DNAnexus, With Google Ventures and TPG’s Cash, Seeks Edge in $100B Genome Computing Market
If there’s anybody in the world of genomic computing with dreams of world domination, like a Bill Gates or a Mark Zuckerberg, it might be Andreas Sundquist. Others may have similar ambitions, but the co-founder of Mountain View, CA-based DNAnexus is one of the few with the chutzpah to say that he thinks a cottage industry of today, which measures its revenue in tens of millions, will soon count its money in the tens of billions.
“When you look at DNA sequencing and what’s happening, the sequencing itself is commoditizing. What’s not commoditizing is what you do with the data downstream,” Sundquist says. “We are building a new industry here. Within the next three years, I think we’ll see upwards of 1 million sequenced genomes. I really think that’s going to happen.”
And the long-term market opportunity for computing systems that analyze/visualize/interpret all that data, as full genome prices plummet from $4,000 to $1,000 and below? “It’s easily a $100 billion market.” And yes, I did ask him to clarify over the phone that he meant billion, with a “b.”
Sundquist, one of the speakers at Xconomy’s “$1,000 Genome” event next Monday at UCSF Mission Bay, has reason to be bold these days. He raised $15 million last week in a second-round financing led by Google Ventures and TPG Biotech, with classic tech investors like First Round Capital, SoftTech VC, K9 Ventures, and Felicis Ventures also on board. The company, which Sundquist co-founded with colleagues from Stanford University in 2009, isn’t saying yet how much revenue it generates, how many customers it has, or who they all are. But as part of the financing, DNAnexus and Google said they have agreed to collaborate on a free public site that will be a mirror image of one of the deepest and most valuable datasets in genomics today—which the National Center for Biotechnology Information is phasing out because of federal budget cuts.
Providing that valuable resource to customers is just one step in the process, Sundquist says. The bigger vision is for DNAnexus to prove, through its relatively low-cost, easy-to-use, Web-based interface, that it can serve as a default plug-and-play genomic analysis system for biologists. These are people who don’t typically have much math training, and often have limited access to the bioinformatics experts who have traditionally helped them play around with the data.
It’s not uncommon today for researchers to run a sequencing instrument to get the data, and then spend months “playing around with the data,” as Sundquist said in an Xconomy feature in July 2010. The goal is to minimize the amount of time a scientist has to spend fiddling around to find out what tools are available, downloading them, and figuring out how to make formats compatible with their instrument,
The pressure to come up with simple interpretation tools is going to be immense in the future, Sundquist says. One analyst, Isaac Ro of Goldman Sachs, noted in a recent report to clients that current sequencing labs spend just 2 percent of their budgets on computing, but that is fast climbing to 10 percent, and could eventually reach 50 percent.
Even though Ro quoted one researcher in that report who said there aren’t currently any good commercial software options, Sundquist sees this market exploding in the not-so-distant future. “Ten years from now, we could see everyone in the developed world get sequenced and have it be part of their medical record. What does the market look like when 1 billion people have access to their genome?” Sundquist says. “The data management and analysis is much larger than sequencing itself.”
DNAnexus certainly isn’t the only company striving for a piece of this emerging market. Illumina, the market leader in sequencing instruments, has been making noise lately about following the Apple playbook to come up with a more thoroughly integrated hardware-and-software product offering called MiSeq. Like DNAnexus, this new offering is supported by Amazon’s massive investment in cloud computing infrastructure.
Competition, Sundquist says, isn’t really his biggest worry at the moment. The company, with 25 employees currently, plans to use its new cash to hire more top-notch software engineers, which is no easy thing in the hot Silicon Valley job market. Sundquist has resorted to offering $20,000 bonuses, and a free sequencing of your entire genome, for anyone who refers him a new DNAnexus hire. Having nailed the new funding from Google and TPG—who he calls “the best big data investor and the best life sciences investor”—has helped rustle up a few promising new job applicants, he says. But DNAnexus will need to capture a lot more bright minds if it is going to seize a big chunk of that $100 billion market he sees materializing. Sundquist is betting that he will be able to appeal to certain engineers who want to do more with their lives than just help people share photos and status updates online.
“When you think about big technical data challenges, this is probably the biggest data problem we face over the next 10 years,” Sundquist says. “And when you think about what effect your work can have on society, there are few places with challenges as interesting as this.”