Genomics is Not Biotech
Many investors prefer discrete, scalable, capital-light, fast-to-iterate software startups to biotech startups. It is a reasonable preference.
software
biotech
Pharmaceuticals require FDA-approved clinical trials with binary outcomes and a high failure rate. Even when they succeed, it takes a long time to produce the first revenue.
Devices require complex components or large numbers of components. This comes with supply chain risk. Devices also have regulatory risk. Even when successful, scaling up manufacturing might be slow.
Agricultural biotech tends to require field testing before mass production. Since Earth orbits Sol only once per year, iterations of experimentation are slow.
Digging is cheaper than making. The market for biofuels and biomaterials made by microbes is only profitable when subsidized by governments. Government subsidies are subject to the whims of fickle politicians. The uncertain revenue stream is unattractive to investors.
Not every biotech company has these disadvantages, but so many do that the sector is out of favor with venture capital investors. This leaves great biotech startups undervalued.
Genomics is a different kind of technology
DNA is digital code, just like software.
Digital information can be copied and processed without degradation. The invention of digitization is as influential on humanity as language and the wheel. In the 1950s, scientists first recognized that DNA is digital code. In the 2000s, we learned to read long sequences. In the 2010s, we developed tools to precisely edit DNA using CRISPR.
At a glance, genomics appears to be a subset of biotechnology. But its digital nature sets it apart. We distinguish software companies from electronics companies. We should also distinguish genomics companies from conventional biotech.
Future genomics startups will not share the same disadvantages as traditional biotech. Gene edits can be simulated on computers, avoiding costly real-world testing and high failure rates. This will enable faster FDA approval compared to conventional biotech. Simulations aren't restricted by seasons or geography. Products will be cost competitive from the start, unlike some biotech that requires government grants or subsidies.
While conventional biotech provides incremental improvements, genomics will create entirely new markets and tremendous value. It is digital technology applied to biology.
Genomics is a different class of investment
Due to wariness of biotech, many investors have also overlooked the revolutionary potential of genomics startups. This has led to underfunding and undervaluation of genomics companies with huge value creation and growth potential.
Now is an ideal time to invest. The low valuations allow large ownership stakes and diversification across various applications of genomics.
In short, genomics should be recognized as a differentiated category from conventional biotech, with standout prospects for investors who see its similarities to software. Targeted investment in genomics will produce outsized returns.