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Affymetrix’s $25M True Materials Buy is Most Recent Graduate of QB3 Garage Incubator

Last week, genetic analysis stalwart Affymetrix spent $25 million to acquire True Materials, a San Francisco Bay Area biotech startup developing digitally encoded microparticle technology for improving nucleic acid and protein analysis.
From Affymetrix’s perspective, the acquisition was significant because it will enable the array manufacturer to enter low- to mid-multiplex markets, compete with bead-based platforms, and beef up its technology offerings to the research, applied, and diagnostic markets, the company said last week.
But the news was also significant to The Garage, an incubator affiliated with multidisciplinary research institute California Institute for Quantitative Biosciences, or QB3. True Materials is the fourth company to “graduate” from the Garage since it opened in 2005 as the first University of California-affiliated incubator in QB3’s facilities on the Mission Bay campus of UC- San Francisco.
True Materials’ “graduation,” however, is slightly different from that of previous companies, all of which closed venture capital rounds of $5 million or more and used the funding to move on to greener pastures. While these graduates have helped validate the Garage’s mission, the rapid development of True Materials – which entered the Garage in 2006 – to a $25 million acquisition target, may be the incubator’s biggest success to date.
“Our ambition is to drive the California bioeconomy – that’s why the state created us,” Douglas Crawford, QB3’s associate executive director, told BTW this week. “This is just a fantastic example of the good work we can do.”
True Materials also is a bit different from most of the companies that have set up shop in QB3’s Garage in that it was not spun out from a UC school, which is one of the major components of the incubator’s mission. QB3 itself is a collaborative effort between UCSF, UC-Berkeley, and UC-Santa Cruz.
“The goal of the state when creating QB3 was to drive the creation of new industries,” Crawford said. “Towards this end we make three efforts. First, we promote creative science by encouraging cross-campus and cross-discipline collaborations. Second, we promote collaborations between industry and the university. Third, we try to stimulate university spinouts.” He said True Materials falls somewhere between items two and three.
QB3 originally started working with Randy True, founder of True Materials, because of the institute’s strong interest in new microarray technologies that the shop was developing.
“Randy was an independent entrepreneur – not an immediate spinout of the University of California,” Crawford said. “He was a close friend and collaborator with some of our investigators at QB3, so he was a perfect fit to be able to kind of nurture very early-stage technologies.

True is just “one [example] of what makes the Bay area so great” in terms of entrepreneurial spirit. “A hi-ho cowboy, all on his own, with a glint in his eye, and that glint is now all the brighter.”

“We provided him with a manageable amount of space to keep his cash flow to a minimum, and allowed him to grow, space-wise, one individual at a time,” Crawford added. “And, more importantly, we provided him access to a variety of cool applications and collaborators to work with.”
This, coupled with access to the intellectual assets and various scientific collaborations that QB3 offered, allowed True Materials to move toward market much faster than it would have been able to otherwise.
In fact, during Affy’s second-quarter earnings call last week, Affymetrix CEO Steve Fodor commented that True Materials was “pretty far along” in getting its technology into the marketplace – undoubtedly a major factor in Affymetrix’s decision to target the company in an acquisition.
“This small company had plans to actually get things to the market in early 2009; we’ll take a look at those plans and will evaluate how much sense that makes,” Fodor said during the call.
Affymetrix also said that as part of the acquisition, True has joined the company as a vice president of research and development.
Crawford told BTW that True is just “one [example] of what makes the Bay area so great” in terms of entrepreneurial spirit. “A hi-ho cowboy, all on his own, with a glint in his eye, and that glint is now all the brighter.”
Garage Door Opens
Previous graduates of the QB3 Garage include Fluxion Biosciences, a UC-Berkeley/QB3 spinout developing assays and instrumentation for single-cell analysis; drug developer Bay Therapeutics; and Satoris, a Stanford University spinout developing a diagnostic for Alzheimer’s disease.
Each of these companies closed a significant financing round in the past year and moved out of the QB3 Garage to other laboratory and office space in the Bay area.
Neither QB3 nor the Garage has taken an equity stake in the companies it has helped incubate, “nor is that really our ambition,” Crawford said. The incubator rents space at market rate to its tenants, and offers a suite of services including access to QB3 researchers who help mentor and guide academic entrepreneurs and young companies “all the way from identifying potential markets for their technology; clarifying the IP position; and finally, renting them space when appropriate,” Crawford said.
“Our purpose was to lower the cost of starting interesting technology companies,” he added. “By being inside an academic institution, it makes collaboration and use of our core facilities much easier.”
According to Crawford, the incubator is also the first specifically focused on spinning out companies from the UC system – a surprising fact given that the UC system has consistently ranked near the top of US academic institutions in generating university spinouts and in technology transfer activity in general.
Crawford said this is partially due to the fact that the UC system has “taken it as a birth right to have that kind of innovation. We have an incredibly rich ecosystem outside the walls of the university, which a lot of communities don’t have.”
In New York City, for instance, “there is very little native tech industry there,” Crawford said. “There are VC companies, but they’re mostly late-stage big companies. There is not a lot of seed-stage investment going on.
“So if you’re at Columbia University, and you want to start a company, and you can’t attract a $5 million round, you’re in trouble; whereas here, in California, generally in the past the thought has been that the ecosystem is so rich that we don’t have to do this.”
But Crawford and others have started to see that this is a false assumption. Without access to the Garage, Crawford said, “I think Randy would have been hard-pressed to keep cash flow under control; and to gain the kind of intellectual power he could by working so closely with university investigators.”
Crawford added that that when the Garage first opened shop, “we had no idea what the demand would be. Remarkably we now have a waiting list and I get almost an inquiry a week from QB3/UC members. The Garage has helped scientists realize that starting a successful biotech company is possible and not prohibitively expensive.”
Three new undisclosed companies have recently moved into the Garage, bringing the total number of companies that currently rent space to nine. One of those companies, Crawford said, is on the cusp of completing its own multi-million financing round. “There has been a remarkable conversion between very early-stage companies and successful outcomes [such as] financing events, and in Randy’s case, all the way through to the goalpost,” he said.

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