From Glowing Plants To Nanodiamonds: Y Combinator's Biotechs Debut

Xconomy San Francisco — 

Silicon Valley’s hottest tech accelerator, Y Combinator, is about to show off its first class of biotech startups.

The five companies, some of which have already raised significant funding, or controversy—or both—will come under the scrutiny of hundreds of venture capital investors on Tuesday, Aug 19, as the Mountain View, CA-based accelerator holds its Demo Day at the Computer History Museum, also in Mountain View.

As Xconomy reported in May, Y Combinator decided that biotech companies could benefit from the same intensive mentoring sessions that have helped boost the trajectories of Y Combinator alumni such as Airbnb and Dropbox. The invitation to biotech entrepreneurs came shortly before the March application deadline for the YC summer session. Some applied quickly, but some were recruited after the deadline on the strength of their innovative science.

On Tuesday, the five startups will take their two and a half minutes onstage amid more traditional Y Combinator participants: 80 young companies creating mobile apps, commerce sites, cloud services, and other tech enterprises. Hundreds of venture firms and other investors swarm to Demo Day, the finale of every YC session.

“We have some really great companies,” says Y Combinator partner Elizabeth Iorns (pictured above) about the biotech startups she helped select. “I think many of them will raise money quite successfully.” Iorns is a former YC participant who founded Palo Alto, CA-based Science Exchange, an online marketplace where scientists can outsource work to well-equipped research centers.

People often equate the term “biotechnology” with breakthrough medical treatments and the long, costly FDA approval process. So, how can a tech incubator program help biotech startups accelerate? One answer: None of Y Combinator’s first “biotech class” is starting out in drug development, though their tools and technologies might eventually be useful to the pharmaceutical industry. A second answer: Each of the five has its eye on near-term product opportunities more in line with the product development timelines for software companies. A quick introduction to their names and earliest offerings:

Glowing Plant: Plants that shine in the dark like those star stickers on a kid’s ceiling.

Bikanta: Nanodiamonds that light up biomolecules like DNA under the microscope.

Ginkgo Bioworks: Microbes built to industry spec in an automated foundry.

uBiome: A census of the bacteria that live inside you.

One Codex: A search engine for DNA code in cyberspace.

A new generation of biotech innovators has been pushing the boundaries of traditional life sciences careers to launch independent enterprises in rented lab space, outside of university or government research centers. Like Web companies, biotech companies can now operate on a leaner, virtual model because many of their tasks can be outsourced, and the cost of technologies such as gene sequencing have dropped dramatically. Biotech startups can now pitch their first products to consumers, says Antony Evans, co-founder and CEO of current YC startup Glowing Plant. The San Francisco, CA-based company is offering customers the novelty of a small plant made luminous with the addition of genes from fireflies and marine bacteria—the kind of genes that can be ordered from commercial suppliers.

Glowing Plant raised $484,000—and the hackles of protesters—with its Kickstarter crowdfunding campaign in June 2013. The startup drew contributions from more than 8,000 supporters who were promised glowing plants, or their seeds, in return. But critics of genetically modified plants later influenced Kickstarter to change its policy and forbid its crowdfunders to distribute any genetically modified organism as a reward for donors.

That new policy didn’t hinder Glowing Plant. On the advice of YC partners, the startup has been showing the prototype of its softly luminous plant, commonly known as mouse-ear cress (Arabidopsis thaliana), to some of its Kickstarter donors this summer. The startup is scaling up production to ship them out as promised, Evans says. On the company’s own website, pre-orders for the plants continue to come in at the rate of $10,000 a month, he says. On top of those revenues, Glowing Plant will also receive the $120,000 that Y Combinator contributes to each of its startups in return for a seven percent equity stake.

The company is still tweaking genes to make the plant shine more brightly. But the glowing houseplant remains a novelty. Evans more ambitiously thinks that larger versions of his plants could form radiant landscaping to replace streetlights. By using the techniques of synthetic biology—an advanced form of genetic engineering—Evans says plants could be green, and not just in color, by producing eco-friendly fuel, or replacing chemical air fresheners by cleaning the air. They might also grow in salty ocean water, or without the need for fertilizer. “We’re using the glowing plant as a beachhead,” Evans says.

Like its YC classmate Glowing Plant, uBiome is also taking advantage of a better technical infrastructure and new business models. UBiome reaped a $351,000 haul on crowdfunding campaign Indiegogo, allowing it to launch in late 2012 in the midst of increasing interest in the health implications of the “microbiome”—the trillions of micro-organisms found in and on the human body. The campaign helped uBiome build a commercial kit. For $89, individuals submit a sample from their nose, skin or other body site, and uBiome uses gene sequencing to identify the mix of bacterial species contained in the sample. Customers can find out how their bacterial population compares with that of vegans, people with certain illnesses, those who have just taken a course of antibiotics, and other groups, says CEO and co-founder Jessica Richman. With a follow-up test, customers can track personal changes. For example, they might want to know how a change in diet or medicines affects the mix of their intestinal bacteria.

Richman says uBiome’s kit lets so-called citizen scientists try to answer questions about themselves, instead of letting “science [be] driven by questions that institutions ask about them,” Richman says.

But uBiome has also scored nearly 100 contracts with institutions exploring their own questions, Richman says. These customers include universities such as Stanford, as well as companies developing products such as shampoo, toothpaste, cosmetics, and drugs. Richman says she can’t reveal names of those industrial clients, which cover the cost of test kits for individuals who participate in their studies. As a big data company, uBiome is using robotic research tools, machine learning, and outsourced high-throughput gene sequencing to build an international database of human microbiomes. It has analyzed 15,000 samples so far from individual consumers and client-backed studies.

