Entrepreneurs who want to use high-powered DNA sequencers for, say, a new way to diagnose cancer, are in much the same boat as infotech entrepreneurs a decade ago. Before they can even develop a product, they need to raise at least a couple million bucks to buy a bunch of fancy tools, on top of making rent and payroll. But in the IT world, cloud services came along, allowing startups to rent servers and bandwidth in small increments. And now Illumina and Russian billionaire Yuri Milner want to do something similar for genomics entrepreneurs, by giving them easier access to the equipment they need to get started.
San Diego-based Illumina (NASDAQ: ILMN), the world’s largest maker of high-speed DNA sequencing instruments, said today it’s creating the first genomics-focused accelerator at its new R&D facility, being built in San Francisco’s Mission Bay district. The Illumina Accelerator Program is borrowing some ideas from tech-oriented programs like Y Combinator. It will select a few promising startup management teams, make a small investment in exchange for an equity stake, and give the startups access to technology and advisors to help the companies get off the ground. Some will surely fail after a few months, while others will graduate to bigger things.
“We felt this would be a great program for Illumina to start because it would help the entrepreneurs in the community to expand the market,” for DNA sequencing, said Mostafa Ronaghi, Illumina’s chief technology officer, in a phone interview today.
Milner, in a statement, added: “Next-generation sequencing has reached the lift-off stage. I’m excited to support this endeavor promoting innovation and entrepreneurship in the genomics ecosystem.”
Here’s how it’s supposed to work: Illumina is setting up a fully equipped lab space for the startups. The Mission Bay lab will be loaded with several million bucks’ worth of Illumina equipment—including HiSeq, NextSeq, and MiSeq instruments, as well as some of the company’s new DNA sample prep technology and chemical reagents for running experiments. Illumina will invest $100,000 in each company in exchange for a 10 percent share of the company’s common stock, Ronaghi says. Milner will also invest, through preferred shares, and companies will also have access to unsecured credit lines worth at least $20,000 from Silicon Valley Bank, Ronaghi says.
Besides access to money, mentors, and equipment, Illumina said the accelerator participants will have access to Illumina’s global customer and venture networks as well as corporate support services like financial modeling, forecasting, and legal and human resources help. Members will also get licensing and technology transfer support and help with developing their investment pitch, the company said in a statement.
The Illumina Accelerator Program will have a full-time director, and the company is interviewing candidates for that job now, said Eric Endicott, an Illumina spokesman.
The first class of genomics startups will include three companies, scheduled to start on Aug. 1. They’ll each join for a six-month session, Ronaghi says. By next year, plans are to expand the program to include as many as 10 startups in each six-month class.
Illumina, as I wrote in a recent column, has been pushing hard to dominate what it sees as a $20 billion addressable market for genomics in research, medical diagnostics, and other uses. It already has a corporate venture capital arm that has invested in about 20 startups, and the venture program will continue to operate independently of the new accelerator, Ronaghi says. But Illumina felt the need to start this new program partly to lower the barriers to starting a company that keep a lot of promising ideas on the sidelines.
There are at least 30 different cancer diagnostic companies in the Bay Area that use next-generation DNA sequencing technology, so there is no shortage of entrepreneurs and ideas, Ronaghi says. Already today, at the Advances in Genome Biology & Technology conference in Marco Island, FL, Ronaghi says he has been approached by four different academic groups that have shown interest in applying to the accelerator program.
The ultimate success of such a program, of course, will be determined by how many great companies it is able to nurture. Illumina is hoping to attract some promising ideas, and has purposely tried to make it attractive by not holding out for lopsided investment terms in its favor.
“We want to be aligned with the entrepreneurs,” Ronaghi says. “A lot of us on the Illumina senior management team are entrepreneurs, and we understand the pain entrepreneurs need to go through to start a business,” Ronaghi says. He pointed to Jay Flatley, Nick Naclerio, Rick Klausner and himself as a few of the Illumina executives who were entrepreneurs before they came to their current roles.
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