Umza Choudry, heads Tech Bio at Octopus Ventures. Technology helps biologists get the most out of … [+]
Putting technology into bio: why cash is still flowing to European biotech startups
Amid ongoing concerns about declining venture capital funding in the UK, biotech startups are doing quite well. According to British Organic Association, companies working in the sector raised £563 million in venture capital and public funding in the three months to September. After a slow start to the year, the Association predicts that the sector is on course to exceed funding levels seen in 2022. Meanwhile, the latest UK report from KPMG Business impulse The report notes that biotechnology – along with AI and climate technology – is poised to dominate the investment agenda.
So what’s up? Why are biotech startups enjoying their moment in the sun?
James Field is CEO and founder of LabGenius, a London-based biotechnology company focused on discovering the “next generation” of therapeutic antibodies. He says the growing importance of the UK biotech sector is partly due to the coming together of two previously separate disciplines, namely biology and machine learning.
This combination has the potential to accelerate the development of treatments that would have previously eluded researchers or taken many years to develop. Referring to his own company’s work, he says: “The human brain has no intuition about the design of these molecules,” he says.
To augment the work of human researchers, Lab Genius created a robotic platform that designs experiments, analyzes the results, and also learns from previous experiments.
Accelerated development
What will this combination of AI and biology mean in practice? Umza Choudry has worked as a scientific researcher in the fields of photochemistry and synthetic biology and today she leads the Tech Bio strategy within a venture capital fund. Octopus Companies.
According to Choudry, researchers have often struggled to understand how much biological information they have. “There’s a lot of material, but it’s hard to visualize it,” she says.
This is changing. The power of AI to automate workflows and analyze data opens the door to new treatments. Hence the renewed interest of venture capital in the Tech Bio sector.
Choudry cites a number of areas where the combination of AI and biology is set to deliver breakthroughs. She expects new, more targeted therapies and, above all, lower costs. Whether healthcare is financed by tax – as in the UK – or by private insurance, the cost of treatment is a crucial factor. One of the potential benefits of the Tech Bio revolution is its ability to “democratize” access to cutting-edge medical technologies by facilitating the development and scale-up of new solutions.
To some extent, we are already seeing this democratization in action. As Choudry points out, reading human genes is now simple. Modifying them is not another matter. However, Crispr editing tools not only open the door to new treatments, but they also make the process of editing genes much less expensive.
So it’s only natural that venture capital firms take note. Sajith Wickramasekar is the founder of Bench, a California-based company that provides a cloud-based data management and collaboration platform for companies working in biology and biotechnology. He cites advances that create new business opportunities. “RNA, gene therapies, antibodies. This is what investors see.
Risk factors
But as Choudry acknowledges, Tech Bio is risky. Lead times are long, developing new technologies tends to be capital intensive, and there are no guarantees of success. However, it is a risk that a growing number of investors are willing to take. “Around 2021, investors were starting to look at riskier areas,” explains Choudry. “We also see that European venture capital firms want exposure to more specialist areas, even though in Europe we don’t have many specialist fund managers.”
A potential limiting factor for traditional venture capital firms is the time required to bring Tech Bio products to market. “The lead times are slightly longer,” explains Choudry. “The detention period could be around 10 to 12 years.” This won’t sit well with many VCs. Octopus, however, is an evergreen fund, making it easier to commit capital over a longer period of time.
Despite a robust investment environment in 2023, some concerns remain about the immediate future. “A lot of money was invested in Tech Bio in 2021 and it was helpful. The big challenge today is that the markets have changed, we are in a non-zero interest rate environment, and many publicly traded biotech companies are trading below their cash flow,” says Field.
On the positive side, here in the UK, life sciences are a priority area for policy makers – not least because there is an opportunity to support a well-established scientific base which could generate huge commercial benefits. There is a considerable amount of subsidies as well as tax incentives to support R&D.
The talent challenge
One of the biggest challenges in the field of BioTech is undoubtedly access to quality data. This raises the question of where the information needed to create AI models actually comes from.
In the case of Labgenius, biology provides data for the operation of AI. “We have a sophisticated wet lab that generates data,” says Field.
This two-sided operation reveals another challenge. As Wickramasekara points out, Tech Bio companies recruit from two very competitive pools.
“Another challenge is talent,” says James’ company, which has a wet lab and also a data side. This is not unusual in this industry. But now you have to walk and chew gum,” says Wickramasekar.
Tech Bio founders not only need to recruit people with the necessary skills, but they also need to create an environment and culture in which people can work effectively together. Sometimes the collaboration is remote. For example, Labgenius has its biologists working in Oxford while the AI operations are in London. However, Wickramasekara is keen to emphasize that cross-fertilization should be celebrated. “I’ve seen people move from technology to biology,” he says. It’s very exciting.
Umza Choudry agrees. “When you bring different disciplines together, you also bring different mental models together. This isn’t necessarily a bad thing. There are people who approach the problem from different angles.
Tech Bio is still in its early stages, but the potential to accelerate the development of new treatments suggests it will continue to suck up investor cash.