Not Your Ordinary Startup Incubator

Eamon Gallagher JD ’13 leans into a conversation about HeavyWater’s latest plans with its chief financial officer David Luk and takes a swig from a Tröegs Scratch 342, a lager from a Central Pennsylvania brewery that markets to those with a spirit of adventure and curiosity.

Fitting.

Those traits, after all, are hallmarks of successful entrepreneurs — and this unique incubator and accelerator for early-stage startups is all about that. But on this last Thursday of the month, the 36-year-old program director wants to encourage another quality, one arguably harder to come by among determined, heads-down techies but central to ic@3401’s successes.

Shoptalk — and what better venue than a 5 p.m. happy hour.

“It fosters community,” Gallagher, tall and lean, with a mop of light brown hair, says, talking a New York minute (though he hails from Maine). “We’ve made it a space where entrepreneurs can come and support each other”

Launched in the summer of 2014 by Drexel and the nonprofit University City Science Center, the innovation center is building a reputation as the spot in the region for embryonic businesses, particularly those in digital health, educational and financial technologies, and the “internet of things” (i.e. connected devices).

Since 2016, 52 member companies have raised $54 million, including $21 million last year alone. It’s “a concentration of capital being raised that you don’t see anywhere else in the region,” says Gallagher, who also directs Drexel’s Entrepreneurial Law Clinic at the Thomas R. Kline School of Law. Nearly 40 percent of ic@3401 members have attracted investments from Ben Franklin Technology Partners of Southeastern Pennsylvania, one of the nation’s longest-running techbased economic development organizations. The incubator also boasts more than 300 jobs created locally since its inception in 2014 and a healthy waitlist.

A lot of credit goes to its unconventional model and its status as the linchpin of Drexel’s ambition to increase the number of University- affiliated inventions that make it to market. Unlike the typical university incubator, ic@3401 co-mingles academic tenants and classrooms with entrepreneurs from the public. That means members come not only from Drexel and its wealth of commercialization and translational research programs (think seed-funder Drexel Ventures, degree-granting Charles D. Close School of Entrepreneurship, health care solutions– focused Coulter Translational Research Partnership Program, etc.) but from other academic institutions, local industry and members of the city’s startup community.

As Gallagher and Luk catch up, a steady flow of men and women unplug from laptops. They wear a path from the expanse of tables and swivel chairs that serve as shared offices to the snug kitchen cum break room on the second floor of 3401 Market St. There, food (Mediterranean from Mama’s Vegetarian this day), beer and most important chatter all abound. A couple of employees from Drexel’s transdisciplinary research ExCITe Center on the first floor wander up and ic@3401 alums such as Luk add to the mix.

It was at a similar happy hour that Gallagher played the matchmaker between Luk, then a principal at local venture firm Safeguard Scientifics, and HeavyWater’s founder and CEO Soofi Safavi, who was looking to expand. The two men hit it off so well, Luk got the job of CFO and chief revenue officer and his venture capital connections started HeavyWater on its path to the big time.

“It would have never happened if I was not at 3401,” Luk, who held office hours here, says of serendipity’s role in the successful pairing. HeavyWater’s legal team had emailed an ask a while back, he continues, but he ignored it at the time. “It didn’t seem like a fit. … I think Eamon did a better job of explaining why we needed to chat.”

Says Safavi: “Eamon grasps at even the most complex level the mission of the company, and on its behalf articulates it and attracts other individuals.”

ic@3401 helped in other ways, too. When HeavyWater needed private office space to meet Black Knight’s security regulations, the large, third-floor game room was repurposed. When HeavyWater needed new hires, a “help wanted” sign on its door landed a graduate student from the College of Computing & Informatics next door. The company also partnered with Drexel’s Xiaohua Tony Hu, an information science professor. Hu happens to be a founding co-director of the National Science Foundation Center for Visual & Decision Informatics, a program HeavyWater used to further develop its technology.

