Two years after opening its doors, biotech incubator Startup Sandbox is demonstrating that it’s ready to play in the big leagues.
Five of the 20 biotech companies that have spent time at the incubator have proven their product ideas and grown large enough to move into their own offices. Nearly all of those companies have chosen to stay and hire in Santa Cruz.
Startup Sandbox, which launched in August of 2017, has become one way of helping UCSC talent stay local, rather than letting them take their breakthrough technologies—and plans to hire employees—over the hill. The incubator has added training programs for member companies, along with a new venture capital fund to offer financial backing.
There were already several well-established incubators and accelerators in the Bay Area, including Berkeley SkyDeck, Stanford-affiliated StartX and MBC BioLabs in San Francisco.
The lack of such a program in Santa Cruz had long been a point of discussion at UCSC. The university has “a deep portfolio of intellectual property,” and had been looking for years to establish an off-campus incubator where that research could be commercialized, says Lou Pambianco, Startup Sandbox’s chair and CEO.
The opportunity to do so came two years ago, as part of a $2.2 million state allocation to UCSC to spur innovation and entrepreneurship. UCSC put $700,000 of that into the Sandbox right away. The school provided another $150,000 to Sandbox in last August.
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Sandbox offers office and lab space as needed to young companies. The idea is that those companies will generally stay at Sandbox for one to two years, or until they can validate their product ideas and attract enough funding to branch out on their own.
One of the companies that launched out of Sandbox is Unnatural Products, which uses computer algorithms and chemistry to predict and test ways to fight disease. Cameron Pye and Josh Schwochert, Unnatural’s co-founders, credit Sandbox with providing a valuable launching pad for their company. They fell in love with Santa Cruz while working on their doctorate degrees at UCSC, Pye says, and they were excited when Sandbox gave them a way to stay in the city and commercialize their ideas.
They joined Sandbox in January 2018 and are moving into an office on Delaware Avenue this month, where they plan to have nine employees by the end of the year. They’ve raised $1 million and are currently working on raising another $5 million.
“Unfortunately, most of the PhD graduates we know have to matriculate on to other cities to find jobs that allow them to use their expertise and use their degrees,” Pye says.
Sandbox is starting to change that, he says. Having gone through talks with investors and other companies, the incubator “really put Santa Cruz on the map as a place where you can do this,” Pye says.
Sandbox is a nonprofit, and one sign of its growing stature is that it now has an affiliated for-profit venture capital fund, called Natural Bridges Fund. The fund launched this year to make investments exclusively in companies that are selected to join the incubator.
Judy Owen, who originally led the Sandbox with Pambianco, is spearheading the growth of the Natural Bridges Fund as the venture fund’s general partner. The goal is to raise an initial $1 million, and eventually another $10 million, to make seed-round investments in Sandbox companies.
Sandbox has also added business training programs to give entrepreneurial advice to company founders, who mostly come from science backgrounds. Much of the training Startup Sandbox offers comes from the more than 25 people in its Founders Circle. These donors have contributed a total of $200,000 to the Sandbox and volunteer their time by acting as advisors to the incubator’s members. Current Sandbox members include Cruz Foam, a team creating a styrofoam alternative using seafood scraps, which was honored as Innovator of the Year at the 2018 NEXTies.
The 13,500-square-foot Sandbox on Natural Bridges Drive has already generated a slew of biotech graduates with a footprint larger than the incubator. Of the five companies that have moved out of the incubator, four of them set up offices in Santa Cruz and have a cumulative 15,000 square feet of production space, Pambianco says. A fifth company moved into lab space in Silicon Valley.
The five companies that have outgrown the Sandbox demonstrate the wide range of what a “biotech startup” can mean. In addition to Unnatural Products, the group includes internet-connected hydroponic-garden maker Aeroasis, 3D-bone-implant producer Dimensional Bioceramics, cancer-screening company Prime Genomics, and Claret Bio, which helps prepare DNA for sequencing.
Aeroasis Founder and CEO Tom Wollenberger says Sandbox offered a “legitimizing space,” where potential employees, investors and customers could see his venture was a serious company. Aeroasis joined the Sandbox in April 2018 and moved into its new office on Soquel Drive this past March. The company has raised $250,000 in funding and is raising another $750,000, with plans to have a team of around a dozen employees by the end of this year.
Pye says one appealing aspect of Santa Cruz is that it’s close enough to the Bay Area that the Sandbox incubator companies have access to the concentration of venture capital there. But even with that proximity, Santa Cruz “is distinctly not the Bay Area. It has its very own culture that we really love,” Pye says.
People here prioritize enjoying life a bit more than they might over the hill, he adds. “Finding similar-minded people and surrounding yourself with that is a good way to balance pigeon-holing yourself and not forgetting what’s important outside of the company.”
Update 8/21/2019 1:18 p.m.: A previous version of this story misstated Owen’s involvement with the Natural Bridges Fund.