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LabFellows Looks to Become “Operating System” For Life Sciences Cos.

Xconomy San Diego — 

[Updated 7:21 p.m. 10/11. See below.] Scientists, no matter how sexy the research they’re conducting, aren’t immune from the administrative minutiae of office life.

Such tasks steal time away from researchers’ main objectives. However, that wasn’t the problem San Diego startup LabFellows was looking to solve when it launched in 2014. Founders Julio de Unamuno IV (pictured) and Tim Ryan saw an opportunity to serve small research groups and nascent biotechs by offering fully outfitted lab space—think WeWork, plus Bunsen burners.

Soon, though, they realized that the people using the space didn’t just need space in which to do science: They were also looking for help with procurement, compliance, logistics, and other administrative tasks. So de Unamuno and Ryan jury-rigged together off-the-shelf software tools to help their customers complete what needed to be done in order to get on with their research—and, once the tenant companies grew enough to move out, they started asking LabFellows if they could keep using the system.

“At that time it was all these spreadsheets and folders duct-taped together, some early beta coded stuff,” de Unamuno said in a phone interview with Xconomy. Seeing interest in its preliminary version of a platform for lab management, the pair went to San Francisco in early 2017 and participated in a 10-week accelerator program for software-as-a-service (SaaS) startups run by Acceleprise.

“That’s when we really started to make this pivot into the software world and into a SaaS platform for life science,” de Unamuno said.

LabFellows customers use its software to manage information related to vendors, procurement, inventory, and compliance, among other administrative work. Using the platform can also help labs better understand their operations, and ensure they aren’t, for example, unnecessarily stockpiling lab supplies. It also allows labs to minimize the creation of silos of information by integrating information across both business and science teams.

By May of 2017, the company was on track to earn $300,000 in annual revenue, de Unamuno said at the time. And it started attracting bigger companies as customers. A year ago, the company reached profitability.

“Now we’ve got these small teams of eight or 10 scientists all the way up to hundreds of scientists” using the platform, he said.

More than 2,300 companies, including good-sized biotechs and startups in co-working lab spaces, use the software, he said. Customers can access the system starting at $49 monthly per user; there’s also an upgraded version available. The startup has grown along with its customer base, reaching 14 employees.

Equillium, a biotech based in La Jolla, has been working with LabFellows since late 2017, Steve Connelly, its chief scientific officer, told Xconomy in a phone interview. The company raised $65 million in an initial public offering in October 2018—19 months after its launch—and cites LabFellows among the factors behind the unusually rapid public market debut.

Connelly first saw how LabFellows worked while in his previous role with BioMed Ventures, an investment arm of BioMed Realty (NYSE: BMR)), the San Diego-based real estate investment trust (REIT).

In his capacity as a board observer for Amplyx, a BioMed portfolio company, Connelly saw how that company, which is developing next-generation treatments for life-threatening fungal infections, used LabFellows in its transition from the San Diego site of the Johnson & Johnson (NYSE: JNJ) incubator network JLabs to its own lab space.

When he took the CSO job at Equillium, Connelly said he first considered subleasing space from another lab to do its research. But he discovered it wouldn’t have been as cost-effective as using a local space that comes with access to the LabFellows services, he said.

By sharing lab space that didn’t use such a system, the fledgling company would have had to, at one such lab, “pay 10 percent of the lab manager [salary], 10 percent of the admin,” he said. “Those 10 percents add up.”

De Unamuno, LabFellows’ CEO, is a San Diego native who previously worked as a business development manager at Danaher (NYSE: DHR), the conglomerate with a life sciences and diagnostics businesses. LabFellows started as a project of de Unamuno’s at the UC San Diego Rady School of Management. After earning his MBA, he teamed up with co-founder Tim Ryan, a local serial entrepreneur, who became the company’s chief operating officer.

Since its founding, LabFellows has raised more than $3 million from investors including pre-seed investment firm Right Side Capital, San Diego angel investor Taner Halicioglu’s Keshif Ventures, and Day One Ventures. [Paragraph updated with the total amount the company has raised.]

“LabFellows is one of our most exciting investments because they have the potential to become the operating system of the life sciences lab space,” said Right Side managing director David Lambert.

Other startups are also targeting life sciences companies with software meant to speed up their work and reduce costs through digitization: San Francisco-based Benchling has raised more than $60 million to advance its R&D data management system, which it designed to help scientists better record results of their experiments.