When Tony Hyk and his team at TheraTec were developing the technology behind their remote sensor and mobile app for physical therapy patients, one conversation changed the trajectory of their company.
“I was talking to an angel group in Rapid City, South Dakota,” says Hyk, CEO of TheraTec. “I learned about a medical company that received LIFT funds to hire people in North Dakota.”
LIFT stands for Legacy Investment for Technology Loan Fund. The North Dakota Department of Commerce describes this initiative as “an innovation loan fund that supports technology advancement by providing financing for commercialization of intellectual property within the state of North Dakota.”
Hyk saw this as an opportunity to grow his firm.
“We applied for the LIFT program. They gave us a million dollars,” he says. “I decided to make North Dakota our home.”
A medical software firm that specializes in musculoskeletal rehabilitation, TheraTec was awarded $1 million to establish a North Dakota office and hire local workers. The North Dakota Department of Commerce works with the Bank of North Dakota to manage and administer the LIFT loan fund.
For TheraTec, that means leaving Minneapolis, crossing the state line into North Dakota, a state of just 780,000 people, and setting up shop in Horace, a suburb in the Fargo-Moorhead metropolitan area.
Hyk says it’s the best move they could have made.
“My experience has been phenomenal,” he says. “We moved our headquarters, and our wearable sensor will be manufactured in North Dakota too. The personal income tax is next to nothing in North Dakota. In Minnesota, they absolutely gouge you. With the costs that Minnesota puts on you, the businesses in Minnesota thrive despite the government.”
Those are strong words about an area widely known as a medical device capital. But Hyk says North Dakota won him over not just with the LIFT loan, but also with its people.
“The people who work here in the oil and soil industries absolutely translate to our industry,” he says. “The schools churn out great workers. There is a genuineness to the people in North Dakota. I am now three for three on my hires in North Dakota, and they are all based in the Fargo area. We will stay here.”
Still Building a Biotech Ecosystem
Hyk says TheraTec will have no trouble finding qualified graduates from the University of North Dakota, North Dakota State University and South Dakota State University.
“It is possible for the medical device sector to expand from Minnesota into the Dakotas,” he says. “Some pieces are missing here, but they can address that. We need more of an ecosystem for regulatory, legal, etc. Those exist in Minneapolis but not here yet.”
What he likes, though, is the fact that “North Dakota turns out top-quality engineers. They graduate and leave the area. They go to work at Google or move to Seattle or the Twin Cities. They don’t stick around. They don’t want to leave home, but they have to in order to find good jobs.”
Ken Barton is the CEO of Safetyspect, a biotech company that is bringing detection and decontamination to the microbial level.
Photo courtesy of Safetyspect
If Hyk wants to change that, he has help. Another firm that’s all in on North Dakota is Safetyspect, a biotech company that provides the world’s only optical system to detect and disinfect in seconds contamination that is invisible to the naked human eye.
Safetyspect got its start in North Dakota when it qualified to receive a $1.5 million grant from the North Dakota Department of Agriculture. The grant in 2021 prompted the firm to relocate from Los Angeles to Grand Forks, North Dakota.
“We are an imaging company,” Safetyspect CEO Ken Barton says. “All matter at the molecular level will reflect photons. We create optical signatures for what is invisible to the human eye. Our first commercial device comes out this year. We have sold 100 units to the U.S. Army. Our offices are on campus at the University of North Dakota in Grand Forks.”
Barton says his firm works closely with researchers at UND and other universities across the U.S. and abroad. “We work with groups in Australia, Brazil and Spain,” he says. “We are doing our manufacturing in North Dakota through ComDel Innovation in Wahpeton. That is about 40 minutes south of Fargo, but our headquarters will remain in Grand Forks.”
Why North Dakota? “We were in the L.A. area when COVID-19 hit. My chief technology officer had earned his Ph.D. at Simon Frazier University,” says Barton. “He and the UND biomedical engineering chief had been roommates in Canada. We learned then that North Dakota had CARES Act funds. We were able to qualify for $1.5 million to develop technology to detect an enzyme in human saliva through respiratory droplets that are invisible to the naked eye.”
He adds that “our experience in North Dakota has been very good. The people here are fantastic. They are hardworking. This has been a great environment for us.”
North Dakota is not alone in its emergence as an upstart life sciences and health technology hub. According to a report just released by Cushman & Wakefield, emerging markets are now more attractive than ever for biotech companies.
“Expanding inventory can serve as a catalyst for innovation in the life sciences field,” the C&W report stated. “As access to additional state-of-the-art labs and research facilities increases, firms will be able to leverage this new infrastructure to expedite development. Increasing inventory in emerging markets frequently offers a cost-effective edge for life sciences companies. In contrast to established hubs, rental and real estate operation expenses are often lower in emerging markets.”
Eight Emerging Markets to Watch
Among the markets cited by Cushman as attractive alternatives are Atlanta, Dallas-Fort Worth, Indianapolis, Austin, Houston, Salt Lake City, Phoenix and Costa Rica. Investment from public sources is often the catalyst for growing life sciences hubs in emerging markets, the report noted: “The inflow of public and private funding in emerging markets indicates long-term investor enthusiasm, spurring swift infrastructure expansion, bolstering fledgling startups, and propelling research initiatives forward … Through grants, tax incentives and infrastructure development, these markets are reinforced as appealing destinations for life sciences innovation.”
All of this is happening in North Dakota, says Josh Teigen, commissioner of the North Dakota Department of Commerce. “If you look at the Twin Cities, it is like the Silicon Valley of medical device tech,” he says. “We are seeing a huge shift in biotech companies flowing from Minnesota over the border to North Dakota.”
A few factors drive this trend, he adds: North Dakota’s friendlier tax and regulatory environment; its quicker and easier path to decision-makers at the highest levels of government; and the presence of two highly regarded engineering schools.
“The cost savings here is massive both on the individual income tax side and the corporate income tax side,” says Teigen. “The path to decision-makers in a small state like ours is so much faster. If you want to get the governor on the phone, he is just one quick text message away. We have a desire to get projects going and across the finish line.”