The San Francisco startup doesn’t identify any specific microbiome profile as a standard of normalcy or health. It’s careful not to position itself as a diagnostic service, which would trigger the kind of FDA scrutiny faced by 23andMe, a Mountain View, CA-based personal genome sequencing company that used to tell customers how their genetic variations might correlate with health risks. In the future, however, uBiome will deepen its microbiome testing to identify specific strains of bacteria that cause disease—which would be a diagnostic assay, Richman says.

After an angel round of fundraising, uBiome is now completing a Series A led by Andreessen Horowitz, the noted tech investment firm that backed Instagram and Pinterest. Richman declined to disclose the amount. The round had begun before uBiome was accepted by Y Combinator. Other companies in YC’s first biotech class say the summer session has put them closer to potential funding sources.

“Y Combinator is one of the best places to learn fundraising,” says Jason Kelly, co-founder of Boston, MA-based Ginkgo Bioworks. The accelerator’s mentors encouraged him to approach tech investors he wouldn’t previously have considered as likely prospects. “We’re getting interest from venture firms you would never think of as biotech investors,” Kelly says.

Founded in 2008, Ginkgo has built an automated, 11,000-square-foot synthetic biology foundry to create custom-tailored microbes for industry customers. The yeast cells and other microbes have been genetically modified to produce fragrances, natural pesticides, cosmetic ingredients, and nutritional compounds.

Kelly sees a strong kinship with tech companies. He says designing a microbe is like writing software. “DNA looks like digital code,” he says. His PhD biologists spend most of their time at computers rather than in wet labs, while technicians and liquid-handling robots execute the assembly of Ginkgo’s tailor-made micro-organisms.

Y Combinator’s expertise has also helped Ginkgo boost sales, Kelly says. The company signed six contracts over the 12 months before the summer session began. “During YC, we added three more,” he says.

Down the road, Ginkgo might become a developer of therapeutics to “heal” an unhealthy microbiome, Kelly says. The company has designed microbes to attack bacterial genes that make them resistant to antibiotics, though for the time being that’s not a front-burner project. Still, Kelly suspects that the microbiome therapeutics of the future might not be drugs, he says. “I think there’s a decent chance they’ll look like engineered organisms,” Kelly says.

Of Y Combinator’s five biotechs, One Codex is the purest data company. Like Google, the San Francisco, CA-based startup wants to organize a world of information by creating a search engine. But it’s the world of DNA sequences, now compiled in various government data banks, which One Codex co-founder and CEO Nick Greenfield sees as ill-connected silos.

Like the early World Wide Web, Greenfield says, the current collections of sequencing data are useful for researchers who know what they’re looking for, but they’re not linked to each other. Each databank has the equivalent of a table of contents. But One Codex wants to create a platform for a blind search: enter a DNA sequence and bring up known references to the same stretch of code, along with a wealth of annotations from multiple databanks about the possible genetic functions linked to it.

One Codex’s first customers might be state public health labs or food safety agencies that guard against infectious disease, Greenfield says. They could input raw DNA data from a mixed sample of bacteria, and the future search engine could identify the microbial species and strains, he says: “They could relate a specific strain of bacteria to a specific outbreak.”

The search engine could later be useful for biodefense and diagnostics. When DNA sequencing becomes a routine part of clinical care, doctors might decide which drugs to use by scanning a patient’s microbial DNA to detect genes for antibiotic resistance, he says.

Y Combinator is the first outside investor for One Codex, and that stamp of approval has made the current end-of-session fundraising drive easier, says Greenfield: “It would’ve required a lot more work to get the equivalent conversations.” Greenfield says.

That indeed is part of Y Combinator’s mission, says Iorns—serving as a due-diligence gateway for tech investors who don’t have the expertise to evaluate biotech companies.

Iorns herself recruited former NIH scientist Ambika Bumb, founder and CEO of the nanodiamond company Bikanta, into the summer YC session. At the NIH, Bumb was one of the inventors of a form of light-emitting nanoscale diamond dust that has immediate uses for exploring biomolecules under the microscope.

Bumb says she was trying to improve on dyes and other additives that make biological structures visible in optical imaging. The dyes fade after seconds or minutes, and tiny semiconductor crystals called quantum dots blink on and off. But nanodiamonds, made by crushing diamonds into super-fine crystals, neither fade nor blink as they emit fluorescent light for as long as several years, she says.

“They’re basically like little flashlights with infinite battery life,” Bumb says.

Bumb’s team encapsulated the nanodiamonds in silica to keep them from clumping together. The silica coating can be linked to other molecules, such as antibodies, which will bind to specific biomolecules such as DNA or cancer cell surface structures, she says. Such modified nanodiamonds will stick to a researcher’s target of interest in a cell and send out a steady signal. “You can study individual molecules, like a single strand of DNA,” Bumb says.

Bikanta’s first target customers are users of high-resolution microscopy tools. The company plans to build a manufacturing facility for nanodiamond probes in the Bay Area. Bumb predicts the company will have revenues by the end of the year and reach profitability by 2015. The next step is building instruments for microscopy and research, a market estimated at $12 billion. Ultimately, Bumb says, the nanodiamond could be part of medical diagnosis, such as the very early detection of cancer metastasis, and of medical treatment, such as targeted vaccine delivery.

“It’s essentially a new building block for nanomedicine,” Bumb says. She declined to disclose Bikanta’s fundraising totals.

As the five biotechs prepare to move beyond Y Combinator, Iorns says the organization is already getting some feelers from life sciences companies about its winter session, which runs from January to March 2015. Although applications are accepted until October, Iorns encourages biotech companies to apply as soon as possible. She says the traditionally tech-centric accelerator isn’t capping its ratio of biotech-to-tech. “If we got one hundred amazing biotech companies that applied, we’d want to fund all of them.”