Tech investors haven’t benefited from cryptocurrency. Metaverse hasn’t, either. Self-driving cars are sluggish to come and social media’s development has slowed.
Where can tech investors find the next great idea? Supplements. Some venture capital firms that earned billions in software and electronics are spending hundreds of millions in nutraceutical firms.
FDA Inspections
Supplements are a celebrity product, not Silicon Valley. A 1994 federal statute exempts supplements from most FDA inspections; the market has thrived, despite effectiveness problems.
Now, venture investors anticipate that DNA sequencing will bring a new wave of gut-health products. Sequoia Capital senior partner Roelof Botha is investing. He claimed a “societal reawakening” concerning the human gut’s diverse flora.
Botha is renowned for early wagers on Instagram and YouTube, but he grew intrigued by gut health after Sequoia financed 23andMe. Sequoia invested in Pendulum, a San Francisco probiotics firm.
Sequoia is popular. According to PitchBook, a startup investment research organization, venture capitalists spent $488 million in probiotic and supplement enterprises globally in 2021.
According to Pitchbook, last year saw a record 99 fundraising agreements. Pharmaceutical and food corporations invest, as does the Silicon Valley elite outside of biotech.
Sun Microsystems co-founder Khosla Ventures invests in Pendulum. Persephone Biosciences, a startup studying cancer therapies using gut microorganisms, has Y Combinator’s backing. Social Capital invests in ZBiotics, which offers a probiotic hangover drink.
Startup founders are pleased.
Ya'll this story is wild.
Quick background: uBiome was a YC-backed startup that raised $100M+ for microbiome testing.
We passed on it at Rock Health mostly bc we felt like consumers weren't ready to collect and ship their poop. https://t.co/bFStg1w78X
— Halle Tecco MBA, MPH (she/her) (@halletecco) April 2, 2022
One probiotic startup already failed. uBiome, a San Francisco business that examines feces for microbiome information, raised tens of millions of dollars from Andreessen Horowitz and Y Combinator.
Pushing On
Federal prosecutors accused uBiome’s founders, Zachary Apte and Jessica Richman, of embezzlement last year. The Wall Street Journal said the two were residing in Germany last year and had not been extradited. Their attorneys didn’t comment.
The focus on uBiome’s fraud is important, but we should not forget about the unethical scientific practices they pursued. (1/n)
— Daniel McDonald (@mcdonadt) March 19, 2021
The experience hasn’t soured VCs on “nutraceuticals,” which fit into Silicon Valley’s biohacking mentality.
Probiotics and other medications offer two advantages that VCs like. People who take tablets regularly or food makers that add them to regulate insulin, enhance digestion, or lose weight generate recurring revenue.
One is lax regulation. Manufacturers can’t pitch supplements as being more effective than research reveals, but they don’t need the same regulatory procedure as medications.
Botha from Sequoia Capital says genetics research has the same promise as microchips a generation earlier when microchip power doubled every two years under Moore’s Law.
DNA sequencing has “outpaced Moore’s law,” he claimed. He said that’s why Silicon Valley should target the sector.
New supplement entrepreneurs must shift the view of their sector as unscientific or Northern California witchcraft. Colleen Cutcliffe, co-founder and CEO of Pendulum, claimed “probiotics are voodoo” Her two co-founders also hold doctorates.
Pendulum sells a product with akkermansia muciniphila, a gut bacterium that regulates diet-induced obesity. Because the bacterium dies when exposed to air, Pendulum has developed a technique to keep oxygen out.
Tens of thousands of gut bacteria types remain to be examined and a $60 billion worldwide probiotic sector awaits new products.
This article appeared in NewsHouse and has been published here with permission.
