Flagship's startup factory recruits AstraZeneca, Bayer and Nestlé

Noubar Afeyan

Doubling down on its in-house startup academy, biotech VC stalwart Flagship Ventures has recruited a trio of big-name corporate sponsors to lend their expertise to its next class of seedlings, expanding its focus well beyond traditional drug development.

Through separate partnerships with AstraZeneca ($AZN), Bayer and Nestlé, Flagship is beefing up its faculty at VentureLabs, its self-described innovation foundry.

Under the no-strings-attached agreements, the three heavyweight companies have agreed to help shape Flagship's inchoate projects without the promise of a deal or equity stake. Instead, each company has agreed to share its decades of respective experience in exchange for a ground-floor look at what VentureLabs is up to.

Of course, if AstraZeneca, Bayer or Nestlé want to partner with or acquire one of the startups down the road, those discussions will surely take place, Flagship CEO Noubar Afeyan said, but they'll have just an "awareness advantage" over others, not a legal one.

And, also new for Flagship, each corporate agreement will cover a distinct pursuit. AstraZeneca is on board to pitch in on traditional therapeutics companies, co-signing Flagship's 15 years of early-stage biotech investing experience with an eye on traditional drug R&D.

Bayer, on the other hand, is looking for innovation in crop sciences, eyeing "companies that will have a positive, sustainable impact on agricultural production and food security in the 21st century," Liam Condon, head of the company's agriculture division, said in a statement.

And Nestlé, through its recently formed Health Science division, is interested in the intersection of nutrition and healthcare. That doesn't mean protein shake R&D, Afeyan said, but rather "clinically validated, often regulatorily controlled products--things that have the same scientific rigor as we're used to in intravenous drugs."

The broad plan for each collaboration is to marry the hard-won expertise corporate giants are so good at amassing with the nimble nature of the startup world, matching the leadership of what Flagship calls its "protocompanies" with experts from AstraZeneca, Bayer and Nestlé. The idea is to create a safe space where innovators can bounce around ideas, bringing out the best from each party.

"I would say that expertise does not necessarily engender creativity," Afeyan said. "But creativity without any expertise can be pretty wasteful, because you really don't know which way to apply it." And VentureLabs, with the help of its new partners, will ideally combine the best of both worlds, he said.

Each of the three companies chipped in for Flagship's $537 million latest fund, unveiled in March, and that purse will help the firm launch as many as 5 new companies a year, Afeyan has said. The fund, Flagship's largest ever, came in at nearly twice as much as the firm initially sought, yet another testament to biotech's protracted boom.

But for Afeyan, who remembers well the lean years of the last decade, soaring valuations don't excuse hyperextension. Frothy markets create "a lot of noise" for Flagship, as assets grow overrated and picking winners can become more difficult. Booms, like busts, eventually pass, he said, and Flagship would rather to stick to the script that got it here than buy into any hype.

"And therefore periods like this, we don't really take too seriously," he said. "We don't adjust our strategy, and that's served us well."

- read the statement

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