“Being part of an incubator like that,” Safavi says, “allows you to augment efficiencies…. We were able to leverage resources to get a little forward momentum.”

Christopher Wink is CEO and publisher of a network of news sites called Technical.ly that follow local tech startup scenes.

“Any city of any size in the world is talking about the tech renaissance,” he says. “We know that innovation happens at the intersection of different communities. Universities are blessed with their own set of internal communities, students, professors, alumni. But critically, universities want opportunity for outside entities to be on campus, bump into each other.”

ic@3401 is that type of ecosystem, according to Wink.

“We need spaces like this,” he says, “to make sure Philadelphia is not a laggard but a leader.”

At first glance, the 7,625-square-foot ic@3401 looks like any coworking space. Walk past the reception desk, past the pillars plastered with company logos, and a collection of 58 desks fill the expanse, making for cozy shared offices. It also has two phonebooths for private conversations, eight individual offices for rent, a few conference rooms with floor-to-ceiling whiteboards should inspiration strike, a kitchen with an espresso machine and on the third floor, and an 891-square-foot game room turned office.

But look closer, and it’s clear ic@3401 — with the tag line “at the intersection of innovation and Market” — differs significantly from the many renta-shared-office options around the region.

“If you go to WeWork, or 1776 Startup Network, or MakeOffices, you’re paying a market amount of rent to have a seat next to whoever else is paying rent,” Gallagher says. “This space is very different. This space is only startup oriented.”

An oft-shared story is how the incubator in 2014 was too heavy on service providers, including five law firms. “I went to every one of them,” says Shintaro Kaido, who oversees the incubator for the University as managing director of venture commercialization at Drexel Ventures, “and asked, ‘Have you met with any of our startups?’ The answer across all five was ‘No.’

“So, it’s like, what in the heck are you doing here?” he says. “At one point, the number of service providers exceeded people involved in startups.”

Law firms were sent packing.

Startups capturing capital were invited to join, enticed by an attractive location near 30th Street Station, the campuses of Drexel, University of Pennsylvania and University of the Sciences, and below-market rents. At the same time, professors with sound concepts that had spinout potential were channeled to the incubator.

Since 2014, the number of companies based at ic@3401 has doubled. Admission is competitive, including a phone-screen and in-person interview that might involve a mixer “just to see how they interact,” Gallagher says. He looks for an entity of one or two founders who want to solve a problem, and know what product will accomplish it.

In addition, Drexel academics with a marketable idea get automatic admission — but only after Kaido signs off. He also puts the project through Drexel Ventures’ Proof-of-Concept Academy, an accelerator program for high-growth startup teams that Kaido runs. Likewise, startups that go through the Science Center’s Digital Health Accelerator, which helps companies grow in the U.S. health care market and increase revenue through sales, get a greenlight.

If Gallagher is the matchmaker, then Kaido is the visionary.

“That curation we talk about is very intentional,” Kaido says, giving off a Silicon Valley vibe with his cropped black hair and 3D-printed glasses, with his shorts and Phillies jersey over a tee. “We’re very keen to make sure the startups are synergistic to the community.” He says some successful early stagers have been turned away because their ideas and products — in terms of technologies — were nothing new.

Keith A. Orris, the then-senior vice president for corporate relations and economic development at Drexel and senior manager of Drexel Ventures, represented the University on the board of the Science Center, a long-time local hub for technology innovation. He brokered the deal with the center to share resources for a single incubator in lieu of two competing entities.

ic@3401, Orris says, fits perfectly into Drexel’s DNA of translational research. “In order to have a successful commercialization program today,” he says, “we not only want to license our technologies to existing companies, we also want to license them to startup companies around the principle investigator who invented it and support these academic innovators in standing up a company themselves. That takes services, mentoring and education. And that takes capital.”

And, he adds, that takes ic@3401. He calls it a dynamic ecosystem “of like-minded thinkers and doers.… We expect you to fail fast or grow consistently, graduate and go to the next level of space.”

In other words, sink or swim.

