Silicon Valley is coming for your gut biome

Cryptocurrency hasn’t done as well for tech investors. Neither has the metaverse so far. Driverless cars have been a long time coming, and social media isn’t the hyper-fast growth it was a few years ago.

So where can a savvy tech investor turn these days for the next big idea? Two words: dietary supplements.

Some venture capitalists who have made fortunes investing in software and hardware are pouring tens of millions of dollars into companies that make probiotic pills, capsules filled with plant extracts, and other nutritional supplements as a potential new frontier.

As a consumer product, supplements are more associated with the Kardashians or Joe Rogan than Silicon Valley. The industry is notorious for its lack of regulation under a 1994 federal law that exempts supplements from most Food and Drug Administration oversight, and it has grown in recent years despite questions about its efficacy. .

Now, venture capitalists are betting that advances in DNA sequencing and related techniques will usher in a new, more credible wave of supplements, focused especially on gut health.

Roelof Botha, managing partner at Sequoia Capital, one of the world’s largest venture capital firms, is among the buyers. He said there is a “social awakening” about the complex biome of the human gut where hundreds of species of bacteria live. .

“Without realizing it, we entered this era where we had a confrontational stance between humans and the rest of nature,” he said. “We overused antibiotics. We overused soaps. And now we’re getting back into balance.”

Botha is best known in the tech industry for his early bets on Instagram and YouTube, but said he became interested in gut health after Sequoia invested in genetic testing companies like 23andMe. That interest led Sequoia to invest in Pendulum, a San Francisco startup that sells probiotic supplements.

He takes them himself. “There’s nothing like having live microbes in his system,” he said.

Sequoia has a lot of company. In 2021, venture capitalists invested $488 million in probiotics companies and other supplement startups around the world, five times what they invested five years earlier, according to PitchBook, a research firm that tracks startup investments. Money last year went into 99 separate financing deals, a record for activity, according to Pitchbook.

The money includes investments from pharmaceutical and food giants, but also from Silicon Valley’s elite outside of the biotech world.

Khosla Ventures, headed by a co-founder of Sun Microsystems, is also an investor in Pendulum. Y Combinator, a well-known technology incubator, has a stake in Persephone Biosciences, a startup investigating potential cancer treatments involving gut microbes. Social Capital, another big venture capital firm, invests in a startup called ZBiotics that sells a probiotic drink as a hangover cure.

It’s a welcome development for some startup founders.

“Five years ago, the investors were either health investors who had a health background, or food investors who had a food background,” said Sofia Elizondo, co-founder of Brightseed, a San Francisco start-up that is developing gut-health products. .

“And what we’re finding is a lot of crossover investor interest now, where a lot of capital shares the thesis that precise proactive health at the molecular level is the way of the future,” he said.

There’s already been a cautionary tale about how a probiotics startup can go wrong. uBiome, a San Francisco startup that promised to give people insights into their microbiome based on stool tests, has attracted tens of millions of dollars in investment, including from venture capital firms Andreessen Horowitz and Y Combinator.

But last year, federal prosecutors said uBiome’s tests were not scientifically valid and charged the founders, Zachary Apte and Jessica Richman, with fraud. The two had lived in Germany since last year and have not been extradited to face charges, The Wall Street Journal reported. His lawyers did not respond to requests for comment.

Still, the episode hasn’t upset venture capitalists about the potential of “nutraceuticals,” which dovetail with a certain strand of Silicon Valley self-improvement culture known as biohacking.

As a business, probiotics and other supplements have at least two advantages that venture capitalists often look for. One is steady, recurring revenue, coming from people who take pills daily or from food manufacturers who use them as additives to control insulin, improve digestion, or try to lose weight.

The other is the lack of strict regulation. In general, ingredients should be considered safe, and manufacturers may not market supplements as more effective than research shows, but supplements do not need to go through the same rigorous approval process as pharmaceuticals.

Botha of Sequoia Capital said he believes genetic research has similar potential to microchips a generation ago, when microchip power was expected to double every two years based on a principle called Moore’s Law.

DNA sequencing has “progressed faster than Moore’s law,” he said. And that, she added, is what makes the sector a good target for Silicon Valley. “It’s about understanding biology as a science of information.”

Elisa Marroquín, an assistant professor of nutritional sciences at Texas Christian University, said the science around the new wave of supplements is still new, but she said at least some tech startups appear to be on the right track. She said that she does not have a financial relationship with any new companies, although she has spoken with them about obtaining samples for research.

“We are still very early in understanding these bacterial species,” Marroquín said. She co-wrote a review of the science this year, saying that future probiotic supplements hold promise compared to supplements that have been available for decades.

“I think they are going to have stronger effects on our health than the current probiotics that are on the market,” he said.

But part of the challenge for the new wave of supplement startups is changing the perception of their industry as unscientific or some kind of Northern California witchcraft.

Among certain scientists, “probiotics are definitely this voodoo,” said Colleen Cutcliffe, Pendulum’s co-founder and CEO. She has a PhD in biochemistry from Johns Hopkins University and her two co-founders also have PhDs.

“In fact, in the first eight years of our company, I didn’t let anyone use the p-word to talk about our product,” he said, referring to probiotics. “I said, ‘This is a microbiotic intervention.'”

Pendulum sells a few products so far, including a supplement with akkermansia muciniphila, a gut bacterium it markets as a “next-generation probiotic” linked to the control of diet-induced obesity. The bacterium is difficult to make alive because it can die when it comes into contact with oxygen, Cutcliffe said, so Pendulum has developed a proprietary process that keeps oxygen out.

Cutcliffe said there are still tens of thousands of strains of gut bacteria to study, with a $60 billion global probiotics industry waiting for new products, which is what has drawn the attention of investors.

“What attracted these people was the idea of ​​category creation and a huge existing market that hadn’t had any innovation in a long time,” he said.

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