Our biotech investments are currently all too young for something huge like an IPO, but many are continuing to grow and prosper. For example, Ginkgo just raised a $45M Series B: http://techcrunch.com/2015/07/23/ginkgo-bioworks-takes-on-zy...

Synthetic biology is super interesting, and maybe that is the right space for YC to play in, but it's not the needle mover that the tech crowd thinks it is going to be. Trying to understand the mechanisms of GNRH receptors and developing lead candidates that could be potential therapies is just not as sexy as synthetic biology. Would you fund something in that space?

But this is where my head just starts spinning

"I'm going to help our biotech startups find the partners and tools they need to make wetware at software-like speeds."

That's not going to happen. It's not how biology works in a lot of others, and you lose a lot of credibility when you say that. Unfortunately, a lot of founders say that as well. I forget the name of the company, but there was a recent algorithms startup that made it sound like they were (a) going to change pharma with their methods, and (b) what they were doing was new and unique. None of which was true.

YC (and others) can do a lot here, but I feel you go in without really understanding the space or the pitfalls. A lot of biotech fails not because of the business model, but because biology hard, the human body is unreliable and illogical, and because our understanding of the science is flawed.

I'll get off my soapbox now :-)

Biological engineering can and should be a thing separate for biological sciences.

You do not always need to understand biology to be able to hack with it; it's robust that way. Maybe biology can't breakout the way software has, but on the off chance that it could, it's worth having a lot of people trying to figure out how.

Biotech startups are fundamentally different in that they're driven by scientific advances, which is exactly what life scientists in academia are trying to produce.

It's definitely not now. The thing holding back biotech isn't business model innovation, it's technical difficulties - what the scientists are tackling. You can't compare semiconductor innovation to biological research - one system was man-made to be as reliable and robust as possible, whereas the other one is still largely utterly incomprehensible.

My sense is that the vast majority of people on HN touting rapid advances in biology have never actually spent any time reading up on the scientific literature, and haven't spent any time doing life science research. The same goes for most of the YC partners, which has led to their selecting companies that often have fatal flaws that are immediately apparent to anyone with life sciences expertise.

This is spot-on. The "quickly move to market" approach of the typical VC simply does not work here.

Good science -- in which I include money-making science -- takes time. There's a lot more fiddling involved, as we can't manipulate the system at all levels.

>I'll get off my soapbox now :-)

Please stay on it. It's refreshing.

That said,these problems must be solved. Which is why over the last thousand or so years, we have built a system of universities, public donations, and taxation, so these problems are addressed by right people.

That said, great research projects do not necessarily translate into great startups. People doing fundamental research with no clear path to market likely aren't a great fit for the program at this time.

There are some aspects of biology that likely translate better to the tech model. But for most aspects, especially anything to do with therapeutics, it is essentially impossible to avoid the hard slog. No software is going to change how you study efficacy and toxicity in animal models and human testing. With more targeted therapies the complexity only goes up.

I think YC should invest in the life sciences, but it should be a different model, perhaps an innovation on the existing tech transfer model, perhaps building an incubator that ends up being an IP funnel for pharma, or to provide some competition in an underserved area, but the software mindset is generally going to fail.

In biotech, once the technology has been developed, the innovative component has largely been completed. And it's the top scientists that have the institutional knowledge and non-dilutive funding to make that happen. The reason there are so many unmet needs in healthcare isn't for lack of trying or a lack of original thought in the top academic research labs - you can be sure that Bob Langer isn't just trying to up his h-index.

That said, you are right that a recent graduate won't be able to found a company in that model. That's mostly irrelevant though, since recent graduates are rarely capable of creating scientific breakthroughs on their own.

Except for the minor problem that any IP generated through their work is owned by the university. And if the IP's valuable, it typically flows straight into the hands of Flagship, Polaris, Third Rock, & co. The professor might have a say in what happens to the IP, but the students and postdocs have zero leverage with the TTO. And how could they? They are replaceable cogs in the machine (and often in the US on a student/work visa) - Bob Langer is not.

And my original point was that Paul Buchheit's request that "If you know great scientists solving important problems, please encourage them to apply" was unrealistic. YC isn't going to get the crème de la crème of scientists or scientific innovations - they're getting what's discarded by the TTOs.

To be more precise, nobody's going to get the top scientists (they're going to go right back to their labs) and the biotech VCs are going to get the top innovations (for which they often have an informal licensing option with the inventing professor before the academic research even begins). There's a record amount of funding in biotech right now, but why spread it evenly? Might as well just run dozens of trials in parallel for therapies derived from a single technology.

Some Universities don't automatically claim ownership of any IP you create there.

Here's the relevant thread: https://news.ycombinator.com/item?id=9924807

You reference Gingko, but that company is (in my opinion) uniquely viable in terms of YC biotech investments.

Of course, my perspective is based on media reports (famously unreliable), by public information, and by my own experience in biotech. I would love to be completely wrong, and I could easily be completely wrong since I don't have access to the information that you do. Also, maybe an outside perspective is what is needed in biotech—good things happen when smart people from other disciplines cross-pollenate. Also, my own startup is not yet successful, so I criticize from within a lovely glass house surrounded by stones. That said, based on what is public, I don't have confidence in YC's biotech investments. I am hesitant to even consider applying, given with what is publicly available.

