The Past and Future of YC Bio

Uh, all right, so now Serbia and I are going to talk a bit about the past and future of YC bio. We have a clicker. Cool, look at that! So, those of you who've had me as their group partner know that I like to cut to the chase and talk about the elephant in the room. So, Jared, I'm gonna do that with you right now.

Okay, I feel like there's this misconception that YC doesn't really invest in bio or healthcare companies, that we don't care as much about our YC and bio program. Is that true? Tell us a little bit about the state of YC bio.

Yeah, I get this a lot from people not in this room who are like, "Wait, YC invests in bio companies? Really?" So, here are some stats to share with everyone. This is sort of the current state of the world for YC bio. We've now invested in over 500 healthcare and bio companies, which I believe is actually the largest healthcare portfolio in the world of any venture investor. Nine of those companies are worth over a billion dollars, and 50 of them are worth over 100 million. A combined valuation of all the YC bio companies is 30 billion dollars, and they've raised over 8 billion dollars from investors. So yes, I would say we do invest in bio and healthcare companies.

Uh, okay, I see, I see. I mean, looking at this list here, it seems like we must have been doing this for a long, long time, right?

Actually, we've only been doing this for seven years. We only started funding bio companies in 2014.

That's incredible! And you know, YC's a household name in the tech industry for a long time. You guys are absolutely crushing it in that sector. Why take the risk and reach out into the bio world, into the healthcare world?

Yeah, it's a good question. So, um, before 2014, YC had really only invested in software companies. Why did we wake up one morning and decide to become the world's largest healthcare investor? That was a pretty interesting decision if you think about it that way. And, um, I think to understand why we did that, you really have to go back to the beginning of how YC itself got started back in 2005.

YC got started back in 2005 by Paul Graham, and Paul Graham really had one big insight, which was that at the time, the founders that were starting tech companies were business people. The founders that VCs wanted to fund were business people; they were experienced executive types. Paul Graham had this then heretical idea that the people who would start successful companies in the future would be engineers who would build the product themselves. He created Y Combinator to inspire those people to start companies and then to fund them.

In 2014, we looked at the healthcare and biotech landscape and the people who were starting companies and the people who were funding them, and we saw the same pattern: the people who were starting biotech companies were business people and executives; they were not scientists. We believed that in the future, scientists would commercialize their own research; they would take research they had done in school and they would start companies themselves and run them themselves. Everybody thought that we were crazy.

My friends who were, how do you know you're onto something?

Yeah, exactly. And so we decided to do it anyway.

Yeah, fantastic! So what did the first couple of batches look like, you know, going from tech into hardcore sciences?

Yeah, so the first YC bio batch was summer 2014. We funded 10 companies in that batch, and you know, we didn't know what we were doing. We were figuring it out as we went along. Um, we didn't have any real healthcare expertise on the team; we didn't have all the things that you've now built at YC that are sort of like healthcare-specific resources and support and all that stuff. But it didn't matter. The thing that we realized was that the companies in the early batches had a great experience anyway.

The reason is simple; it's because they helped each other. Like, what really worked with YC bio was it turns out that when you get a bunch of companies who are working on something similar together, they help each other. They were also able to benefit from the other YC founders and the YC network that we had built up over the years of founders and investors. And, um, we also realized, like today from Othello said earlier, that combining biotech and healthcare founders with founders working on software companies turned out to be a feature, not a bug. They actually benefited a lot from that and were inspired to move faster and inspired to build their companies in a nimble and flexible way.

That's fantastic! So can you give us an example of one of the first bio companies you invested in?

Yeah, um, I want to take a minute to recognize a few of the pioneering YC bio companies that took a bet on us when we were just getting started at this. Um, so the first one is a company called Ginkgo Bioworks, which probably everyone has heard of. Um, this is a photo of Jason, the CEO, on stage at demo day in 2014. He's wearing a Jurassic Park t-shirt. Um, and yeah, that's where it all got started. And today, of course, Ginkgo Bioworks is this huge public company with all these awesome robots and like the pioneering synthetic biology company, but it got started with Jason and a band of founders and a crazy idea.