To its credit, more of the startups swim. In 2017, out of its current 48 members, a dozen companies exited and three failed, Gallagher says. On average, companies graduate in 19 months, often with a team of eight to 12 “with legs firmly under them,” he says.

One reason newbies stay above water is that ic@3401 comes with built-in coaches in not only Gallagher and his connections, but other startup founders, some of whom have sold previous companies.

“This space has so many entrepreneurs,” says computer scientist Zikria Syed MS ’89, who is CEO of his third startup, PatientWing. The online system to facilitate patient enrollment in clinical trials has called ic@3401 home since its inception three years ago. “It’s a great space to mingle and learn and share stories and experiences.”

PatientWing found its first pilot customer in then incubator member, The One Health Company, which enrolls dogs with cancer in trials. As PatientWing scales, it has partnered with a Science Center startup working on novel cancer treatments. So far, it has raised almost $1 million in funds.

A decade ago, when Syed was launching his other companies, “incubators were really not there,” he says.

“We were much more isolated from other businesses.”

ic@3401 — and Gallagher in particular — make connections to the larger business world happen, says Priya Bhutani, founder and CEO of REGDesk, a machine-learning platform that helps medical device companies navigate the regulatory process.

“Eamon goes out of his way to establish opportunities, which is what is needed in this space,” she says. Quorum, a nearby Science Center event and networking space, put REGDesk in front of medical device and pharmaceutical leaders. “These types of introductions are a direct help to us.”

Also, a Slack channel offers a platform for members to ask real-time questions and share industry news. Recently, a post about employee health/benefits plans for B2B customers got three swift responses. And Gallagher created a Takeout Kit, a vetted list of startup providers such as accountants, attorneys, software shops “and on and on.”

Then there is the building itself. It houses myriad opportunities, starting with the presence of Ben Franklin Technology Partners. Because ic@3401 has proven a fruitful pipeline for the investor, it maintains an office onsite, with staff managers rotating through thrice a week.

“I think it’s an ideal place to start a company,” says Anthony Green, vice president of Ben Franklin’s technology commercialization group. “When you cut to the chase, everybody needs money. They also need guidance, market strategies. Some are very early stage. They don’t even know what company they are.”

Dreamit Ventures is another funding source that has shifted from supporting back-of-envelope ideas to scaling companies. Based up the street at 36th and Market streets, the Science Center has additional commercialization programs and spaces to connect, including Quorum that’s free and open to the public and Venture Café Philadelphia, a weekly gathering of entrepreneurs, creatives and those with an interest in out-of-the-box thinking.

“ic@3401,” says Science Center president and CEO Steve Zarrilli, “leverages and builds on the success of both institutions’ legacy of supporting startups and convening communities around innovation and entrepreneurship.”

Even after companies graduate, the relationship continues.

“We caught up recently,” says ROAR for Good’s co-founder and CEO Yasmine Mustafa, who sought Gallagher’s counsel on fundraising platforms for the company’s new product. He always “lessens … the degrees of separation from someone you want to meet. He’s really amazing.”

For the matchmaker, it was just another day at ic@3401.

When Kaido was hired in late 2014, one of his early goals was to build a supportive, on-campus community of entrepreneurs to help Drexel innovators with their entrepreneurial endeavors. To the serial entrepreneur who launched and directed a nationally recognized accelerator program in the Midwest, that meant exposing Drexel academic innovators to an ecosystem that not only offered access to seed money and support but also to an innovation nexus.

“Many from Drexel are new to entrepreneurialism,” Kaido says. “So ic@3401 was built so that there’s a critical mass of active and successful entrepreneurs who Drexel participants can work alongside to move up the learning curve as fast as possible.”

When Drexel alumnus Johann deSa ’10 looked to take his invention to market, he needed a company office.

He found it at ic@3401, where Instadiagnostics has lived since 2016. “The space is a great stepping stone for early-stage startups,” says deSa, now a Drexel visiting research professor of biomedical engineering and founder and director of the business that brings laboratory blood testing to point of care. “The practice pitches are really helpful.”

