This article appeared in the October 2020 issue of University-Industry Engagement Advisor. Click here to subscribe.

Universities launching incubators is old news. Corporations launching incubators is not uncommon. But universities teaming with corporations — with a spinoff, no less — not so much.

In an unusual partnership, the University of Utah has joined forces with Recursion (a clinical-stage biotech company combining experimental biology and automation with artificial intelligence) in establishing Altitude Lab — a “blended incubator/accelerator program focused on developing diverse and inclusive businesses in the health care sector.”

Like most university-industry partnerships that ultimately prove successful, Recursion and the university have complementary strengths and close mission alignment. “Bringing together the fastest growing company in the region with a university that is its largest employer garners attention,” says the university’s Keith Marmer, DPT, MBA. “Each of us could have done this on our own, but not as powerfully.”

[Editor’s note: Marmer, Associate Vice President for Technology & Venture Commercialization and Corporate Partnerships, participated in this collaboration as Associate Vice President and Executive Director for Technology & Venture Commercialization (TVC) and Corporate Partnerships. As we went to press, the university announced the formation of the Partners for Innovation, Ventures, Outreach & Technology (PIVOT) Center, which will “build on the work by TVC to serve as a hub to foster partnerships between industry, university, and government entities,” and which Marmer will lead as Chief Innovation and Economic Engagement Officer.]

In fact, both of the partners were initially planning an incubator on their own. “We had been working on developing an incubator for about a year and half, and we were moving along slowly as a large, public bureaucracy,” Marmer recalls. “I was having lunch with Chris (Chris Gibson, co-founder and CEO of Recursion) one day and he randomly asked how it was going with opening the incubator.” Gibson then noted “that they had moved out of their old building last year and were trying to figure out if they should consider opening up an incubator, but they did not want to conflict with what we were trying to do (the buildings were about a block apart). It was one of those classic lunch things where a business plan is hammered out on the back of a napkin. By the end of the lunch we had in effect mapped out a plan to partner and open up an incubator. I went back to the office, told our folks to put our plans on pause, and we opened up discussions with Recursion.”

This is the first major partnerships between the university and Recursion, although Gibson notes a shared history, including the university’s equity stake and IP licensing with the spinout. The school also hosted a number of “Women in STEM” events with Recursion.

“It all fell into place so nicely and quickly; this was serendipity,” Marmer offers.

Multiple drivers

Gibson notes that Recursion’s impetus to back an incubator was driven by several key factors: A strong desire to stay in Salt Lake City (no doubt music to the university’s ears), a keen interest in equity and diversity (also shared by the university), and a desire to help other start-ups avoid some of the growing pains Recursion faced.

He came to the university in 2009 and studied with Dean Li, the other co-founder of Recursion. After earning his PhD and taking a leave of absence from medical school in 2013, he started Recursion, working with Marmer to license inventions into the new company. With his wife being a doctor at the university, he wanted to stay in Salt Lake, but there was precious little lab space available.

“We ended up negotiating a deal with the university to lease a conference room, a closet and a bigger closet in a building that was part of University of Utah Research Park; it was pretty stressful,” he recalls. It was also expensive, at $2,700 a month for 1,800 square feet. He talked with the university about how challenging it was for start-ups to find space. After two or three years the company grew into 18-20 people, raised a $15 million Series A, and needed more space. They started building out vacant space, also in Research Park, signed a 10-year lease, and were soon busting out at the seams. “We literally had people with desks sitting on the floor,” he recalls.

So, Recursion started working on a much bigger space downtown. They signed a deal to take over a big sporting goods building. “We now had raised $450 million, had a huge partnership with Bayer, and almost 200 people,” says Gibson. “We can grow to 200-300 downtown, but I talked to our board about how important it is for Recursion’s long-term future to create an ecosystem around us. There’s a great tech culture, medical devices and diagnostics, but only a handful of therapeutics companies — and frankly a pretty evident lack of diversity, which is one of our cores as a company. Ultimately, through our discussions with Keith, which went well, we got to scheming. My board understood what we needed if we were to grow to an iconic company. So, we said, ‘Why not see if we can put at least 20 companies into our old space? My board got behind it and created a foundation to ultimately do more for the community, building STEM and a diverse ecosystem of biotech founders.”

Complementary strengths

Marmer is keenly aware of Recursion’s priorities, and believes they are part of what makes the “sum” stronger than its “parts.”

“While I think we have a shared vision of wanting to build infrastructure to support the regional economy for life sciences, one of the other things Recursion was looking to do was bring focus to equity, diversity and inclusiveness,” he notes. “While it is something that we are likewise supportive of, I think they will be the champion for this as a private enterprise and will be able to recruit around that as an amplifier. When you get a company that is rapidly growing and attracting investment companies from around the world as they are, it brings an added dimension to that narrative I think is tremendously valuable. Also, I think the combination public-private partnership in terms of our commitment to raising up the regional ecosystem is a force multiplier in terms attracting talent and investment, and allows us to bring more companies access and visibility than either of us could have done independently.

“Now what you have,” he continues, “is the start-up ecosystem; there are companies we spin out of the university co-locating with companies that are also early stage, either in Utah or coming out of anywhere else. I just interviewed a potential resident from Asia. When you get that diversity, you create an environment that can grow, expand and accelerate more rapidly — and probably more dynamically.”

