Episode 43: If You Build It…We Will Grow: Ceres Nanosciences Utilizes New Accelerator to Scale Up

May 21, 2018

According to Brookings Institution research, there are approximately 700 business incubators or accelerators in the United States. Accelerators and incubators offer entrepreneurs good opportunities early on. Company founders get help to quickly grow their business and they often better their chances of attracting a top venture capital firm to invest in their startup at a later point.

Today’s episode focuses on a company called Ceres Nanosciences which evolved out of George Mason University campus in Manassas, Virginia. In 2014, they were the first company to sign-on with the newly-created Prince William Science Accelerator. Four year later they have grown dramatically and they are the first company to graduate from the facility.

We interview two key players in this episode. Ross Dunlap is a founding member and the CEO of Ceres Nanosciences. Jeff Kaczmarek is the Executive Director of the Prince William County Department of Economic Development which manages the Accelerator.

 

 

Andy Levine (DCI): According to Brookings Institution research, there are approximately 700 business incubators or accelerators in the United States.

Patience Fairbrother (DCI): Accelerators and incubators both offer entrepreneurs good opportunities early on. Company founders get help to quickly grow their business and they often have better chances of attracting a top-venture capital firm to invest in their startup at a later point.

Andy: Today’s episode focuses on a company called Ceres Nanosciences, which evolved out of the George Mason University Campus in Manassas, Virginia. In 2014, they were the first company to sign on with the newly-created Prince William Science Accelerator. Four years later, they’ve grown dramatically, and they are the first company to graduate from the facility. So welcome to Episode 43 of “The Project: Inside Corporate Location Decisions.” I’m Andy Levine of Development Counselors International.

Patience:
And I’m Patience Fairbrother, also with DCI, and Andy’s co-host of The Project.

Andy: So, Patience, we’re doing something completely different today.

Patience: So you’re finally gonna let me perform this episode as a musical, Andy?

Andy: We’re not gonna go that different, but…maybe on the next one. So today, what’s different is we’re gonna delve into the world of accelerators and incubators and how they can help a new company get off the ground.

Patience: So let’s set the stage by defining the difference between an incubator and an accelerator because these terms are often used interchangeably. So an incubator focuses on the creation of disruptive ideas, as they’re called, with the hope of building a business model and company. It’s an early-stage proposition.

Andy: As the name suggests, an accelerator is designed to accelerate the growth of an existing company and help it scale up faster. But for our purposes today, we’re going to use these terms kind of interchangeably.

Patience: So today’s episode focuses on the Prince William Science Accelerator in Prince William County, Virginia. We interview Jeff Kaczmarek, Executive Director of the Prince William County Department of Economic Development, which manages the accelerator.

Andy: But we’re going to get started with Ross Dunlap, who is the CEO of Ceres Nanosciences. Ceres started working in the Prince William County Accelerator in 2014, and just graduated to a 9,100 square foot facility, about a mile away from the accelerator. They did that in January of 2018. Here’s Ross Dunlap.

Ross Dunlap (Ceres Nanosciences): I’ve been with Ceres Nanosciences from the beginning when it spun out of George Mason University in 2009. Prior to this, though, I worked in management and technology consulting and I worked with a lot of other entrepreneurial and new technology startups in the Metro DC and Northern Virginia area. So I was always very interested in doing something on my own, and just luck introduced me to the inventors of this powerful technology.

Andy: I’m gathering in looking at your LinkedIn bio that your background is a little more on the business side than the scientific side. Would I be accurate in that?

Ross: That’s absolutely right. Yeah, so I am pure business, and that’s why, as a CEO, I focus on aligning, you know, all of our resources, business resources, funding, people, and lining that up with our strategy and how we execute. There is a lot of science that goes on in our company, and, you know, my goal is to find the best people to do the science and to help me commercialize this technology.

Andy: Let’s hear about the technology. And once again, I remind you that most of our listeners are not scientists.

Ross: Let me tell you a little bit about what Ceres Nanosciences does and the space we operate in. We are a life sciences company and we have a technology that’s an innovative, patented technology, we call it the Nanotrap Particle, and we customize and manufacture this and sell it to our customers.

This technology, it’s actually a chemical compound, really, and our customers who buy this are other life sciences companies, so pharmaceuticals, clinical lab testing companies, diagnostic test manufacturers, research labs in government and academia, and they’re all over the world. So let me try to describe the technology itself and use fairly generic terms.

