Silicon Valley's biotech firms: 'Theranos gave us a black eye'

Despite signs of crisis among science startups, many still think that biotech will create companies so powerful that they will ‘win’ the 21st century

 Attendees browse at IndieBio’s demo day in San Francisco. Photograph: IndieBio

 Attendees browse at IndieBio’s demo day in San Francisco. Photograph: IndieBio

It was noon on a Thursday at a gathering of science startups in San Francisco. The public market for biotechnology stock had dropped 25% in two months. The private sector’s star startup, Theranos, valued at $9bn, has begun to implode. The most popular food tech startup, Hampton Creek, which is trying to reinvent mayonnaise, has reportedly stretched the truth of their science.

And yet there was no sign of trouble on that sunny afternoon.

“The fourth industrial revolution is happening right now, right here,” the IndieBio incubator program director Ryan Bethencourt said, gesturing toward his startups. That day, IndieBio’s 14 startups, which had each received $250,000 in funding, were hoping to raise millions more.

How do tech investors, who are often just guys from Stanford University’s Sigma Nu fraternity with little science background (“crossover investors”, as Bethencourt calls them) get sold on investing into biotech startups and how smart is their money? Last year was the biggest ever for venture capital funding into the biotech sector with over $7.4bn invested, according to a report from MoneyTree, but this year is looking to be much more difficult.

A bouncer on the sidewalk let attendees pass into the cavernous rustic wood and copper refurbished warehouse, full of gold balloons and orchids.

I’m one of the only people in the world that’s eaten a dinosaur

Gupta, founder of IndieBio

 Arvind Gupta, founder of IndieBio Photograph: Michael O'Donnell

 Arvind Gupta, founder of IndieBio Photograph: Michael O'Donnell

In the warehouse, Bethencourt stood by a red velvet rope set up in the middle of the room. It separated those 400 attendees from the startup founders, who hawked their technology – engineered shrimp replacement and cheaper cell assay technologies – to the VIPs. Bethencourt nodded at a bouncer to unclasp the rope as people came toward him: “He can get in, yeah you’re good” or “Hey, sorry guys.”

“It sucks Theranos has given us a black eye,” Arvind Gupta said. “But who gives a shit? The truth is still: whoever wins in biology wins the 21st century.”

Gupta, wearing tennis shoes with a plant pattern, started talking about his companies, a set of futuristic, ambitious startups that each waver on that knife edge between real and imaginary.

“Today, you’re going to see someone present for the first time ever a cure for cancer – I almost can’t say it,” Gupta said, covering his mouth. “These aren’t apps to help you buy wine without leaving your couch.”

“We’re not even gonna talk about it, but I’m one of the only people in the world that’s eaten a dinosaur,” Gupta said, of his startup Gelzen that recreates animal protein in gummy form. “We can’t even talk about it here because it’s too far out there.”

Investors took their seats. Gupta, whose title “the architect” flashes on screen, starts: “Biology is the most powerful technology ever created. DNA is software, protein are hardware, cells are factories. The world has a huge number of trillion-dollar problems wanting to be solved and biology is the only way to do that.”

Bethencourt goes by “hustler in chief”. The words “speed is safety” flash on the screen.

The dinosaur protein gummy bear maker stands on stage: “Evolution is a constraint,” he says, holding a gummy bear aloft.

Another presenter says he’s reprogramming cancer to die: “It’s like blowing up the death star from the inside. This may sound like science fiction, but in the last few weeks, we’ve made it science fact!”

A woman presents a fake shrimp made from plant material and of which a chef at Google has already ordered 200lb. “Our shrimp outperforms its ocean counterpart,” she said. “We de-risk the supply chain.”

The audience, a few drinks in by 2pm, started getting rowdy. One of the bouncers had to kick someone out, and he went stumbling through the crowd toward the door.

IndieBio Demo Day. Photograph: IndieBio

IndieBio Demo Day. Photograph: IndieBio

A pasta company consultant, Andrew Pederson, was on assignment for Barilla Foods. “Look around,” he said. “Who’s in food and agriculture here? Who’s in medicine? Who has the expertise to make any judgments about these companies?”


Food and agriculture is new and unfamiliar, so it’s appealing Pederson said, especially as the app economy seems overblown and overvalued. “They’re right this space is gonna grow. It’s going to be huge,” he said. “But look at this party. I’ve never seen anything like it. So many people in this room are gonna get hosed.”

Rohit Sharma, a venture capitalist with True Ventures, thinks biotech is safer for investing than the rest of the tech industry right now. “In biotech, we’re not in the same up and down cadence as the rest of the industries. Companies are more aware of the longevity of their endeavor in biotech,” Sharma said. “And behind each cycle of computing there’s a bump in biotech, which is just starting now.”

A few days later, at the IndieBio headquarters, Bethencourt, who previously made a name for himself as a body hacker bent on fusing his body with technology, led a tour of the lab. “We build companies out of the valley of death,” Bethencourt said. “That’s what we do in biotech. That’s what we’ll do if it all crashes.”

For good measure, he added one of the catchphrases: “What other people call impossible, we call inevitable.”

Gupta agreed. “Hype tends to precede the reality in biotech, but the reality does follow,” he said.