a16z: A Decentralized Guide to the Biotechnology Industry

Original Author: Jocelynn Pearl, labDAO

Original Title: 《A Guide to Decentralized Biotech》

Compiled by: Biscuit, Chain Catcher

Traditionally, biotechnology in the United States has been a centralized industry, with most companies concentrated in a few cities and collaborating only with internal teams of scientists in their laboratories.

In the 1980s, biotechnology first established its foothold, and the geographic priority of its industry was reasonably centralized around universities that provided talent and intellectual property. However, with trends in financing, a global workforce, and the real estate market, as well as the popularity of decentralized models in other industries, the limitations of this centralized structure have become evident. These changes have become increasingly apparent over the past five years and are gradually becoming mainstream.

Now, decentralization in the biotechnology field is emerging in various ways, such as startups being established outside of industry hubs, the rise of shared laboratory spaces, cross-border recruitment, and collaborative research projects. There are even new types of organizations distinct from traditional companies, such as decentralized autonomous organizations (DAOs), which have entered the drug development industry driven by capital.

The decentralized model is still in its experimental phase, lowering the barriers to entry for startups and leveraging a diverse pool of scientific talent, which may accelerate the development of new drugs and hold promise for practical therapeutic effects.

So, how can biotechnology companies leverage decentralization to initiate decentralized models? How can founders utilize DAOs to gain advantages in the future? Drawing on the experiences of biotechnology startups and the workings of DAOs, as well as dialogues with leaders in biotechnology exploring decentralized models (some of which help identify new therapeutic approaches), I have compiled a guide on the decentralization of biotechnology, covering the current and future directions of the field.

Co-working and Cloud Labs

While biotechnology companies can be defined in various ways, most refer to small startups developing biopharmaceuticals, typically conducting closed research that requires a dedicated "home-style" laboratory. However, a report released by Dallas-based commercial real estate services and investment firm CBRE in November 2021 indicated that during the COVID-19 pandemic, laboratories in Boston and other biotechnology hubs became particularly scarce. This laboratory scramble was "due to the significant investment in the life sciences sector, leading to a natural outcome of global pushes for new drug research."

Some developers have recognized the growing expansion of biotechnology and the declining supply of real estate, beginning to build flexible co-working spaces to accommodate smaller teams. This "WeScience" model allows biotechnology startups to share office, laboratory suites, and workbenches, typically on a monthly basis. The two major players in this field are Biolabs and Alexandria LaunchLabs.
If biotechnology companies completely abandon physical laboratory space in favor of a "virtual biotechnology" model that outsources research processes, they will need to pay for one or more of the following services:

Contract Research Organizations (CROs), such as Charles River Labs, can provide a range of support services for biotechnology companies, from preclinical to clinical development and regulatory filings. This CRO directory outlines all possible services.
Sponsored Research Agreements (SRAs), where biotechnology companies pay academic laboratories to conduct preclinical or clinical development research.
Cloud labs, such as Emerald Cloud Labs and Strateos, which are AI-driven platforms that can automate functions like small molecule drug discovery and allow researchers to remotely control experiments.

The anti-aging drug company Loyal demonstrates the practical application of virtual biotechnology, with its team of scientists overseeing preclinical research on lifespan extension primarily conducted by CROs. To ensure that founders of biotechnology companies have access to this hard-earned knowledge, Loyal's CEO and founder Celine Halioua wrote an article discussing the costs and considerations of using CROs and compared the costs of CROs with in-house experiments.

Virtual biotechnology has some obvious drawbacks. On one hand, scientific research requires advance planning, which is more stringent than traditional methods. As a result, scientists may reduce original innovation. Another reason is that using CROs can be tricky for founders, as different CROs excel in different functions, and founders can only rely on word-of-mouth recommendations to hire CROs. Establishing a credible network platform could improve this situation. Additionally, in terms of cloud labs, large pharmaceutical companies capable of conducting routine experiments often deplete the bandwidth resources of cloud labs, meaning that startups may find it difficult to access cloud lab resources.

Fortunately, these drawbacks are not insurmountable. Science Exchange is a platform launched in 2011 that greatly improved the acquisition and use of CROs. The platform sources, orders, and pays for scientific services from over 3,500 suppliers through its marketplace. LabDAO is another company dedicated to balancing supply and demand in biotechnology research and development, building a community marketplace where small startups and academic researchers can find microCROs (smaller-scale research contracts) to provide services such as bioinformatics analysis, automated cloning, and construct design. The field still has a long way to go to reach services like AWS. However, platforms like Science Exchange and LabDAO are gradually improving access to contract-based research needs.

Empowering Talent

Biotechnology startups need to collaborate with existing pharmaceutical giants or biotechnology venture capital firms to secure early investments. Compared to founders in other industries, executives with decades of experience are most likely to secure funding. However, in recent years, the industry has undergone a transformation in biotechnology resources through two evolving technologies: founder-led biotechnology and decentralized science, both of which advocate for and promote the development of emerging companies in a highly democratic manner.

Founders now have more funding options, as tech venture capital firms have increased their investments in biotechnology, particularly in emerging companies led by younger founders. Nowadays, to invest in popular startups, many venture funds are issuing oversized checks, providing founders with practical business assistance and other insider resources.

