MINNEAPOLIS, Minn.–For all of his star power and biotech gravitas, G. Steven Burrill is finding Minnesota’s investment climate a bit too chilly.
The CEO and founder of Burrill & Co., a San Francisco-based venture capital firm, has been trying to raise a $1 billion fund to back Elk Run, an ambitious bioscience incubator located outside of Rochester in rural Southeastern Minnesota. The idea is to lure cash-needy biotech start-ups across the country to move to Elk Run, as well as commercialize technologies developed at nearby Mayo Clinic and the University of Minnesota.
But sources say he’s nowhere near $1 billion. Depending on whom you ask, Burrill has secured anywhere from zero dollars to $250 million.
A quarter-of-a-billion dollars is nothing to sneeze at, especially in this economy. Hell, I would be impressed if he raised $50 million, which is more than I can say for Minnesota start-ups hurting for money. However, to complete the fund, Burrill looks like he needs to either tap his own cash and/or bring in a large foreign investor(s) like a sovereign wealth fund, a more likely scenario.
But in some ways, the amount of money is besides the point. Where it comes from matters far more. To build local support for such an audacious project, Burrill needs local money. Good luck with that one.
As any seasoned observer of Minnesota can tell you, the state is not exactly awash with high rollers. Land of Ten Thousand Lakes? More like the Land of Ten Thousand Tight Wads.
Burrill and the project’s developer, Tower Investments, did manage to squeeze $15 million from state coffers to build an interchange from Highway 52 to the Elk Run project. But convincing politicians to fork over taxpayer money is far easier than convincing rich people to write personal checks.
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A specialty drug is a class of prescription medications used to treat complex, chronic or rare medical conditions. Although this classification was originally intended to define the treatment of rare, also termed “orphan” diseases, affecting fewer than 200,000 people in the US, more recently, specialty drugs have emerged as the cornerstone of treatment for chronic and complex diseases such as cancer, autoimmune conditions, diabetes, hepatitis C, and HIV/AIDS.
Burrill is starting to recognize this. At a recent LifeScience Alley luncheon, Burrill said he was disappointed about the lack of local investors.
But Burrill may also have to share some of the blame. Raising $1 billion in a post-recessionary economy was always going to be tough. But Burrill, known for bold pronouncements, told me in July that he will complete the fund by the end of the year.
Well, here we are.
If you set a specific time table, boy, you better deliver. By setting unrealistic expectations, missing a deadline, even an artificial one, drains your credibility and signals trouble–not exactly the kind of message you want to send to the public. It’s one thing to say you’ll raise $1 million in five months. But $1 billion? Really?
In addition, Burrill’s proposed fund structure scared off some investors, or at least confused them. The fund will spend roughly $500 million to purchase $20 million equity stakes in each of 15 to 25 companies that will move to the bioscience center, ranging from start-ups to publicly traded companies. The remaining $500 million will go toward the rest of Tower’s real estate projects on Elk Run, including a health living center, offices, shops and residential homes. Investors can’t choose where their money goes.
Why would a potential investor in, say, a drug start-up want to put money in a clothing store? Technology is a completely different animal than real estate.
Burrill is now considering a plan to split the fund into two. That should help. But at this point, Burrill will need every ounce of his formidable persona to will Elk Run into reality.