Andy: That would be great. I would pretend like you’re explaining this to a 12-year-old, and that might help me.

Ross: So these are…literally, they are particles. We produce a chemical compound, they’re particles, and we use these particles to capture and concentrate and preserve really valuable molecules or materials out of biological samples. So things like blood, urine, saliva samples of patients.

And what they’re doing is they’re…these particles are improving the accuracy and the sensitivity of diagnostic tests. What that means is that we can detect diseases earlier, we can detect diseases better, and that has, obviously, a huge impact on patient health and outcomes.

Andy: So, you are the first company we’ve interviewed…we’ve done 42 of these episodes so far. You’re the first one we’ve interviewed that has sort of come through an incubator. So tell us about the Prince William Science Accelerator and kind of the benefits of starting out in an incubator.

Ross: So, why did we locate in the Prince William County Accelerator? A little backstory why we are here. So we had been operating out of various labs at George Mason University’s Science and Tech Campus in Prince William County for several years already. And we were growing, and as we grew, we were very limited in our options to expand at the university. Really, they just don’t have a lot of vacant lab space.

Also, we were eager to grow out of the mold of being a university startup and to be seen as more of an independent and, you know, commercial great companies. So the Prince William County Accelerator was the only game in town at the time for a growing biotech company that needed lab space in the Northern Virginia area. There were no other options really. They had just built out their new accelerator, and we were also pushing them to do it for years, and they finally built it out.

Andy: And just so I get this, your alternative would have been basically to build your own space, which I assume would have been cost prohibitive.

Ross: Cost prohibitive for any startup biotechnology company or even a growing biotech company. The resources and the types of space that we require for laboratories is very expensive and specialized. And, you know, the other alternative would have been to relocate and to find other lab vacancies. But that wasn’t ideal because we really had some good roots in Prince William County and in the university as well.

Patience: So this is probably a good point to switch gears to Jeff Kaczmarek of the Prince William County Department of Economic Development for a look at the genesis of this accelerator.

Jeff Kaczmarek (Prince William County Department of Economic Development): We had done a study, Andy, back in 2012 when I first came here. And one of the things they noted was that we did not have commercial wet lab space, and that was causing us…we had lost a couple companies to Maryland. And so when Ceres Nano came along and we got to understand the science and what their growth potential was, it sort of all came together.

I was the new guy in town and maybe the easy mark. So we were approached by a developer who had tried this before unsuccessfully to get wet lab space developed. So that was the genesis in Ceres Nano’s, you know, work, and the incubator kind of coincided and started to align at that point. So it’s kind of a collaboration there between the company and ourselves to both help them as well as to get the Science Accelerator going.

Andy:
Based on Ceres interest, Jeff developed a business plan, and he took it to the County Board of Supervisors.

Jeff: We knew that life sciences was the target industry for us, but we had this gap in terms of wet lab space, and we really wanted to grow that ecosystem, we had to do this incubator. So we made the case to the board, and to their credit, they backed us. And you think about this, this is a conservative county, and basically, I had to go down and say, “Hey, listen. We need you to spend $1.3 million, sign a 10-year lease, that now costs us about $230,000 a year, and I have no tenant. But this is something that I think will pay off in the long run.”

Andy: The space has filled up quickly and is 97% occupied today. But let’s get back to Ross and the growth of Ceres Nanosciences. In January of this year, you made the decision to move and to expand into larger space outside of the accelerator. Tell me about the drivers behind that decision and what led you down that path.

Ross: So it’s a good story, you know, our team is growing. Our growth is being driven by, you know, new projects being funded from research grants, but also, more importantly, there were several industry-funded programs that were going very well, leading to more work, and all this meant we needed more engineers and scientists and more specialized and often large pieces of laboratory equipment to do all this work. So there was that.

The other driver, we had just closed on a big round of venture funding, our very first. This was a $9 million Series A round from a venture fund, name is GreyBird Ventures out of Boston. And this investment to grow and accelerate our lead product development efforts meant that, you know, we had to scale up once again.

Andy: You mentioned the…I think it was $9 million in venture funding from GreyBird. When you received that, was there any consideration of and maybe…sometimes, the venture firms will say this, “You know, gee, we’d like you to move to Boston, so we can see you more closely,” or, “Gee, we’d like you to move to the Research Triangle,” or something like that. Was there any discussion of, well, now is the time to relocate somewhere else?