For example, Petri is a biotechnology accelerator founded and funded by Pillar VC, which offers a startup course called Frequency that guides participants to a community-exclusive channel where they can connect with each other for help throughout the entrepreneurial process. Another example is Axial, whose founder Joshua Elkington hosts a biotechnology Slack community with over 10,000 members, discussing various aspects of gene therapy and even startup recruitment.
There are many other examples of community-driven funds, indicating that the entire industry is shifting towards biotechnology investors and that resources are becoming more democratized. This trend is closely related to decentralized models, bringing more founders of startups together.

Next-Level Collaboration

Scientists and entrepreneurs are forming new decentralized teams to achieve common goals. In the biotechnology field, a key question is whether these organizations can develop curative functional drugs, and there are currently two successful cases.

The first is Perlara PBC, an innovative biotechnology company led by biologist Ethan Perlstein. Previously known as Perlstein Lab, Perlara was a typical centralized Bay Area biotechnology company focused on repurposing drugs to find treatments for rare diseases. In 2020, it operated in what Perlstein referred to as "Perlara 2.0," with a distributed team of scientific advisors seeking treatments for patients and foundations.

The group detailed the current state of drug development for specific rare diseases and developed project management plans to identify treatment methods (often relying on labs like Charles River). The plan oversees drug procurement and all subsequent affairs, allowing the company to leverage drug assets and monitor the progress of clinical trials. Perlara's first successful treatment did not happen overnight; it took years from early drug repurposing research to small trials demonstrating efficacy in two patients, followed by a Phase III recruitment trial. However, Perlstein hopes this template can be replicated across other patient populations in the Perlara program.

Phage Directory is another decentralized group of scientists working collaboratively to identify treatment methods. The idea for Phage Directory began with a tweet: epidemiologist Steffanie Strathdee from UC San Diego called on the team of researchers to help find a treatment for a 25-year-old patient who appeared to have an antibiotic-resistant infection. (Strathdee had previously conducted phage therapy on her husband Tom, documented in the book "The Perfect Predator.")

This tweet inspired Jessica Sacher and her developer partner Jan Zheng, who saw an opportunity to optimize community coordination in "phage therapy" and created a community of phage therapy researchers. To date, Phage Directory includes 448 phage researchers and 100 phage groups. Its model is simple: a decentralized global community of scientists, including a reserve of treatment methods, an alert system, and templates for guiding treatments from the lab to the clinic. The organization provides three separate "n-of-1" treatment plans based on experimental treatment guidelines. In other words, the community tailors treatment plans for all patients. Currently, Phage Directory is working within an academic medical network funded by the Australian government.

DAO-Funded Projects

A notable company in the decentralized biotechnology space is Molecule, which serves web3 biotechnology. Biomedical researchers Tyler Golato and engineer Paul Kohlhaas founded Molecule in 2019 with the goal of establishing a new system to support early drug development. They intend to sell research assets on the blockchain as IP-NFTs, providing a new way to purchase translational research. More importantly, Molecule has launched three biotechnology DAOs as new collaborative communities in biotechnology, aiming to attract biomedical researchers from all corners of the internet.

VitaDAO is a DAO under Molecule focused on longevity, operating like a venture fund. A working group composed of scientists and investors evaluates projects for funding. Community decisions are primarily made through voting using the $VITA token, and most work is conducted transparently, meaning that almost any internet-savvy user can join the DAO's Discord channel to make suggestions or oversee the community's actual work.

The main advantage of VitaDAO is the speed at which work is completed. In the 10 months since its launch, VitaDAO has evaluated over 60 research proposals and provided nearly $2 million in funding for 10 research projects. This is akin to receiving NIH grants, where a lab typically receives $250,000 annually and then allocates funds to projects across 60 labs, with a funding cycle of five years, allowing the public to learn about the organization's progress through its community and financial reports.

Another advantage is that DAO organizations do not have the hiring restrictions of traditional biotechnology companies. This means that individuals with diverse experiences and at different stages of their careers can participate in the DAO, without exclusivity. The benefits of joining a DAO differ from traditional jobs: participants may receive project tokens or Ethereum as compensation instead of a salary in dollars. However, for those with ample time, biotechnology DAOs provide a playground for scientific ideas, teamwork, and innovation, even serving as a place to learn new skills like content creation and marketing.

Welcome Criticism and Look to the Future

Some experts hold a critical view of decentralized biotechnology. While supporting centralized systems can be reasonable—scientists may find it cheaper to conduct research in internal labs in certain cases—decentralized teams often work more efficiently. We should analyze and discuss any good-faith criticisms to improve emerging decentralized systems. In an ideal world, we could test hundreds of "bench-to-bedside" approaches, mixing and matching components of new enterprises for maximum efficiency, and I expect to see more such experiments in the coming years.

There is a more compelling, non-technical reason to explore decentralized models in biotechnology: biotechnology companies have long been searching for new therapies for patients. Why not optimize the drug development process? Optimizing the drug development process can facilitate faster and easier sharing of research results worldwide.