Um, the next company that I want to call out is a company called Lucera. This is the founder on stage at demo day again making a rapid diagnostic test for gonorrhea, I think. And during the pandemic, they pivoted to COVID, and they actually became the first FDA approved at-home COVID test, which is awesome. Their test is great; incidentally, you can buy it on Amazon now. Serbia and I use it all the time. He's taken hundreds and hundreds of the Sierra tests.

Yeah, um, and the last one that I want to call out is Shasky, which was the very first therapeutics company that YC funded from Winter 15. Um, Shasky has a new technology for localized drug delivery that they're applying initially to oncology, and the founder, Jose, is here with us in the audience. Wave high, Jose, so I can embarrass you. There's Jose! Hi, Jose! I'm going to embarrass Jose by congratulating him publicly because his drug just moved to phase two clinical trials and also because [Applause], and also because the research that his drug is based on was called click chemistry, which just won the Nobel Prize for chemistry a couple of weeks ago. And Shasky is the leading company commercializing it, so congratulations, Jose! [Applause]

So, with that initial success, I mean, you didn't know then that these technologies were going to be as revolutionary as they are today, but you clearly saw promise in the founders. What did you decide to do with that?

Yeah, so after the first few batches of YC bio, we knew that we were onto something. Um, and so we decided to scale up the program. And here's some more stats for you: this is the growth of the YC bio companies from the 10 companies in the first batch in summer 2014 to now funding over 500.

Um, perhaps more strikingly, this is the total valuation of the YC bio companies over time. So we started in 2014, and just three years later, by 2017, we had crossed over a billion dollars in market valuation, and today we're over 30 billion dollars. Um, these are the nine YC bio companies that are worth over a billion dollars now. Um, and as you can see, like they're doing all kinds of different things. You've got diagnostics and therapeutics and patents and synthetic biology, um, all kinds of things.

Uh, this is actually the sector breakdown of the companies that we funded. We've always had sort of a sector-agnostic approach to investing. We don't think about investing in sectors; we just think about investing in founders. And so, uh, this breakdown is really effectively a representation of what the best founders want to be working on. Um, I do want to point out that these awesome results are really due to the amazing work of the founders that we funded, quite a few of whom are here in the audience today.

So, um, for those of you who are out building YC companies, like you're awesome, you're crushing it. Um, but if there's one stat that I want everyone to take away from it today, it's this one, which is a really simple one: which is, uh, today, actually, YC funds more bio and healthcare investors per year than any other investor of any kind in the world, which is pretty crazy! So that earlier misconception, again, not quite true.

Yeah, um, so a few years ago—actually, about four or five years ago—it became clear to us that healthcare was going to be a really important part of YC's core business going forward. But we had a bit of an issue, which is that we didn't actually have a healthcare partner running the program. And that was clearly the next step.

And so we set out to find the person with the right expertise and skills and background who could take what we had started and really take it to the next level and turn it into a world-class program. And it took us several years, actually, to find the perfect person to do that, but we found her, and she's sitting right next to me. Of course, it's Serbia Sarna, and there is a really special moment in October 2021 when we finally got to announce that we had hired Serbia to run YC bio. And that was when I knew that it was really in good hands and was really going to succeed.

Um, and so in a moment I want to have Serbia tell you a bit about what she's working on now and her plans for the future. But before we do that, um, I want to take a moment to recognize the people who came before us, because before a Serbian I worked on YC bio, there were really seven key people who got it off of the ground, and a bunch of them are here in the audience today—Diego and Uri, um, and also, in particular, Jeff and Paul Bukite, who are standing over there. I can confidently say that if Jeff and Paul had not believed in YC bio at the very beginning, when it was far from obvious that it was going to work, we would all not be sitting here today. So let's have a round of applause for Jeff and Paul. Thank you!

