It began by accident. Chemical engineer Armon Sharei was working on his Ph.D. at the Massachusetts Institute of Technology (MIT), developing a microfluidic gun to, as he termed it, “shoot stuff into cells.” The gun didn’t pan out, but the idea of squeezing molecules into cells looked promising. Sharei hooked up a gas-pressure system to a chip and used it to deliver molecules of interest. He thought, “Ok, it looks like we might have the start of something useful. But what do we do about it?”
In 2013, with the help of mentors and some legal advice, Sharei and his friend Agustin Lopez Marquez launched SQZ Biotech. Since then, they’ve won top honors and $550,000 in prize money, raised $1 million from investors, generated substantial revenue, and set a course toward establishing a novel drug-delivery method for therapeutics. “I believed in the science and wanted to push it hard,” Sharei says.
This is the stuff that Cambridge is all about. People getting out of academia, getting started, bootstrapping, getting some venture capital funding, getting some grants, and making it work.
Sharei isn’t alone in his entrepreneurial ambitions; many young scientists are veering off traditional paths to launch companies. In doing so, they are overturning the view that scientific startups are daunting, rare, and mercenary and that scientific entrepreneurs are fearless, endowed with special skills, and selling out.
The movement is fueled by a new “lean startup” culture replete with scientific contests, co–working opportunities, rent-a-bench incubators, and a slew of eager professionals—lawyers, investors, advisers, consultants—willing to donate time or defer payment.
For Sharei, the company’s CEO, and Lopez Marquez, its president, scientific entrepreneurship is less like buying a lottery ticket and more a means of propelling an idea forward. They started by collecting $100,000 from their own savings, relatives, and mentors—including Robert Langer and Klavs Jensen, both chemical engineers and MIT inventors. Sharei and Lopez Marquez then took their idea to MIT’s tech transfer office—and so began their startup odyssey.
Lesson 1: Write a business plan.
Business plans are less ubiquitous than they once were. Everyone agrees they’re useful, but they’re often scrapped or repeatedly rewritten—that, anyway, is the current conventional wisdom. Still, MIT insisted that SQZ Biotech produce a plan to both focus the ideas and make the case for patenting. Luckily, Sharei had written a version for the now-defunct squeeze gun as a class assignment at MIT. He modified that plan using essentially the same market analysis and business model. The strategy was to sell the device to laboratory researchers immediately while working toward the longer-term goal of advancing therapeutic applications.
Lesson 2: Get the right patent.
One of the earliest mistakes scientific entrepreneurs make is to get patenting wrong, says Langer, who has been involved in more than 20 startups. In the case of SQZ Biotech’s technology, “the concept is so simple,” says Lopez Marquez, “We really needed strong protection.”
The entrepreneurs chose to invest in a robust international patent. It cost $120,000—too much for the fledgling company, but MIT helped buffer the cost. The university obtained the patent—that’s standard procedure for an invention made on campus—and licensed it back to the company while retaining a percentage of royalties for any therapeutics that emerged.
Lesson 3: Enter a contest.
In search of cheap office space, Sharei and Lopez Marquez heard about a contest and organization called MassChallenge. Modeled after MIT's 100K competition, MassChallenge invites applicants, startup founders all, to compete for 128 finalist spots. SQZ Biotech nabbed one of them, and for 3 months, Lopez Marquez and Sharei gleaned free office space on Boston's trendy waterfront.
The entrepreneurs were surprised to find that office space was the least of their booty. MassChallenge also offered a co–working environment in which entrepreneurs could share tips and contacts. There was an eye-catching cast of mentors, invitations to presentations, freebies like software from sponsors, and access to an impressive network that SQZ Biotech continues to tap for business, legal, and investment help.
Lesson 4: Funding comes in many forms.
In October, SQZ Biotech became one of MassChallenge's four “diamond” winners (out of 1600 applicants), netting $100,000 for the contest plus more than $200,000 from the Center for the Advancement of Science in Space, a new add-on that awards a separate pool of money to test technologies on the international space station. It was the biggest payoff for any company in MassChallenge history.
Winning the contest also lent SQZ Biotech credibility with investors. In the next funding round, Sharei and Lopez Marquez had to cap angel investments at $1 million; more might have created unrealistic expectations. Yet, more money came in from other sources. Sharei’s research team procured $4 million in grants from the National Institutes of Health. Lopez Marquez sold alpha versions of the company’s product to scientific customers. He is gearing up SQZ Biotech to be a technology platform company that will enable a new generation of R&D and therapeutics.
The combination of investments, grants, and research-related sales has positioned the company to begin focusing on the therapeutics side. The company has more than doubled in size over the last few months, from five full-time employees to 12. It moved out of the laboratories of Harvard Medical School, where Sharei was a postdoc, and into laboratory and office space leased at the Venture Development Center, a startup incubator for life sciences at the University of Massachusetts, Boston.
Lesson 5: The science isn't everything.
Molecular biologist P. Shannon Pendergrast launched Ymir Genomics with little more than a name. His brothers, Scott and Stephen, were both computer scientists who had started and sold several companies. The two were hankering for a new enterprise and wanted to back their brother, P. Shannon, who specialized in RNA technology.
In 2012 the three launched Ymir Genomics, calling it that because they thought the name, which arose from a Norse creation myth involving three brothers, sounded cool. “We created the company with no technology, no patents, no business model,” P. Shannon says.
