It would be a lot easier to understand just how successful University Enterprise Laboratories in St. Paul has been if no one insisted on calling the place an incubator.
Not that an incubator, to house and nurture start-ups with some professional services and some capital to fund them, wouldn’t be nice to have.
But what the region has, instead, is what the people currently running University Enterprise Laboratories sensibly call a “cluster.” Industry clusters are valuable things, too, and this one just happens to be mostly under one roof.
Known mostly by its initials, University Enterprise Laboratories is a 125,000-square-foot former distribution center with nearly 25,000 square feet of “wet labs” as its defining characteristic.
Walking through UEL, noting the completely unfamiliar logos and corporate names of companies occupying spaces small enough that a staff of a half-dozen pretty much fills it, and UEL certainly looks like it could be a classic business incubator.
But to be an incubator UEL should have shared services, such as a group that does the start-ups’ accounting, as well as a pot of money to invest in some of the most promising companies.
That’s never been the model at UEL, although having a source of investment capital or fund of some kind has been discussed.
“We should have strong enough tenants that they should be able to attract an investor,” explained Todd Taylor, the Fredrikson & Byron attorney in Minneapolis who now chairs the UEL board.
Incubators also usually have what’s called a graduation strategy, meaning that maybe 24 months at home is all one new company gets before it’s booted out into the world. Taylor thinks a similar approach here would likely kill some of UEL’s most promising companies.
There may not be any venture capital coming to tenants through UEL, but start-up companies, particularly in pharmaceuticals and other parts of the health sciences industry, do catch a huge financial break by moving in there. That’s because they likely need wet labs to do their early development work and won’t have to pay to build them.
Wet labs are specialized rooms with the plumbing to deal with chemicals and other liquids, and with the proper ventilation for fumes.
They cost maybe $300 per square foot to build. Because the next tenant isn’t that likely to need one, landlords won’t build one on their own dime, particularly for a start-up company.
The UEL board estimates that by now more than $9 million of value has been realized by the companies that have taken advantage of these facilities over the last decade. That’s about what corporate and institutional donors agreed to contribute, as part of a mix of public and private financing, to bring the facility to reality more than 10 years ago.
And if services aren’t necessarily shared, what are easily shared by UEL’s tenants are fixed assets, expensive things a young company might need a couple of times a week. A good example is an autoclave to clean and sterilize instruments.
“I can walk one hallway down and get five autoclaves,” said John Schorgl, CEO of UEL tenant Peytant Solutions, a small biotech firm still developing its products. “There’s always one open. So I don’t need to buy an autoclave. There are three fume hoods right outside my door. A fume hood starts at $15,000.”
Peytant Solutions last summer moved into about 600 square feet of the cheapest space in the building, back in the no-frills, 3,700-square foot ‘UEL Garage” where the space goes for about a buck per foot per month.
With all the equipment available along with people offering a little help, Schorgl said, “in a sense I feel like I occupy all 125,000 square feet.”
That’s the kind of thing executives say about the value of being in a cluster. It’s a pretty common term in business by now, and it means a group of companies more or less in the same industry that tend to grow faster and be more innovative just by being located right next to each other.
In a cluster, know-how and ideas seem to seep from one company to another, often through informal channels.
Being right in the middle of this UEL cluster is one reason why Prism Clinical Research, the biggest tenant in UEL at more than 17,000 square feet, not that long ago decided to stay in the building for 10 more years.
Prism is a service company, not one with a product development program that takes a lot of wet laboratory space. Much of its revenue comes from helping drug companies do their first human trials of promising new medications, working with a large database of volunteers in and around the Twin Cities willing to participate in medical research.
Prism’s president, Jeff Cosgrove, described ongoing work with three other companies in UEL, including additional work now getting underway with the analytical lab services company ChRi Laboratories, located just a quick walk across the main lobby.
Now on the UEL board, Cosgrove asked UEL property manager Greg LaSalle to come up with a list of companies inside UEL that have worked together, and off the top of his head LaSalle listed more than 10 collaborations, in addition to the three Prism has going.
Cosgrove said the potential of a place like UEL to foster a cluster of biotechnology and health sciences firms is far more exciting now than when the place was first conceived.
On the other hand, he and the other volunteers involved with UEL over the past decade think marking 10 years with a building filled with entrepreneurial companies working with each other is something that needs to be celebrated right now.
“The country is littered with unsuccessful incubators,” said Paul Knapp, vice president with The Vomela Companies in St. Paul and a past chair of the UEL board, in an e-mail. “Very few people in this community appreciate how amazing it is that this thing worked.”