Reshma Shetty, Ph.D., didn’t have a million dollars in her pocket when she came out of MIT with a graduate degree in biological engineering. She didn’t have a big-name backer or wealthy parents. But she did have a great idea and a mentor who encouraged her to go out and build her company from the ground up.
That idea became Ginkgo Bioworks, a biotech that aims to program cells just like we do computers. The company’s platform has applications across food and agriculture along with industrial chemicals and pharmaceuticals, and it counts Moderna and Roche as collaborators.
Shetty, who currently serves as president and chief operating officer, is one of five co-founders who have settled into the C-suite. She’s part of a trend of founder-led biotechs that have risen in prominence in recent years, going from startup to well known with lightning speed.
These scientists-turned C-suite occupants know their technology inside out. They’ve got credibility both at the bench working with their research teams and in the boardrooms selling their future products.
“I like to say that I'm super qualified for the job I had two years ago, because the organization has grown and is tackling new challenges and facing new things,” Shetty said during the Founder-Led Biotech Summit on Nov. 1. “It's like you are always sort of trying to keep leveling yourself up and keep up with the growth of the organization as you go.”
Decades ago, the founder-led biotech was rare and considered the tougher path to follow. Regeneron is a standout, with scientific co-founders Leonard Schleifer, M.D., Ph.D., and George Yancopoulos, M.D., Ph.D., still at the helm today since founding the company in 1989.
Schleifer recalled scratching out the initial $1 million investment in Regeneron on the back of a napkin at a Chinese food restaurant in a recorded history of the company.
"We actually could do more, not less in this kind of environment, rather than an environment where you constantly, even if you have money, you have to have space, you have to have people. It takes years to get anything done," Schleifer said in the audio timeline. "There are some advantages to living in an entrepreneurial business setting that you don't get in the academic setting. Of course you give up a lot that you get in academia, but you get a lot."
The Regeneron model is no longer novel. Biotech is booming, and while traditional VC-led biotechs with leaders from that world are emerging every day, founder-led biotechs with scientists at the helm are becoming just as common. See Acelyrin, Vedanta Biosciences, Talus Bio, Strand Therapeutics, Verge Genomics, Parallel Bio, Cellino Biotech and so many more.
Another thing that really stands out about founder-led biotechs is that many of the leaders are women or people of color or both. These new companies are “lowering the barriers and trying to democratize access” to the biotech industry and the C-suite itself, according to Tony Kulesa, Ph.D., founder and partner of the biotech accelerator Petri.
“Everything that we're trying to achieve here is just recognizing that great ideas and talent is universally distributed, but opportunity isn't necessarily,” he said in an interview.
VC investment in healthcare companies founded by women has been growing steadily, according to an analysis by PitchBook. As of August, 43% of investment across the healthcare universe went to these companies, which has risen from 25% in 2011. The capital market company flagged the $400 million series C financing of AI-powered drug discovery company Insitro, led by scientist-turned founder Daphne Koller, Ph.D., as a standout for 2021.
Shots on goal
What biotech is going through now models what happened with tech “a generation ago,” Kulesa said. Universities began launching accelerators that could take promising technology research and spin it out into the real world.
Now, students with a great idea can learn how to build a company along with fundamental science at their own schools, like the program at Cambridge, Massachusetts-based MIT or the University of Pennsylvania. There also are industry-led programs like Johnson & Johnson’s JLABS or Y Combinator. (Ginkgo is a Y Combinator alum.) New locations for biotech innovation beyond the well-known hubs in Boston and San Francisco have opened up through these accelerators. Previously, people in those regions coming out of schools would get access to the companies and learn the ropes that way.
“If you're not part of that network, it's really hard to know how to get started,” Kulesa said.
A new report from IP and R&D tax credit analysis firm GovGrant on the state of university spinouts in the U.K. ranked biotechnology as the top industry for new companies, with a combined value of 3.16 billion pounds ($4.2 billion). AI drug hunter Exscientia, with a valuation of 784.5 million pounds ($1.05 billion), is listed as the most successful U.K. university spinout of the last decade. No. 2 is Nightstar Therapeutics, the gene therapy biotech that was bought by Biogen in 2019 for $877 million. Other top biotechs include vaccine maker Vaccitech, which landed on the public markets with a $110 million IPO in April and developed a COVID-19 vaccine with AstraZeneca.
These U.K. companies follow a more traditional leadership path, with seasoned executives at the helm and advisers from the universities they spawned from. But they demonstrate the swift rise that can follow a great idea emerging from a school.
