The Rise of a New Generation of Biotech Leaders: Can They Reshape How Drug Startups Are Built?

Kevin Parker is an expert in genomics, immuno-oncology, and computational biology. As a doctoral scientist at Stanford University, he has contributed to research published in renowned journals such as Science, Nature Medicine, and Cell.

But two years ago, when Parker and colleagues were brainstorming about starting a new biotechnology company, he found himself stepping into unfamiliar territory. Parker excelled at tackling tough scientific challenges but struggled with the process of building a startup.

"The specific details of starting a company—registering the business, handling legal matters, opening bank accounts, purchasing health insurance—these minutiae... no book teaches you how to do it," Parker said.

Starting a biotech company was not his original career plan. His lab head, physician-scientist Howard Chang, encouraged students to explore various career paths, including industry, which led Parker to an internship at the drug startup Maze Therapeutics. There, he saw the limitations of academia.

"Academia focuses on analyzing data, publishing papers, and then moving on to the next topic; industry focuses on translating those ideas into impact for patients," Parker said. He founded the cancer drug development company Cartography Biosciences in 2020.

However, making the transition across fields was not easy, and he considers himself lucky to have succeeded. A new generation of biotech leaders, including Parker, hopes to make this transition easier, filling the gaps where they once felt lost for future entrepreneurs. Frustrated with how drug startups are typically assembled, they are not only creating companies themselves but also working to build a new kind of community.

"There's grassroots energy here. They are spreading accumulated knowledge," said Tony Kulesa, a partner at the venture capital firm Pillar VC. Kulesa has become a well-known voice in this loose-knit group of executives, scientists, and students.

In the view of Kulesa, Parker, and their peers, the well-funded venture capital firms that incubate most new biotech companies are not forming startups quickly enough to harness this energy, leaving many aspiring entrepreneurs without a path forward.

Some also point out that traditional investors are too focused on their own models and goals to accommodate unconventional ideas. Typically, VCs place an executive or seasoned entrepreneur at the helm of a new drug company based on validated research. "For the investment firm, the product is the company itself," said Matt Gline, CEO of Roivant Sciences, in a recent interview with BioPharma Dive.

Admittedly, the VC model has produced many successful biotech companies and innovative drugs. "The way these companies are created has become cookie-cutter in some institutions," said Maha Katabi, general partner at Sofinnova Investments. "But that is certainly not the mainstream reality of how this industry develops."

However, some entrepreneurs believe that researchers with good ideas who want to retain control may be left out. Using terms like "founder-led biotech" and "techbio," they see themselves as drivers of a movement encouraging and supporting more academics to start drug companies. In doing so, they hope to broaden the industry's map beyond traditional hubs like Boston, San Francisco, and San Diego.

Open-source approach

Last fall, the growth of this community was on display: hundreds of scientists and entrepreneurs attended a virtual event called the "Founder-Led Biotech Summit." The conference included panel discussions on topics such as "New Financing and Organizational Models" and "Entrepreneurial Pathways."

Kulesa said this was the second time the event was held, and he launched the summit through Pillar VC, a firm that provides seed capital. More than 3,500 people registered, and the summit also covered areas that receive less VC attention, such as reproductive health.

Attendees described how they stumbled upon entrepreneurial ideas during their academic pursuits. "You come to class and say, 'I just started a company,'" Kulesa joked with former MIT classmate and Amber Bio founder Jacob Borrajo at one summit session. "I thought, 'That's allowed? That's incredible.'"

For many, the appeal of this community seems to lie in its borderless nature. The founder-led biotech network does not originate from prestigious schools and labs in Boston and San Francisco but is built on Zoom, virtual events, and Twitter. Its goal is to help people everywhere connect with like-minded entrepreneurs and investors.

"There is a lot of great science and a lot of latent demand from people who have not previously been integrated into the startup network and culture and are now trying to enter this field," Kulesa said.

Take Guillermo Vela, a biotech entrepreneur in San Antonio, Texas, for example. A former cancer and stem cell researcher at Johns Hopkins University, he returned to his hometown to pursue entrepreneurship. Creating his cancer drug discovery company, NeuScience, involved numerous cold calls and emails. The executives and investors who answered often referred Vela to others in the industry.

Having received help, Vela is now active on social media and other forums, trying to spread knowledge and "demystify" the process of company creation.

"There's no denying this is an industry that requires experience, and a lot of know-how is only gained over years," he said. "But there are also many secret recipes and tacit knowledge that are not public because there is no truly effective mechanism."

Organizations like the BIOS community at Alix Ventures and Nucleate—a mentorship community for researchers, university students, and entrepreneurs—are trying to share some of that know-how.

Nucleate has even attracted the attention of established drug companies, including Genentech and Alnylam Pharmaceuticals, the latter of which announced a partnership with the graduate-student-led organization in July. Nucleate, partly run by Kulesa's colleague Michael Retchin, has also created a venture fellowship program with support from Pillar VC.

In Retchin's view, Nucleate's goal is not "to hand every PhD a term sheet and say, 'Go,'" nor is it to criticize how biotech investors operate, as he believes a more diverse range of ideas has been funded recently.

