into San Antonio.
A recent article in the San Antonio Business Journal outlines how Mr. Imran has committed a great deal of his own time and resources into the project, making the city his second home in an effort to stoke investment and growth in his project. The article spins the project in such a way that suggests that InCell has been extremely successful to this point, which in large part has involved the raising of capital and relocating a few companies:
“Imran told the Business Journal in June 2010 that for InCube to be successful in San Antonio, to have the financial legs needed to launch new bioscience technology and companies, it would have to secure local investor support. InCube has found open arms.
Imran now says InCube has secured roughly $30 million to date in local funding, which includes both public and private investments.”
The article goes on to explain that InCell’s efforts have included the relocation of Corhythm Inc., Fe3 Medical Inc. and Neurolink Inc. into the San Antonio area, and that the lower cost of living compared to the Silicon Valley and other established biotech hubs will continue to encourage biotech growth in the city.
Not all perspectives on the InCell project in San Antonio are positive, however.
An editorial on MySanAntonio by Greg Jefferson argues that the vast majority of investment into InCell has come from the city itself, and that the gamble on bringing biotech to San Antonio is too risky for the city to make. Jefferson points out that the city, in conjunction with Bexar County, the University of Texas at San Antonio, the University of Texas Health Science Center, and the Texas Research and Technology Fund have contributed a total of $10 million toward the $30 million dollar investment in InCell thus far, and that the prospect of this $10 million dollar investment paying off in the long run is tenuous at best:
So the city et al are investors. But they’d probably only see a profit if Big Pharma or medical device makers devour the startups for their products. That’s the exit strategy for most venture capitalists.
That’s also a big “if” because most biotech startups fail — something on the order of at least 85 percent. It’s not hard to see why. These ventures require gobs of capital for R&D; the technology may not pan out; and the companies often are subject to strict government oversight.
Proponents of the effort would argue that what mitigates Mr. Jefferson’s view is the fact that the Texas biotech sector continues to grow in leaps and bounds, and that all of the state’s major economic cities have a unique opportunity to attract biotech talent. Add to this the strong track record of Mr. Irman’s start-up efforts — only two of his twenty-two venture capitalist projects have ever failed — it would seem that InCell is probably the best bet for bringing biotech to San Antonio.
The Greg Jefferson piece, however, argues that it is not a lack of faith in Mir Imran, but rather the biotech industry in general, which has a high rate of failure, that makes the city’s gamble too risky. His citing of minimal results on the investment to date,claiming that the endeavor has cost an astronomical $857,142, may be an unfair criticism, considering that the plan is to see the InCell investment mature by 2015. But the mere difficulty in being able to objectively characterize the InCell project at present as either a “success” or “failure” speaks to the inherent gamble of trying to bring the biotech sector full force into the city, as well as the optimal characteristics of the Texas biotech sector, and how opportunity still exists to attract biotech talent and investment into the state.