Kulesa said biotechs traditionally have launched from a handful of venture creation firms. The many companies to come out of Flagship Pioneering—see Moderna—are a great example of this approach. So while that model has benefited from a flood of capital, it’s controlled by a small number of gatekeeper firms.
“The problems that we need to solve with biotechnology are much greater than can be solved by a small number of integration funds,” he said, pointing to Alzheimer’s disease and other neurodegenerative disorders, cancer and cardiac diseases. “The more shots on goal that we have on these problems, the better off we're going to be.”
But biotech is not like launching an online shop or putting out a product that people can choose to buy. Real people are involved in clinical trials, and they can be harmed by bad science—and even good science can be bumpy, Kulesa points out.
“No one dismisses the gravity of what we're doing,” he said. “But … does that mean that the only people that can build these companies are the ones who've done it before? Because certainly everyone has done it for the first time at some point.”
That means founders need to build an excellent team with the right experience and resources around them.
The people aspect
For new executives, the switch from student to executive can include some hard lessons, as Shetty found out.
“I was a scientist and engineer by training. I am a very analytical person, but then as Ginkgo grew and as I sort of scaled myself as a leader, I came to appreciate just how much of my role came down to the people,” Shetty said of the transition from grad school to the C-suite. “That people aspect was a very steep learning curve for me. It’s a learning curve I continue to climb today.”
Kulesa said one of the hardest things to reframe is that, in academia, you’re constantly focused on how something could go wrong. As an entrepreneur, you have to switch that mindset to what could go right—that’s how you sell your product or service.
“How do you both be rigorous with the science but also sell people on the vision of what you could achieve and really believe in that yourself?” Kulesa said. “Not every great scientist wants to be that person.”
Often, these biotechs place a “visionary out-facing person” at the forefront and “the very rigorous inward-facing scientific director” at the top of the company’s research. A good example of this is BioNTech, which has the more outspoken Ugur Sahin, M.D., as CEO, and Özlem Türeci, M.D., as chief medical officer. Both founded the company, but they slid into the positions that best suited them.
It was the same situation at Regeneron.
"What George needed, in my opinion, was somebody who could work for him that he could trust. And that turned out to be me," CEO Schleifer said of his scientific partner Yancopoulos in the company's recorded history.
He remembers pitching the venture to Yancopoulos as building "a company where the administration of the company, the business people, management, whoever, we're working for the scientists rather than the scientists working for them."
Not all scientific founders are suited for the CEO spot, according to Celine Halioua, who is herself a founder-CEO of dog longevity biotech Loyal. She recently served up the "unpopular opinion" that "scientists make bad founder-CEOs without a lot of work." She suggested that these biotechs should bring on more traditional leaders with experience and interest in building new biotech companies.
Commenting on the founder-led biotech movement, Avoro Ventures Partner Sara Nayeem said sometimes a VC expert is exactly what a biotech needs to launch.
"Before you take the CEO role, speak to others who have gone that route and make sure you’re comfortable with the 'less fun' but critical elements, such as non-stop hiring and fundraising," Nayeem said in a recent Twitter thread with advice for aspiring biotech founders.
Giving it your all
Scientific founders tend to be eager to share their expertise. CAR-T and immunology expert Carl June, M.D., who was behind Novartis' Kymriah, is a prime example. After founding immunotherapy biotech Tmunity, he now provides advice to other companies such as CytoSen, Kiadis and Nanjing Bioheng.
One of the hardest parts of starting any new company is, of course, raising money. Before embarking on a hunt for capital, Jamie Goldstein, founder and partner of Pillar VC, warned attendees at the Founder-Led Biotech event to make sure their executive partnerships are secure.
“You're about to set on a multiyear journey that's going to impact all of your collective lives and it's important that everybody's on board for the commitment it's gonna take,” Goldstein said during a session on building a relationship with investors.
He suggested that founders be upfront with VC firms about whether they would like help bringing on an outside leader to handle the business aspect. Those candid conversations set the initial meeting on solid footing.
Goldstein said Pillar has worked with companies where university faculty didn’t want to work full-time at a new biotech, but perhaps dedicate a day a week to the company. In that case, his firm has work to do to figure out the best way forward. Is there a group of grad students who are willing to jump to the new company? If not, the VC firm has to consider whether they can form a team around the idea without the founders.
A leadership role at a biotech could last a short amount of time and end in failure. Or it could keep going with an IPO—or an acquisition by a much larger company. That's the dream, according to Nayeem. But founders need to be prepared to accept all of these outcomes.
"Before you jump out of academia be sure you want to sign up for throwing your whole being into a company that may fail, and consider that route versus other alternatives such as staying in academia and being part of a few different spinouts over time," Nayeem said.