Getting things going

How did the partners work together on implementation of the incubator? “The key pieces were around physical buildout, the funding, the staffing and governance,” says Marmer. “A core team of three or four from each of us assembled. For the most part, within a matter of a few meetings we were able to frame what we wanted to do and then work through the details of each piece.”

The partners, he adds, did not take the approach that they each had to put an equal amount of “everything” into the project. “What we said was, ‘Where does Recursion have the ability to be nimble and where does the university have that ability? For example, it made more sense for Chandana (Chandana Haque, executive director of Altitude Lab) to be the employee of a non-profit subsidiary of Recursion as opposed to an employee of the university. It’s easier for the university to make capital equipment investments than to hold the lease on a private building; it made sense for Recursion to actually hold the lease.”

The capital investment, he continues, included staff, space (about 15,000 square feet), office furniture, desks, chairs, co-working space, private offices, conference rooms, and most expensive, the buildout of lab space — about one-third of which is wet lab incubator space. “We had to put lab benches in, and very specific equipment — everything from fume hoods to bio safety equipment, and specialized microscopes.” In short, he says, the investment “is probably several million dollars over the first three years.”

“We felt this was a natural fit,” adds Gibson. “There are other spaces in Utah, but as the first deep bio-focused incubator we felt like we could do a better job together. The only challenge was overcoming the same [state law] difficulties you always face when state universities and for-profit companies do anything, but it was not a huge hurdle.”

“Either partner was not sufficient on its own,” adds Haque. “There are many examples of universities that have spun out incubators. They do well in serving university-specific companies, but Salt Lake City is a little unique; some of the best examples of entrepreneurship have come independent of universities. Now they are spinning out companies of their own. However, building independent of the university is not sufficient either. Companies like Recursion do not have things a university has, because they are aligned on the goal of building an economy here to attract talent from all across the globe. We have one from Singapore, one from [Montreal]. But they would not have come if it was just the university; Recursion’s weight and credibility helped draw them. While 70% to 80% of the founders will be drawn out of the university, others will come from all over the world because of the breakthrough approach Recursion has to science. Frankly, that’s what Salt Lake needs — bringing companies from all over the world to help this geography flourish.”

Interfacing partners

As the incubator develops (there are already three initial tenants), the partners operate in a structure that has them meeting together regularly. “We have monthly meetings,” says Marmer. “They cover everything from operations to strategy, and we have meetings scheduled as required to review and approve new residents. Chandana manages all applications; if she puts forward a company that she thinks worthy of having residency, we come together as a group to do final review. And, because University Research Park has certain governance requirements, we have to make sure these companies meet those too.”

Gibson is “absolutely” pleased with how the partnership has evolved. “The Recursion Foundation has a board — Keith, Jonathan Bates (who heads the real estate side for the university), myself, Tina (Larson, Recursion COO), and Chandana,” he explains. “We operate at a high level as a board and overlook Chandana’s work to build the facility. We help her make sure we invest in ways that build the community and have long-term benefit for the city, the state and the region.”

“I work extremely closely with Chis, Keith, and Jonathan Bates,” adds Haque. “The three of them guide me in thinking about which partners to bring on, public as well as other industry, to help guide me in how to develop the innovation ecosystem here. Altitude Lab is a node where the founders come to, but there are all those structures around them at the university — core labs, field expertise, thought leadership, lots of IP strategy, and even connecting founders to potential executives and investors. And from Recursion they can learn how to develop a company from two investors to scale, controversies involved in building machine learning or AI-based innovations, and connections to investors focused on new thinking. And surrounding all that are professional services — banks, accountants, and tons more that we have to support them.”

Off to good start

While still in its first six months, Altitude Lab is drawing a good deal of activity. “We have three beta companies; one was in Y Combinator, and one is an alum of Recursion,” notes Marmer. “We’ve interviewed dozens who have applied. We are getting applications nationally and even internationally.”

“So far, so good,” adds Gibson. “There’s so much demand, I’m talking with Keith and others about whether there are ways to build a next stage, a landing pad for these companies. The Mayor is really excited about what life science can bring to the city. They are super aligned to build tech and biotech here, and we’ll do anything we can to help.”

Does he feel this will add to future collaborations with the university? “Absolutely,” Gibson asserts. “Not only ongoing, but lots of stuff I have not thought of, and they have not thought of. We’ll be long-term partners with them; in many ways we’re alumni of the university.”

Marmer is of the same mind; he does not wish to put limits on what such partnerships can do, including strengthening the community. “Fundamentally, from a university perspective we’re not thinking of companies simply as a source of money we can use for internal purposes, but rather thinking of corporate entities from a relationship standpoint,” he says. “Partnerships take many forms; the incubator is one great example. Recursion probably could have afforded to put their name on a building and not be involved with us, but we offered talent and experience. What they bring is far more than the money.”

In the end, he is optimistic about the ecosystem’s future. “With the great universities and all the research here, and Salt Lake City being a great place to live, we will push hard to build a biotech hub,” he says. “It may not be Cambridge, nor does it need to be, but we will build something special.”

Contact Gibson at chris.gibson@recursionpharma.com; Haque at 385-273-7559 or chandanahaque@recursionpharma.com; and Marmer at 801-581-7792 or keith.marmer@tvc.utah.edu.