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Five Years After Y Combinator First Admits Biotechs, They’re Dug In

Xconomy San Francisco — 

Five years ago, the big tech incubator Y Combinator started to welcome life sciences companies into its sizable startup classes, which had previously nurtured entrepreneurs in information technology almost exclusively.

That opening to biotech startups in 2014 was controversial at the time. Some observers simply wondered what kind of guidance a deeply tech-focused accelerator could offer to biology lab scientists messing with live cells and tissues, and facing lengthy development times for new medical treatments.

Others worried about a new startup model that was emerging for young biologists who were frustrated with career barriers at universities and constraints on government grant funding. Some of them were going outside academia, running crowdfunding campaigns to finance their projects, renting lab benches in coworking spaces, outsourcing some of the lab work through the R&D services marketplace Science Exchange, and joining accelerator programs.

Those strategies jibed with Mountain View, CA-based Y Combinator’s longstanding prescription for tech startups—move fast, create a first product, and consult constantly with potential users while planning the next steps. This had been possible for tech startups because of coworking centers and new services such as software sold as a subscription, which could be used by fledgling companies at a low initial price. As they scaled up, they could pay more.

Fast-forward to today: One of the first life sciences startups admitted to YC—in the summer 2014 session—now rates among the most successful graduates from the incubator program since it began in 2005.

In fact, Ginkgo Bioworks ranks number 8 on the list of 102 top companies YC named in a recent blogpost, based on their valuations as of this month. Each one is valued at more than $150 million. In the rankings, Ginkgo follows only the much-noted tech enterprises Stripe, Airbnb, Cruise, DoorDash, Coinbase, Instacart, and Dropbox in the roster of leaders. Collectively, all the scores of top companies taken together have a cumulative valuation of more than $155 billion, YC says.

Boston-based Ginkgo wasn’t involved in drug development when it joined YC’s summer 2014 session, but it was indeed messing with cell cultures. The company was using the techniques of genetic engineering and synthetic biology to custom-tailor microbes for companies that planned to use them to crank out food compounds, cosmetic ingredients, enzymes for fermentation, and other products. But technological advances in software and robotics allowed Ginkgo to do this efficiently. Its top scientists could design the genetic codes of new microbes at their computers, while the assembly of the life forms they envisioned was carried out in an automated foundry.

In recent years, Ginkgo has formed a partnership with Roche to explore the potential for novel antibiotics, and another with Synlogic (NASDAQ: SYBX) to speed that company’s work on medicines consisting of bioengineered bacteria. In September, Ginkgo announced a $290 million funding round that pegged its valuation at as much as $4.8 billion.

Though the company relies heavily on software and hardware, standout Ginkgo is more directly involved with wet-lab biology than most of the other YC life sciences grads also named among the incubator’s most valuable 102 companies to date.

San Francisco-based Benchling, ranked number 46, makes software tailored to help life sciences researchers track the progress of R&D processes and keep the resulting data organized in its Web-based storage.

Nurx (#62) is an online reproductive healthcare firm in San Francisco that connects patients with its medical team for evaluation and prescriptions, then mails them birth control pills or devices, as well as home test kits for sexually transmitted infections.

Mountain View, CA-based Athelas (#81) builds on software innovations such as machine learning and computer vision to create medical devices that detect levels of blood cells and immune system elements in drop-sized blood samples from patients.

Two other San Francisco life sciences companies also rely on AI to try to improve medical treatment. Notable (#95) combines lab studies of patients’ cells with AI analysis to predict which experimental drugs might work best for specific forms of cancer.

Atomwise (#96) uses artificial intelligence in pursuit of a goal similar to Notable’s—creating a new era of personalized medicine. But rather than working with biological samples, the San Francisco company scours through millions of existing data points to predict which molecules could become effective new drugs for patients with particular diseases.

There may be other top companies not named in YC’s list, because the incubator allows any of them to choose not to be included. YC also advises that it uses valuation as a standard for the rankings, not because it’s the best measure of success, but because it’s “the most commonly available metric to compare companies in the startup world.’’

“Other metrics, like revenue, are more often kept private. It’s worth noting that we have a number of impressive companies who would appear on the list or rank even higher if we counted other metrics,’’ the incubator says. The community of YC grads from all sessions over the years now exceeds 2,000 companies.

When Ginkgo went through its YC session, it was one of only five life sciences startups in a class that included 80 other participants—mostly developers of apps, online marketplaces, ecommerce businesses, and other tech plays. But those five companies, constituting a formal entering wedge for life sciences at YC, triggered a boon for every other startup in all … Next Page »

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