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November 12, 2019 09:00 AM

J&J investment brings London tech incubator to New York

Jessica Kim Cohen
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    A technology accelerator and incubator from London is setting up shop in the U.S., with an initial mission to tap into New York's healthcare scene.

    Founders Factory is planning to open a site in New York, marking its fourth location worldwide, the group said Tuesday. The hub will initially focus on startups in the consumer healthcare space, thanks to an investment from Johnson & Johnson Development Corp., the venture capital arm of medical device and consumer goods giant Johnson & Johnson.

    "For every investor that we bring on board, we create a sector with them," said George Northcott, a co-founder and vice president at Founders Factory.

    In 2016, Founders Factory launched a program focused on beauty and cosmetics technology startups with an investment from L'Oréal.

    As Founders Factory partners with more investors, the New York hub will expand its focus outside of consumer healthcare, Northcott said.

    Founders Factory declined to share the size of the investment, but said it plans to work with Johnson & Johnson's Consumer Health Products business to grow and scale 25 existing startups and help launch 10 new startups over the next five years. Founders Factory provides existing startups with $100,000 in funding and new founders looking to build a business with $250,000.

    In exchange for funding and operational support, Founders Factory receives equity of 4%-7% and 25% from existing and new startups, respectively.

    Since its founding in 2015, Founders Factory has built and scaled an estimated 140 startups. Those startups have raised a combined $200 million in capital and signed more than 200 commercial agreements with Founders Factory's corporate strategic partners, which include investors like L'Oréal and EasyJet Airline Co.

    At the New York hub, Founders Factory is seeking startups working on topics like healthcare access, smoking cessation, mental health and allergies.

    A particular area of interest for Founders Factory will be women's health, said Maya Baratz Jordan, CEO of Founder Factory New York.

    The global market for digital tools designed to improve women's health and well-being—often referred to as "femtech"—has the potential to hit $50 billion by 2025, according to a report released by market research firm Frost & Sullivan last year.

    "It's a very fast-growing industry," Jordan said. "It's an area that we're really excited that people are beginning to put a lot of focus on."

    Founders Factory is currently working on hiring staff and identifying an office for its New York hub. It plans to bring on a team of roughly 30 for its New York office.

    New York has proven an attractive location for healthcare entrepreneurs. Since the start of 2019, 41 digital health startups in the New York City metropolitan area have raised a collective $1.3 billion in funding, according to data from Rock Health, an early-stage venture fund focused on digital health. In 2018, digital health startups across the U.S. raised a total of $8.1 billion.

    Earlier this fall, Chicago healthcare incubator Matter revealed plans to open a second location in New York in collaboration with the New York City Economic Development Corp. and healthcare investment firm Deerfield Management. Matter was selected to build a New York innovation center by the city's Economic Development Corp. based on its success in Chicago, where it launched in 2015.

    "The New York region is home to one of the world's great concentrations of healthcare and life sciences startups, large pharmaceutical and biotech companies, leading health systems and academic research centers," Matter CEO Steven Collens said in a statement announcing the new site in September.

    Northcott said Founders Factory was drawn to New York because of the mix of industries working in the city—including healthcare and technology, but also sectors like finance and fashion—opening the door for possible cross-industry collaboration down the line.

    New York also offered proximity to Johnson & Johnson's headquarters in New Brunswick, N.J.

    "You've got all sorts of different sectors intermingling, as well as a very large talent pool," Northcott said of New York. "Our model is really dependent on entrepreneurial talent."

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