So, Serbia, tell us about what you're working on now, how YC works today.

Great! Um, you know, there are some concrete things over the last couple of years that we've implemented understanding that, though a lot of the fundamental lessons of what it takes to be a fast-moving entrepreneur directly translate over from tech, we also know that for those companies that have to do clinical studies or go through regulatory or sell into hospitals, that perhaps there are unique challenges, correct?

So we have put in place a couple of things that are specific for bio and healthcare companies. So we've talked today a lot about speed, right? And speed, especially when you're in the YC program, but always, for those three months, we want you to have a handbook as you enter the program of the different functional areas and how you can show progress in each one. So we've done that; that's been established and is actually part of our handbook now.

We also have group office hours that occur every other week, where we have bio-specific and healthcare-specific curriculum in place. During those group office hours, you're surrounded by section mates who are often working on things very similar to you. A couple of batches ago, in fact, we had five sections total working on either healthcare or bio—in a diagnostic section, a synthetic biology section, a therapeutic section. So as you grow, you'll be working with more and more companies who do what you do, and therefore, there's going to be even more opportunity to learn.

And then, starting two batches ago, we had YC alums come back from our sector to speak in the batch right on our Tuesday morning events. So now not only do bio founders get to benefit from the incredible stories of the founders of Brian Chesky and Airbnb, but you get to hear from incredible folks like Ivana, who started and took Asher bio forward within the YC program. And they're also existing elements of, uh, YC that we've noticed our bio companies taking advantage of and benefiting from even more than our tech companies do.

So one of those things is co-founder matching. So, with co-founder matching, it turns out that's a bit hard, right? To pull people out of academia, it's a bit hard to find other scientists who are like-minded who will, you know, sort of leave the comfortable jobs. And so as a result of co-founder matching, you can see here that several companies have used it.

Yeah, so, um, if anyone here is looking for a co-founder or thinking about it, yeah, you should sign up and try co-founder matching. Um, it's actually built by Kat Lee, who's here in the audience—I'll embarrass her; she was the person who created co-founder matching, and it's really working. So if you're looking for a co-founder, you should sign up and use it. Yeah, incredible work, Kat!

And then we noticed that healthcare companies also use work at a startup to find the initial members of their team, and that's again something you have access to at workatstartup.com. This is a site that we built specifically to find jobs at YC companies. And I actually just, when I was hanging out here earlier, I met two people in the audience here today who found jobs at YC bio companies from work at a startup.

So yes, it actually works; it works! And then after our bio and healthcare companies have that initial data or traction that they need, we do have a Series A program that will refine your pitch further and help sort of introduce you to the right investors and kind of look at the landscape for you.

So that's pretty incredible! So all of these different aspects, of course, strengthen the YC bio and healthcare program, but what really, really drives the success of the program is all of you—it's the YC community! I cannot tell you how many times I've had a founder stuck on a problem who then reaches out to an alum that helps bring them forward.

And we have a lot of interest; like I said, there's over a hundred YC alums here today, and we had a WhatsApp group that we had to move off of WhatsApp when it exceeded a thousand people. I mean, guys, this is the size of the community that's growing! And so similar to tech, where companies kind of grew together, that is what's going to happen within YC bio as well.

And I also want to announce some big plans for next year. We want to officially announce that we will be doing a YC bio tour across the country at different colleges and companies to expand that community further and to find those scientists and engineers who want to translate their ideas into research into startups. And as we do this, as we're on the road, we're going to continue to develop our relationships with payers and strategics so that our companies have the resources and relationships that they need to move forward.

Also, officially announced today and also decided yesterday is that we will be doing an event at JPMorgan this year! So I hope to see all of you then. And so one key thing to remember, really, as you're thinking about the future of YC bio, the future is really all of you who are willing to take that leap of faith, right, and make a positive impact on this world and, yes, absolutely build multi-billion dollar companies while doing so.

Thank you, guys! [Applause] Thank you!