He spent the first year after launch reading the literature and looking for an idea. He seized on three converging molecular biology trends: micro RNAs that do not code for proteins, high-throughput sequencing, and microvesicles shed from cells that encapsulate RNAs. The concept was to mine the RNA sequences in public databases to find biomarkers for drug development.
Scott and Stephen wrote a computer program, which discovered a slew of novel microRNAs. “But they existed in silico,” says P. Shannon. “We didn't know if they existed in real life.”
Lesson 6: Rent a bench.
In early 2013, labs in Boston were running about $2000 per month and up for empty space: no cell-culture hoods, centrifuges, or sequencers. Leases required a 1-year commitment. P. Shannon was at a crossroads. He could limit the company to computer science or dip deep into its million-dollar seed money. “But what if the computer program didn't work?” he fretted.
He searched the Internet and came across Cambridge BioLabs (CBL) near MIT. CBL was new type of laboratory incubator run by Johannes Fruehauf, himself a MassChallenge winner. Armed with $20 million in venture capital, Fruehauf had needed to rent and outfit a lab for Cequent Pharmaceuticals, his first biotech startup. Grasping at sources of income, Fruehauf did contract work and began subleasing benches and access to equipment to other entrepreneurs.
Fruehauf was so successful that he pulled together a powerful group of sponsors and last March launched Lab Central, a spiffier, more focused version of CBL. Both are located in the so-called “Boston Innovation Supercluster” that encompasses MIT and a slew of biotech and pharmaceutical companies.
“This is the stuff that Cambridge is all about,” Fruehauf says. “People getting out of academia, getting started, bootstrapping, getting some venture capital funding, getting some grants, and making it work.”
The Pendergrasts made it work. They rented space monthly, first at CBL and later at Lab Central. To save money, P. Shannon worked in the lab one month then left the next, as he waited for his brothers to rejigger the code to match the lab data—back and forth, from lab to laptop. The Pendergrasts also hired a senior scientist, Anna Markowska, who worked days at the bench. P. Shannon worked nights and weekends to get as much use as possible out of their rented lab space.
In 2 years, the Ymir team spent just a quarter of their startup budget. They discovered two marketable technologies that extract biomarkers (RNA and protein) from urine faster, cheaper, and up to 100 times better than current kits. The team is now using the technology to advance the therapeutic side of their strategy.
At the same time, P. Shannon Pendergrast discovered the benefits of “co–working” with other entrepreneurs. At places like Lab Central, the tenants are less like commercial rivals and more like collaborative academics. Startup founders swap articles, methods, reagents, and connections, P. Shannon says. The only thing they guard is their key proprietary information, their so-called secret sauce. “I thought people would be much more secretive,” P. Shannon says. “But it has worked incredibly well. People are smart. They know what not to talk about.”
Lesson 7: Assemble a good team.
In 2013, while obtaining his master’s degree at Rutgers New Jersey Medical School, molecular biologist Sourav Sinha heard about a contest called the Breast Cancer Startup Challenge. Sponsored by the National Cancer Institute (NCI), the challenge offered up patents and technologies that NCI had shelved. Contestants did not have to invent a technology to apply; they just had to assemble teams with a mix of scientific and business expertise. “Ideas change,” Sinha says. “People really don’t. Who you put together in your team can really define your success.”
So Sinha approached Riley Ennis, a friend from his undergraduate days at Dartmouth College.Ennis had founded Immudicon, a cancer vaccine company, as a freshman. The two consulted biotech entrepreneur Errik Anderson, co-founder and COO of Adimab, an antibody company in New Hampshire. They wrote a business plan and entered the contest.
In March, Sinha’s team won the right to license a technology developed by cancer researcher Nadya Tarasova. It involved linking antibodies to a potent chemotherapeutic agent for targeting to cancer cells. A month later, Sinha and Ennis launched Oncolinx. In May 2014, Sinha finished his master’s degree and began working full time as CEO of the company.
Lesson 8: Biotech companies can be virtual.
Today, Oncolinx is an instance of what Sinha calls the “virtual biotech model.” The strategy is to license the antibody-drug conjugate technology to pharmaceutical companies which in turn link them to existing tumor-targeting antibodies.
But Sinha also aims to develop Oncolinx's internal targets, serving unmet clinical needs in underserved patient populations. Right now he is doing that without a laboratory, headquarters, or office. He and Ennis are courting many pharmaceutical partners, several of which have signed materials transfer agreements for project planning and pilot studies with Oncolinx.
Sinha wants to submit experimental plans to clinical research organizations (CROs) and drug specifications to clinical manufacturing organizations (CMOs). The CROs will do drug-development testing, from the preclinical to phase-II clinical trials, using drugs made by the CMOs. The data will go to the Food and Drug Administration and pharmaceutical companies; they, in turn, will use their own platforms for subsequent trials.
The virtual biotech model makes use of an infrastructure that is already in place. Companies like Oncolinx are filling pipelines with high-risk ideas that traditional pharma can no longer afford. The rewards have a “high ceiling,” Sinha says, and investing effort instead of money and tapping resources already in place allows a small company to “de-risk” an idea, which makes it more attractive to potential business partners. “I know a few biotech entrepreneurs who run their companies in their PJs from their bedrooms,” Sinha says, “and they are very successful.”
Lesson 9: Entrepreneurship = experience.
Sinha’s ambition goes beyond merely dressing in sleepwear while realizing the promise of a game-changing technology. “As someone who's worked in labs all my life, there’s an instinct that says the most important thing is the science,” Sinha says. “This is really great experience, to put myself in a community of other entrepreneurs and learn that there are many other factors that drive the success of an idea.”