Clarus Leans on Customer Reviews at the Broad Institute to Bet on NanoString
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about NanoString, Clarus made it up its mind to find ways to invest in a new generation of high-powered genetic analysis tools that would have potential for use as diagnostic tests, Galakatos says. Financially, the strategy was to invest as growth equity players—that is, to find products at a commercial stage that needed help to reach their potential, as opposed to earlier-stage venture investing necessary to develop the technology in the first place, Galakatos says.
OVP and Draper Fisher Jurvetson shouldered that initial risk with NanoString, when the company was founded in 2004 as a spinoff from Leroy Hood’s Institute for Systems Biology in Seattle. The latest financing from Clarus and the other two firms amounts to something of a lifeline for NanoString. The company’s early CEO, Perry Fell, stepped down back in March, and it hasn’t yet hired a permanent replacement. Before the money came in, NanoString was “pretty darn close” to running out of cash, OVP managing director Chad Waite told me last month. [[Editor's note: An earlier version of this story referred to Perry Fell as the founding CEO of Nanostring. He wasn't involved at the founding, but was listed as CEO in the company's announcement of its first fundraising round in 2004. The company's founding CEO was Krassen Dimitrov. We regret the error.]]
Now NanoString will clearly have a real chance to see what it can do in the marketplace. Part of that will depend on whether its users, at places like the Broad Institute, are able to generate results from experiments that otherwise would be impractical to do with some other tool. Nanostring’s machine is not cheap, at $250,000. And there’s tough competition from Affymetrix, Carlsbad, CA-based Life Technologies, and San Diego-based Illumina. Like any new entrant in a field like this, NanoString had better have a winning value proposition. Galakatos didn’t say how much time the company will get to prove itself, although the financing “should get them to profitability,” he says.
As to whether the NanoString technology was in jeopardy, and was essentially saved by some really strong customer reviews before the new investors came along, Galakatos didn’t want to go quite that far. “It’s better to be financed than not,” he said, adding. “We’re just very excited about the opportunity. Their technology is unique.”