Silicon Valley Wants to Disrupt Biology

(Bloomberg) -- Can an incubator of life-science startups in the heart of the San Francisco tech scene work at the “move fast and break things” pace of its Silicon Valley neighbors? 

IndieBio made that bet in 2015. Its office has all the trappings: industrial-chic design, a Blue Bottle Coffee down the block, and a sign reading “Revolution Workspace” above the front desk. Twitter Inc. and Uber are nearby. The newest addition to the skyline, the Salesforce tower, looms large above it all.

Manipulating molecules isn’t as simple as manipulating code, but recent advances in the lab have made it a lot easier. By providing Ph.D.s with seed funding and business mentors, IndieBio wants to churn out successful life-science companies the same way Y Combinator spawned Airbnb and the like.

“Biotech had sped up enough and got cheap enough where you could do early-stage biotech in a fundamentally new way that no one had done before or tried,” said Arvind Gupta, a founder of IndieBio and its chief executive officer.

At IndieBio, scientists with an entrepreneurial mindset get $200,000 and four months of access to a 7,000-square-foot high-end laboratory. The startups are working on speeding up the arrival on the market of lab-grown meat, wood without trees, smart bees, pollution-free chemicals and even cancer therapies.

Of the 94 companies that have gone through the program, some have attracted big-name investors such as Bill Gates, venture firm Andreessen Horowitz and corporate giant Tyson Foods Inc. IndieBio itself has attracted renowned Massachusetts Institute of Technology scientist Tim Lu to its board of adjuncts. And the incubator recently got as much as $25 million in state funding to open a second location in New York City in 2019. 

Along the way IndieBio has proved at least one thing: Biology is Silicon Valley’s next hip market.

When Gupta first floated the concept of a biotech accelerator past his friends and mentors, most of them, he recalled, told him it was crazy.

Gupta, a lanky 44-year-old with slicked back hair and a penchant for loud patterned button-downs, studied molecular biology at the University of California, Santa Barbara, in the 1990s.

By 2013, he had left the Palo Alto design company IDEO for a career in venture capital with the firm SOSV. Why not, Gupta thought, combine what he knew about design and startups with his interest in biology? 

Across the bay in Berkeley, Ryan Bethencourt, a biohacker working on projects like open-source insulin, and Ron Shigeta, a chemistry Ph.D. with academic training at Stanford University, Harvard Medical School and Princeton University, were running a no-frills incubator space. They, too, were convinced that new biological technologies had made converting science concepts into products simpler and cheaper.

The three men linked up and the first IndieBio class started in the spring of 2015, with funding from SOSV. Most of the 80 or so candidates were “super whacky,” Gupta recalled. Twelve made the cut.

“It gave Ph.D.s another option besides going into academia or working for a major company,” said MIT’s Lu, who signed on as an adviser after a few of his own students got funding from IndieBio. “That option didn’t really exist before.”

Of the first batch, half survived, including Clara Foods, which was developing the world’s first animal-free egg white, and a stem-cell company that later pivoted to make synthetic wine and renamed itself Ava Winery.

“We try to really focus them on one thing, one product,” said Jun Axup, IndieBio’s scientific director, who holds a doctorate in chemical biology from Scripps Research Institute. 

IndieBio, which gets an 8 percent equity stake in its companies, says 64 percent of them have raised follow-on funding, a total of more than $174 million. Some of that money has come from SOSV, but increasingly also other investors. About 8 percent of the startups have legally shut down, though several more appear to be inactive.

Last year, the research firm CB Insights listed IndieBio as the most active investor in startups based on synthetic biology, a marriage of engineering and biology that allows scientists to construct genes from scratch.

“IndieBio has quickly carved out a niche helping early-stage biotech founders move from the lab into commercialization while attracting investors,” said CB Insights senior intelligence analyst Nikhil Krishnan.

The incubator's most high-profile company is Memphis Meats, which unveiled its first lab-grown meatball in early 2016. It has raised at least $22 million though it has yet to commercialize a product. In January, Tyson Foods joined Bill Gates and Richard Branson as an investor.

“They're looking at technologies that are further along and are ready to be incubated and catapulted into the world of entrepreneurship,” said Vijit Sabnis, a partner at venture capitalist Khosla Ventures. “I don’t know of another accelerator with this mindset.”

Success has brought competition. 

This year, Y Combinator started a dedicated bio incubator, YC Bio, doling out up to $1 million for a stake of as much as 20 percent and offering lab access.

“The thing that we look for in a new industry are super-talented and ambitious founders, dramatically lowering costs and shortening cycle times,” said Sam Altman, the head of Y Combinator. “It was a question of are all the stars lined up. And now they are.”

Google's life-sciences arm Verily has also created a health-care incubator.

Meanwhile Gupta has scaled up his ambitions, saying it’s time to focus on ideas that have potential for societal impact, like therapeutics. The upcoming New York location is slated to take on a record of 20 companies next year.

“We expect our exits to come within seven to 10 years,” Gupta said. “It might take little bit longer. But we try to make up for that with trillion-dollar market-size problems.”

Some investors are skeptical.

“When you're building a software company, you can hack progress in three months through sheer force of will. You do all-nighters and you can make really great progress by writing code,” said Seth Bannon, founding partner of Fifty Years VC, which has invested in IndieBio companies, and a Y Combinator alumni. “If you're dealing with something like biology, you can't just force life to move faster.”

In September, a company from IndieBio's recent batch, New Age Meats, invited reporters and investors for a tasting of its first prototype, a lab-grown pork sausage made from cells cultured from a pig named Jessie.

At a brewery in San Francisco’s Mission District, after speeches and toasts, the founders unveiled the fruit of months of labor: three egg-roll sized sausages. 

“We think we'll be ready to go to market in a couple years,” CEO Brian Spears said. 

One nearby taster suggested it may take more work to get there.

“It tastes like bread,” she said. 
 

To contact the editor responsible for this story: Cecile Daurat at cdaurat@bloomberg.net

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