Instead, he hopes to see entrepreneurs who have successfully started companies or advanced drugs to market play a more active role in mentoring emerging leaders. "Bringing in more people and giving them access to the excellent advice, rigorous thinking, and processes of seasoned professionals can solve many problems," Retchin said.

"A tricky business"

However, entrusting startups to biotech novices may add uncertainty to an already risky endeavor. Although the industry's most successful companies, such as Genentech and Regeneron, thrived under young founders, more often investors bring in trusted executives or pair industry newcomers with seasoned helpers.

"It must be remembered that drug development is a tricky business, a long road that requires both an experienced management team and experienced investors," said Katabi of Sofinnova.

Successful biotech companies often need years and hundreds of millions of dollars to bring a new drug to market. Each step involves different types of expertise, from drug discovery to clinical trial design to working with regulators.

Founders who have previously started companies or served as biotech executives may be better equipped to raise capital, execute business plans, and steer the company through ups and downs. Even science founders who are business-savvy may need experienced people to join the management team to assist with drug development.

"In biotech, almost nothing happens in a vacuum," Katabi said. "It is bringing together both mindsets and experienced investors that creates the ultimate biotech success."

These success stories include many drug companies that originated from the established VC ecosystem. Alnylam, now the industry's largest developer of RNA interference drugs, was once a startup incubated by firms like Atlas Venture and Arch Venture Partners. COVID-19 vaccine developer Moderna was built by Flagship Pioneering and privately funded for years before becoming a household name.

Other companies that have brought drugs to market in recent years or are about to, such as Bluebird bio, CRISPR Therapeutics, and Sage Therapeutics, also grew under the incubation or close guidance of blue-chip biotech investors.

There are also biotech veterans who advocate for patience. Next-generation leaders must first master fundamental skills—whether by working for years at a pharma giant or another startup—before they can expect their ideas to gain traction with investors.

"This is an industry where impatience does not pay off because it is heavily regulated," said Jeff Jonas, CEO of biotech incubator Abio-X and a veteran drug developer who previously led Sage. "There are so many rules and regulations about how to do things. You cannot be impatient. You can be urgent, but you must always be willing to learn."

Nevertheless, young founders see other ways to accumulate industry knowledge, such as through experienced boards, and are eager to carve their own paths.

A decade ago, when Armon Sharei was completing his PhD at MIT, he began looking for ways to apply his research to drug discovery. He contacted an investor who was interested but doubted whether Sharei's idea could support a mature company. Others told him not to bother, and VC firms were hesitant about his lack of experience.

Sharei continued to build his startup, later named SQZ Biotech. The company entered MassChallenge in 2014 and won the $100,000 grand prize. More importantly, in Sharei's view, he met Amy Schulman, an investor at Polaris Partners.

Schulman mentored Sharei during his postdoctoral research, advised SQZ, and later became its executive chair. Her name seemed to ease investors' concerns about a young scientist at the helm.

"She helped Polaris join and lead the initial financing," Sharei said. "While she was on the board, people felt, 'Okay, we trust you won't mess this up.'"

However, things did not always go smoothly. Although SQZ went public in 2020, with its stock peaking at $32 per share that fall, its shares have since lost nearly all their value. In November 2022, Sharei left SQZ citing "differences over company strategy," as the company announced a restructuring.

Can both coexist?

The growth of the founder-led movement shows there is demand for new career paths in biotech and a more open approach to company creation.

However, Julia Moore, co-founder and managing partner of Breakout Ventures, which invests in early-stage biotech and medical technology companies, believes there is room for both traditional VC-backed startups and founder-led startups.

"When you are doing something that does not follow the existing playbook and requires the founder's passionate commitment, that can be a powerful recipe for success and focus," Moore said.

Closer collaboration with the new generation of entrepreneurs may lead to biotech companies of different shapes, and it may also mean more new drugs developed for historically neglected diseases.

For example, Amylyx Pharmaceuticals was founded by two Brown University undergraduates, Justin Klee and Josh Cohen, who led the company until its ALS drug Relyvrio was approved by the U.S. Food and Drug Administration.

However, stories like Amylyx remain the exception rather than the norm. It is rare for two students with no company-building experience to develop a drug and bring it to market. Amylyx's success may not be a model that can be easily replicated.

Nevertheless, some founders say industry veterans could do more. "It is a supply-and-demand problem," Sharei said, with far more aspiring entrepreneurs than industry mentors to guide them.

Large VC firms do have some initiatives aimed at bringing more academics into biotech company creation. Sofinnova has a program that introduces graduate students to biotech investing, with courses on business development and clinical trials taught by senior firm members. Foresite Capital, through its incubator Foresite Labs, offers fellowships that teach academics venture capital and company creation.

Other programs start even earlier, such as Project Onramp, a Boston biotech internship program partially funded by Third Rock Ventures, which recruits college students from low-income backgrounds.

Kulesa believes that more entrepreneurs competing for investor capital should lead to a more diverse set of ideas complementing those supported by traditional VCs.

Ultimately, however, the measure of biotech success is developing new drugs that benefit patients. Starting and funding new drug companies is only the first step of a long journey, and how much impact the founder-led movement can have remains an open question.

"Time will tell, right?" Kulesa said.

Ben Fidler contributed reporting to this article.