Rochester bets big in hopes of becoming a magnet for biotech startups

ROCHESTER – In 2022, economic development officials in Rochester sent out a survey asking what biotech leaders across the globe thought about the prospect of setting up shop within steps of Mayo Clinic.

Four-hundred responses later, the message was clear: Most of them had never even considered the idea of having a presence in Minnesota’s third-largest city.

“There was very little of, ‘I wouldn’t go there because it’s small or it’s isolated or it’s cold,’” said Michael Flynn, senior director of economic development for the city’s Destination Medical Center initiative. “The big feedback was, ‘I know Mayo Clinic is a really great hospital, but I couldn’t tell you if I would go there because I don’t know what the opportunity is.’”

Three years later, Rochester is trying to change that perception.

Through a collaboration between DMC, Mayo Clinic and the developer Mortenson, the city will soon break ground on a new $16.5 million shared lab space in the downtown Discovery Square sub-district.

The goals for the space are lofty: Within the first three to five years, local officials want the facility to house up to two dozen emerging biotech companies, many if not all with direct ties to Mayo.

But Mayo and DMC leaders are confident the demand is there. They see more opportunities for Mayo researchers to spin off new startups, while also luring in international companies looking to collaborate with the medical center.

They also see the lab as another piece of the puzzle in building Rochester into an entrepreneurial hub for biotech as Mayo ramps up commercialization efforts, including through a new business accelerator program.

“A lot of times when these companies are looking to partner, they’re not just looking to partner for real estate, they’re looking to partner for that clinical access, that clinical know-how,” said Dr. Janani Reisenauer, medical director for research and innovation in Mayo’s Department of Business Development. “So, what we’re going to do is really put a flag in the Midwest as a major center for shared lab space and health care innovation.”

The feedback from the 2022 survey went beyond diagnosing a lack of awareness about what Rochester has to offer.

The results also offered a prescription: The city needed to build affordable turnkey lab space to attract and retain the types of biotech companies it imagined when it pushed for DMC, the 20-year economic development initiative backed by $585 million in public funding.

“We now know there are companies out there that want to locate in proximity to Mayo Clinic, but don’t have $2 million and 18 months to build out their own lab,” Flynn said. “Because they tend to be operating on research dollars or venture investment dollars that have pretty short runways.”

To solve for that, the state board overseeing DMC voted in May to allocate $8 million for the lab space, which would be located on the third floor of Two Discovery Square, a 121,000-square-foot health science campus downtown.

The funding will support the outer shell of the lab, with Mayo putting up an additional $3.1 million to stock it with new technology.

For BioLabs, the Boston area-based company selected to manage operations of the lab, it will be the first lab of its kind in the Midwest. The company now has 16 locations in cities such as Boston, New York and Paris.

Susan Chase, BioLabs’ senior vice president for business development, said the company’s presence here will go beyond providing physical infrastructure for startups. As with its other labs, she said, the coworking space also aims to offer entrepreneurs with industry connections and access to funding.

“It’s not just that companies of this size and scale don’t have access to the equipment that they need,” Chase said. “They also haven’t built a network of collaborators that can help them sort through all of their different challenges.”

For years, Mayo has sought to bolster its entrepreneurial efforts after a reckoning in the early 2010s that it had been falling behind its peers.

Since then, Mayo has loosened restrictions on allowing its physicians to launch their own entrepreneurial endeavors — leading to the development of promising startups, such as the cancer therapy company Vyriad.

The changing environment has also spurred the development of the types of spaces needed to retain those types of companies.

In 2019, with support from DMC and Mayo, Mortenson opened the first Discovery Square building on the southeast edge of downtown. Three years later, a second building was completed next door.

Meanwhile, companies like Vyriad have also found space on the former IBM site, in what is now known as the Rochester Technology Campus.

Flynn said the addition of the BioLabs space — expected to open in 2026 — will only build off those efforts to create an “entrepreneurial ecosystem” that allows startups at every stage to set up and stay in Rochester.

“We’ve always had the ideas here. But how do we take those ideas and wrap them in this ecosystem and ground them in this physical space to turn those ideas into industry? That’s what we’re trying to solve for.”