Worcester Business Journal

16 Worcester Business Journal | June 22, 2020 | wbjournal.com F O C U S E N T R E P R E N E U R S & I N N O V A T I O N Innovating in a pandemic e coronavirus and the economic recession has made life hard on startup companies, although opportunity still exists BY RILEY GARAND Worcester Business Journal Editorial Intern W ith the coronavirus remaining a part of life in the United States and the na- tional economy now in a recession, startups are facing a time when survival could be more difficult than it has in years. Industry leaders in Massachusetts, though, see reasons to think young firms will continue, whether it's because of existing relationships, a range of potential funding sources, or, in some cases, the critical nature of the work they do for industries in need. Investors are looking for innovation during challenging times, said Donna Levin, Worcester Polytechnic Institute's executive director of innovation and entrepreneurship. "You have investors for the first time really wanting us to innovate ourselves, where normally there's a process of people doing due diligence, getting to know you, double checking your tech- nology, or your invention," Levin said. "Now, people are willing to move really quickly, for perfect ideas." Levin sees opportunity for new ideas within this challenging time and credits past startups who started during recessions. "If we look back at other points in time in history, let's go back to the last recession – you had Dropbox, Black- door, Fitbit, Smashburger, Zocdoc, Airbnb, Beyond Meat, Rent the Runway, Uber, Venmo, Slack, Credit Karma," Levin said. "All of these startups are companies that we know of now, that we no longer think of as a startup, and all got going during a recession. If you go even further back to the Great Depression, you had General Motors, GE, and even things like the Monopoly game invented." Life sciences advantage e ability to judge if a startup will survive in a period of economic uncer- tainty can stem from what industry they are in and how well they adapt to the changing environment. When looking at life sciences, John Hallinan, the chief business officer over- seeing innovation services programs at the Cambridge-based Massachusetts Biotechnology Council, sees startups in the life sciences industry faring better than those in others. "I think 2020, if you look at it just as one year, it's difficult to say that the pan- demic is drastic in effect on our industry then it is on others," Hallinan said. "We have continued to see first round fund- ing, we continue to see vibrant fundrais- ing from venture capital firms ... at's going to translate into more investments and first-time investments, so again, I think that it is pretty positive overall." e life science industry in Massa- chusetts is a standout nationally. Employment in the biopharmaceu- tical industry in the state has jumped 35% in the past decade, and life science lab space has ballooned by 70%, hitting 30 million square feet last year, accord- ing to MassBio. e industry is not immune to eco- nomic disruption, Hallinan said, but it is in a good position because of firms' development of products that help pa- tients with better immunity and health. "Other countries are having similar problems in regards to health and the aging population, and the industry is helping provide products that serve the needs of those patients" Hallinan said. "Long-term, things are very good for the industry. We are also very heavily focused on creating solutions for the coronavirus." Jon Weaver, president and CEO of Worcester-based Massachusetts Biomedical Initiatives, agrees finding success as a startup will progress faster in life sciences. "Biotech is going to come back faster than a lot of industries, and a lot of industries are really hurting through this," Weaver said. "We are lucky that hopefully, the solution for all of this is coming from the biotech industry and hopefully as a result that industry is going to come back pretty quick." The hold on investment capital Overall, when looking for investors and or public funding, Weaver sees investors being more cautious. "On the private capital side, I think that a lot of the investors are in a wait- and-see mode," Weaver said. "A lot of them and their capital reserves have declined, and I think they have a lot of their own existing investments that they have already made, that they want to make sure that they can cover." Ari Glantz, the director of develop- ment and strategic initiatives at New England Venture Capital Association in Cambridge, sees a more cautious approach from investors changing who benefits from their financing. "In times of uncertainty, risk toler- ZATA Pharmaceuticals and its President and CEO David Tabatadze operated out of the Massachusetts Biomedical Initiatives incubator in Worcester. PHOTO/EDD COTE Venture state Massachusetts is a major leader nationally in venture capital funding. Only California attracted more funding in the first quarter of 2020. Source: PwC/CB Insights Healthcare MoneyTree Ranking 1 2 3 4 5 6 7 8 9 10 State California Massachusetts New York Pennsylvania Texas Washington Illinois Montana Connecticut Minnesota Total funding $3.2 billion $1.5 billion $332 million $137 million $115 million $100 million $100 million $66 million $50 million $50 million Number of deals 69 35 12 7 9 4 2 2 8 3

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