Y Combinator, Silicon Valley's best known start-up accelerator, thinks it has found a new type of biotechnology start-up.
Life-sciences companies come with a high risk of failure—often, the science behind a proposed invention isn't entirely proven, and turns out not to work. Because of this risk, the traditional way to fund early-stage life sciences companies is for a landmark East Coast investor, such as Third Rock or Flagship, to take a huge equity stake in the business and replace the founder with a seasoned executive. In exchange, it pumps tens of millions of dollars into the company over many years. It often takes more than a decade to generate a return.