On a weekly basis, Gallagher and incubator members gather to offer feedback around pitches. “You learn a lot of things you wouldn’t see in academia,” he says. Instadiagnostics has won about $1.5 million in grants from NSF, National Institute of Health and others.

Kaido envisions an ecosystem with “a value proposition” of nurturing first-timers with urgency. “When we come to a problem, we need an answer now,” he says, speaking from experience. “Tomorrow is almost too late.”

Consider Sage Smart Garden, a University of Delaware spinout developing a smart irrigation system for landscapers and home gardeners. The startup joined the incubator last summer after going through the NSF I-Corps Team program. Almost right away — thanks to an encounter at one of Gallagher’s happy hours — Sage Smart partnered with fellow tenants GrowFlux. The two Drexel alumni use a horticultural lighting and sensing platform using some similar technology.

“We were able to significantly cut down our product-development time,” says Sage Smart chief technical officer Trevor Stephens. After only a few months, the company graduated to NextFab in South Philadelphia to focus on hardware development and manufacturing.

Meanwhile, GrowFlux moved from a small office on the second floor to HeavyWater’s old digs. The ping-pong table now serves as work table, where tinkering and testing of the agtech lights marketed to growers of cannabis and agriculture takes place.

Before its May move to ic@3401, GrowFlux kept offices at various co-working spots. None proved an ideal fit, says CEO Eric Eisele ’09 and Chief Technology Officer Alexander Roscoe ’13.

That’s because none catered specifically to startups, Eisele says. “I think,” he says, “seeing other people at the same stage as us boosts our energy.”

For ACE, which has launched pilots in Philadelphia-area schools, it’s all about networks. “It’s a space where you can bounce ideas off one another,” says Lori Severino, an assistant professor of special education and principal investigator on the I-Corps grant. “We wouldn’t have gone anywhere without Drexel Ventures and ic@3401. We would have had this great idea, and it would have just sat there.”

After all, any startup has a lengthy to-do list: “I need to find an accountant,” Gallagher says. “I need to form an LLC. I need to find someone to help me with my search optimization and marketing and webpage. … You can go down a Google rabbit hole. You can be paralyzed by the infinite options sitting in front of you.”

Enter ic@3401.

“A lot of what we do is collapse that infinite paralysis into a few defined pathways,” he says. “Everybody else in this space has gone through that.” Of course, like-minded colleagues only help if they intermingle.

To that end, Gallagher promotes regular luncheons, venture capital firm visits and, of course, happy hours. Even ic@3401’s physical design fosters serendipitous connections.

“We’ve got one coffee machine,” he says. “Everybody is going to go to that coffee machine. We’ve got one water fountain. Everybody is going to go to the same water fountain.”

Perhaps most important, Gallagher added monthly one-on-one catch-up meetings with each member to assess needs.

As Kaido puts it: “He knows what keeps the members at ic@3401 up at night. They’re all different issues. When somebody comes along that either has something that can solve it or help solve it, then he knows to put them together.”

In many ways, Gallagher’s background has proven perfect for matchmaking.

After a liberal arts degree in “everything,” as Gallagher says, he worked as a recruiter in the Philly area for four years, focused on the IT and accounting fields. In 2010, he entered Drexel’s Kline School of Law and its business and entrepreneurship program. At the same time, he was a fellow at the Keiretsu Forum, an angel investment group where he helped conduct due diligence on early-stage businesses.

With his degree in hand, Gallagher worked as a full-time associate at a small firm that counseled startups and a couple of years in, also took a role as assistant director at the Innovation, Creativity and Entrepreneurship Institute at Villanova University.

In 2016, Gallagher was hired to manage ic@3401 and carry out Kaido’s vision of a beacon for local entrepreneurs and investors. The incubator “really builds on all of those relationships and experiences dating all the way back to tech recruiting,” he says.