Ross: They had no interest in having us move. They actually saw a huge benefit in where we are located because we were able to get very affordable space, we were able to pull from a really good talent pool of scientists from all the universities, and we’re also in a location that’s really easy to get to. We’re only 30 minutes from 2 major airports, Dulles and Reagan National. Those investors in Boston were able to see us after a 50-minute flight and vice versa.

Andy: As a final question, I asked Ross to weigh the pluses and minuses of operating in Prince William County, versus a larger market with a more prominent life sciences cluster.

Ross: And this kind of ties back the..you know, why Prince William County is a great place to be. And this is not just for other biotech companies, it’s honestly for investors and biotech companies. You know, it’s great to be in close proximity to your collaborators and partners and talent and funding, and that’s why so many other biotech companies are concentrating in the clusters like Silicon Valley in Boston and the Research Triangle.

But being in those locations makes everything you do really expensive: leasing, hiring, commuting, living, and cash management in the biotech industry is so critical. So my advice is, you know, to look and consider sites like Prince William County that are outside of these top-tier clusters that have a lot of great talent, have great resources, great universities, but are much more affordable and easy to do business in. And especially, you know, today we’re…so much, even in the life sciences, can be done virtually.

Patience: So we’re going to give Jeff Kaczmarek the final word in today’s podcast with some guidance to other cities and counties that might be thinking about getting into the incubator game.

Andy: So let me take in a little bit of a different direction here, Jeff. So if you were advising another community that was thinking about starting an accelerator or starting an incubator, what advice would you give them?

Jeff:
Other than don’t do it?

Andy: There has to something other than don’t do it.

Jeff: Other than that, okay. All right. [inaudible 00:12:09] try to provide it a value here. You know, I think the key is eyes wide open, first of all. Life sciences is a very difficult area. It’s a long ramp up. In contrast, we set up a second incubator about the same time, four years ago, in computer game design, working with George Mason University MS. That is a piece of cake compared to this. All you need for a game design company to flourish is a high-speed broadband and lots of coffee. And that’s all they need.

That’s completely different in the life sciences area. You’re talking about sophisticated lab benches, fume hoods, [inaudible 00:12:53], you know, 85-degree freezers, autoclaves, etc., etc. So it’s a very expensive proposition. And the incubation period for life sciences companies is much longer. So you have to have that patience. So whatever entity you’re reporting to, whether that be a private sector board, you know, a government, or whatever, you really need to lay out that business case.

Andy: So to put a bow on this, today’s story has a happy ending. Ceres Nanosciences now has 20 employees and expects to continue its upward growth. And the Prince William Science Accelerator is 97% full, with 8 life sciences companies that are in various stages of development.

Patience: So we’re up to takeaways portion of the episode. Andy, what pearls of wisdom did you take away from your discussions with Ross and Jeff?

Andy: So I’ve toured a number of incubators in my life, but this was one of the first times I really got to do an in-depth interview with the CEO of one of them. I think what struck me was just how challenging the life sciences industry is to start up in this. There’s a lot of heavy cost, heavy equipment, important talent that you have to find, and so it’s just a much, much more challenging industry than many other types of industries that we work on.

Patience:
So if you had to guess, if Ceres had not had this accelerator available to them, what do you think would have happened?

Andy: I think there would have been two choices. They could have tried to stay within George Mason University, and stay small, and sort of nimble and, you know, have people working in four different labs, at different times, and midnight, and that sort of thing. Or they would have moved. And I think they probably would have moved to somewhere like Maryland that was close by. They could keep the talent close by. Or they could have gone to somewhere like Boston.

Patience: Yeah, and I think Jeff makes the point of being in a research cluster like in Boston or the Research Triangle, it’s great, but it is cost prohibitive, and, as you said, there is that important component in the life sciences industry.

Andy: Cost prohibitive The other thing that did come up, and we didn’t include in the podcast here, was in terms of talent, there’s a lot more competition. So you can hire a hot shot scientist in one of those places, but the chances of them getting plucked away from you six months later are very, very high, and that’s a huge negative to a company like Ceres.

Patience: So that is a wrap on Episode 43 of “The Project: Inside Corporate Location Decisions.”

Andy: We wanna thank both Ross Dunlap and Jeff Kaczmarek for taking the time to speak with us on today’s episode.

Patience: “The Project” is sponsored by DCI. We are the leader in marketing places and have served over 450 cities, states, regions, and countries. You can learn more about us at aboutdci.com.

Andy: We hope you’ll keep listening. There are many more projects to come.

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