There has been a lot of excitement over the announcement that a leading tech incubator — Y Combinator — is moving into the life sciences. We think this is great news and agree with the various plaudits for the move. There has also been criticism, as well as take-down of that criticism, both are conveniently found in this article by well known life science investor Bruce Booth, Here.
What has been overlooked in the discussion of capital needs and timelines of tech versus life science investing, however, is the single most critical distinction between the two: in life science companies patents are *mandatory* — there is simply no way to proceed without them. With tech startups, in contrast, patents are optional, and indeed many tech investors are decidedly anti patent (or at least anti software patent). A call for the abolishment of software patents can be found in this article by well known tech investor Brad Feld, Here.¹
With the rise of ‘virtual’ biotechs, as pointed out in the articles in support of Y-Combinator’s move, it has become easier for some select life science innovations to get to a proof-of-concept stage in a shorter period of time and with fewer financial resources than was typically the case since the advent of the biotechnology business. This is becoming true for certain medtech and medical device technologies as well.
Accordingly, other tech accelerators may follow Y Combinator in reaching out to the life sciences. We think this is an excellent development for scientific and economic advancement, but it is important that all of these new entrants to the life science entrepreneurial space understand that patents are an indispensable component to the bioscience business model, and core to the entire venture.
Without both defensible core patents and freedom-to-operate, there can be no biotechnology company. Intellectual property strategy then is mandatory and a key distinction between tech and life science companies. As tech investors expand their investment theses to include life science bets, understanding the patent strategy of accelerator applicants must be a required component of their screening and diligence process. If exhaustively executed, these efforts will undoubtedly aid in improving the opportunities for success. Once this distinction is woven into the new life science investor’s DNA we see a bright future for tech incubators and accelerators moving into the life sciences.
¹ It should be noted that many large tech companies that were once considered anti-patent have become, in recent years, significant patent holders. See, e.g. Google, Here.
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