I don't think this is an appropriate forum to be specific with criticisms, nor do I wish to be a "negative Nancy" with YC's new push—if YC could do a fraction of what it did in software in the biotech area, it'd be amazing. I would however like to offer one particular outsider's perspective.

Maybe this is exactly why you should apply :-)

> You reference Gingko, but that company is (in my opinion) uniquely viable in terms of YC biotech investments.

Remember VC economics and the power-law distribution of returns. One big winner pays for a lot of small losing bets.

The calculus is actually quite different in biotech. With proper scientific due diligence (read: late-stage cherry-picking), there are usually more (but smaller) winners and fewer (but larger) losers in biotech than in tech. The absolute number of winners may still be smaller than the number of losers, but there isn't a tech-style power-law phenomenon. This is partly because the needs are often very well understood in the life sciences, so the size of the opportunity isn't that uncertain. It's whether or not the science will pan out that is uncertain (which can be very costly to find out and with little recourse - you can't easily pivot on a therapeutic, particularly if that happens late in clinical trials).

I'm surprised YC is investing in wet science rather than computational life sciences such as cognitive neuroscience, or even bioinformatics.

>Why give half of the money you raise to your university when you can rent lab space for hundreds of dollars a month?

Because:

1. In practice, you don't actually have to give half the money you raise to a university. Universities reap huge benefits from collaborations with the private sector.

2. SBIR/STTR grants come with far fewer strings attached than do funds from VCs.

3. Scientific startups often need credibility, and working with a university all but completely resolves that issue.

4. Universities are not simply a monetary resource; you benefit from (a) access to domain-specific expertise (b) cutting-edge research (c) a pool of highly-educated people to take on as interns and employees.

YC should pay special attention to point 2. I'm co-founder a startup that offers cognitive biometric analysis -- we can make inferences on cognitive and affective state through video analysis. We have a general-purpose product (read: large and diverse customer base) and we can go very far with very little funding, so why sell shares when we can get a 50k grant in exchange for some (admittedly tedious) paperwork?

Can we go faster with, say, 1 million? Sure, much faster, but then we have to deal with investors who probably don't know much about our product. And more to the point: universities, to a certain extent, behave like VCs.

To be entirely frank, it depends on the field, but I imagine it's easier in many ways to get VC funding than a grant for many projects. Grants are a pain to apply for (there's a reason that full-time grant-writers exist) and the feedback loop is very slow. Compare that to the VC world, where you can quite easily raise a small amount of seed/pre-seed capital quickly, and even when you're rejected, you're likely to hear back quickly[0].

This will be a challenge for YC, because it inherently creates an adverse selection problem. The companies that YC (and all venture funds) want to attract the most are the ones who could win a grant if they applied, not the ones who are seeking venture funding simply because they can't actually survive the grant process[1]. The grant application process is terrible for a lot of reasons, but it does have the side-effect of filtering out a lot of people who simply aren't that serious or invested in their work. For YC, it means a lot more companies to sift through to identify the gems.

There are certainly some billion-dollar companies that could not survive the grant process (or simply would prefer not to go through it), but if we're looking strictly at the ratios, it's going to be a lot more challenging for any venture fund to find these 'needles', because the 'haystack' is simply much larger (relatively speaking).

[0] If you never hear back from a VC, that means you're probably either rejected or being punted on ("not now, but maybe later"). But that's a good thing - at least you know! If you don't hear back from a grant application after 2 months, that doesn't actually mean anything other than your application may not have been reviewed yet.

[1] Possible reasons for failing to win grants: project/business model is simply not valuable, project is not well fleshed-out, company does not have the runway to survive the drawn-out application cycle, etc. All of these apply to the venture world as well, but the cycle there is much faster.

Regarding grant writing, it is a pain in the ass, but the terms very generous, and universities have no qualms about letting you borrow their grant writers. At the end of the day, it makes little sense to sell shares for 1 million USD when $100k ensures that the same shares will sell for 5 million in one year.

>There are certainly some billion-dollar companies that could not survive the grant process

Billion-dollar companies are looking for billion-dollar grants. It's a question of how much one needs. For small seed funds, grants make a lot of sense.

In any case it should be obvious that, as you said, it all depends on the field. What's undeniable is that grant money comes with far more favorable terms than VC funds.

At the risk of tooting my own horn, I'm surprised YC is moving towards wet-science instead of investing in projects similar to my own; they're life-sciences with a highly computational aspect, which implies the tight development cycles they're used to. It also means they can understand what I'm talking about, at least on the implementation level.

Case in point, I saw this on the retraction watch twitter the other day: http://aushsiblog.com/?p=252

There was a grant application rejected because the header font was 13pt rather than 14pt. Most of us have to deal with some level of petty bureaucracy, but that level is just absurd.

Speeding up life sciences development cycles the way development cycles in software engineering have been sped up is the goal, but the way to do it is hard and complex and uncertain. It requires funding, perseverance, trial and error, incremental improvements as much as breakthroughs. YC has proven they're good at all of this.

However, I've always thought that with the right network and influence one could make major shifts in a whole industry if the timing is right. As history has shown us, all we need is one breakthrough way of doing things and previously closed doors are busted open. If YC convinces enough people along the biotech foodchain, they can at least get a good crack at it.

I'd love to see a post specifically about what they have in mind for biotech.