The Garage Moment — 3 Reasons Why Biotech Is Finally Ready For Startups

In 1938 David “Dave” Packard and William “Bill” Hewlett, with $538 in capital, started using a one-car garage in the place they were renting to build a company. The garage is arguably the birthplace of Silicon Valley, and thousands of companies, from Apple to Google, have since followed the Hewlett-Packard model / myth of starting in a garage. The garage is emblematic of starting with few resources, raising enough funds to get to market, and drive towards a very large vision.

While the garage transformed the entire tech industry, it really hasn’t picked up in many other industries. High cost of development, long sales cycles, risk and regulation are among the factors that have historically hampered the explosion of startups in areas like life sciences or auto. But things are changing and this post will focus specifically on biotech and why it is finally witnessing the garage moment.

1) Accessibility Of Clinical Trials

Biotech presupposes clinical trials and the gold standard is a double-blind longitudinal study. Which means you need to recruit enough patients (money) and follow them enough (time). These two expenses have historically favored large companies disproportionally but there are strong signs of startups batting above their weight class. The figure below comes from a McKinsey study published in Nature which shows how the top 10 pharma companies are increasingly a smaller percentage of the industry relative to new entrants, many of which are biotech:

The underlying reasons why clinical trials are more accessible to startups include friendlier regulation and higher amounts of capital available to them. And with pharma getting revenues increasingly from acquisitions rather than partnerships or organic growth of their products ((from 10% in 1997 to 46% in 2017), it means there are more exits and thus more incoming VC.

2) Availability Of Data / Storage / Compute

It shouldn’t be news to anyone in tech the cost of storage has dropped precipitously. What may be a surprise is that it is precipitous even on a logarithmic scale and an entire human genome (roughly a gigabyte of data) can be stored for about one cent now:

Same story in terms of sequencing cost, we are very close to effectively sequencing an entire human genome today for $100.

This improvement has far exceeded Moore’s Law which is a cornerstone of tech — computational power roughly doubling every couple years. From a computational perspective, we could argue biotech is better positioned for a transformation now than tech was during its garage moment. And what does this revolution really mean for startups? It enables them to design more targeted clinical trials requiring smaller number of patients and less time to recruit and conduct.

3) Lab As A Service (LaaS)

Biotech requires wet lab and wet lab requires money. But shared facilities provide a scalable solution. From LabCentral in Boston or StartMedX in Palo Alto, wet lab equipment has been saving startups millions of dollars that they can instead apply on product and market development instead. Think of it as the equivalent of what the cloud did for traditional tech companies. Some of the most promising biotech startups, from 10X Genomics (raised total of $243M) to Foundation Medicine (sold in 2018 for $2.4B) and Gingko (raised total of $429M) have been products of LaaS.

Biotech will likely always take more time and money than tech but all trends indicate that we are finally there in terms of a Cambrian explosion of ideas.

This article is inspired by conversations with Deniz Kural and James Sietstra; I am a small angel in their company Totient. These are purposely short articles focused on practical insights (I call it gl;dr — good length; did read). I would be stoked if they get people interested enough in a topic to explore in further depth. All opinions expressed here are my own. If this article had useful insights for you do give a like, any thoughts comment away.