Lineagen: Integrating Cutting-Edge Research with Commercial Viability

Founded in 2002 and based in Salt Lake City, an innovative startup called Lineagen is performing unique research that can dramatically increase our ability to diagnose certain diseases earlier than ever before. Its recent successes have placed Lineagen on the radar of a growing group of investors, reflected in its most recent round of funding that brought an additional $12.17 million into the company.

What is it about Lineagen’s genetic studies that is catching the eye of so many investors?

The secret to Lineagen’s success it that their research focuses on studying large pedigrees—entire families over the course of many generations—enabling researchers to pinpoint genetic markers which can indicate particular diseases. Given the fact that we share close genetic sequences with our relatives, Lineagen’s genetic studies are shedding light on which individuals are most at-risk for certain medical conditions. Identifying these markers is extremely important to doctors, since the ability to make an early diagnosis is a crucial factor in determining the effectiveness of treatment.

A great example as to why Lineagen’s research is so compelling can be seen with their Autism initiatives. Autism Spectrum Disorder is a neurodevelopmental disorder that leads to a variety of impairments, especially with regard to social interaction and communicating effectively. It is estimated to affect approximately 1.5% of children across the U.S., and many studies indicate that its occurrence is on the rise. Lineagen is currently working on two major research programs, one with the University of Utah and another with The Children’s Hospital of Philadelphia, that are uncovering genetic markers associated with autism.

This groundbreaking research is greatly advancing our knowledge about autism and has led to the development of FirstStepDx PLUS, which is currently the most cutting-edge genetic testing service available for those with child developmental disorders. Available in kid-friendly cheek swab format, it’s a product which combines several services related to testing, reporting, and counseling that provides families with easy-to-understand objective data about their risk-factors. FirstStepDx PLUS represents a significant advancement in the diagnosing of autism and other child developmental disorders, and it is one of the most prominent breakthroughs of Lineage.

It’s this combination of scientific rigor, practicality, and simplicity that has captured the attention of Lineagen’s funders since its founding. Without compromising on research standards or integrity, it has been able to develop commercial services that are immensely useful for patients and physicians alike. Just as importantly, Lineagen is making a great use of its location in Utah, a state with genetic assets highly conducive towards medical research.

Interest in FirstStepDx PLUS has been surging lately as word has spread through peer-reviewed publications about its achievements.  The most recent $15.8 million that was raised in their Series C round of funding will enable the startup to further the successful commercialization of their services, spreading Lineagen’s innovation to an ever-growing number of communities across the country. Given the commercial applicability of their medical research, it’s likely that what we’ve seen so far is only the beginning for Lineagen.

Investing in a University Spinout with a Faculty CEO

I recently touched base with a university asking if they had any good technology candidates for our startup foundry program. They responded that university faculty were starting businesses on all of their best technologies. I found that disappointing. We don’t build startups where the faculty is the CEO. But a lot of universities push the faculty CEO method now. And admittedly there have been some very successful startups run by faculty. But the odds of a faculty CEO with no business experience building a strong company are probably rather low.

How can you tell if a faculty CEO is investable? We advise investors to consider the “three Cs”; competence, commitment and coachability.

Competence: The first thing we consider is the faculty members’ business competence. Some faculty have had significant experience in a corporate business environment or even with a startup. Some have built and exited from pervious startups and clearly have the ability to serve as CEO for some period of time. But many do not have any experience and naively believe they can develop the necessary skills overnight. I like to ask potential faculty CEOs about their understanding of equity dilution as something of a test question. Often they respond that they don’t know the term, which tells me they probably don’t even have the basic knowledge and skills.

Commitment: Faculty are used to juggling many commitments and projects, including teaching multiple classes, mentoring doctoral students, managing research projects and writing papers. Many believe they can add running a startup as another part-time activity. While that may work if the startup is a just providing consulting project, or securing government grants for research projects it is not appropriate for a startup that is ready to receive equity capital. A simple question to ask a faculty CEO is “are you willing to leave your faculty position and lead the startup full-time if I invest?”

Coachability: Most faculty are high achievers. Over time this can result in a certain level of arrogance, and in turn an unwillingness to listen to others who are not clearly superior in their field. I’ve heard many investors state that coachability is the most important trait in an entrepreneur, and some faculty fall grossly short in that area. I typically find this issue is greater the longer the faculty has been in an academic environment. Young faculty are often very open minded, but may lack commercial sector experience and the willingness to take try entrepreneurial risks.

While I don’t want to argue that all faculty run startups are doomed to failure, I do think investors need to take a critical look at faculty serving as CEOs. In another article, we’ll take a look at the issues around persuading a faculty member to give up the CEO position and majority control of the startup.