Why It’s Easier to Create a Tech Startup

Picture this. You are a new biology PhD, and you have a great idea for a new drug that will cure a disease. It will be revolutionary and improve the life of millions. You will have complete monopoly of the market and you’ll be able to charge astronomical prices. You work hard, spending years of nonstop research, jumping through FDA hoops, and all the time attracting little funding and earning little money for your efforts. Finally your efforts are rewarded and you cash out in stock after twenty long years.

The opposite story is that you are an unemployed tech worker laid off in the 2008 recession. You team up with one of your college roommates to launch a new social media platform or sharing economy app. You attract incredible venture attention, get to siphon off six figures for yourself in income, and even though the product isn’t profitable, you have enough “eyeballs” to get bought out by a big company like Google or Facebook.

This isn’t too far from reality. The first story is roughly that of Gilead Sciences, a pharmaceutical company behind sofosbuvir, a revolutionary treatment for hepatitis C. Though the company was founded way back in 1987, it took them until 1992 to go public, and they only got $86.25 million in IPO proceeds. Many decades of slogging through developing later they finally got to their big moneymaker, only for it to make headlines for being too expensive, gaining FDA and legislator scrutiny.

The second is pretty much any moderately successful tech startup. YouTube probably fits the bill the best, but Uber and Airbnb are comparable as well, both of which are valued in the tens of billions.

It’s a headscratcher. Innovation in biology and medicine is tough. There’s a lot of man hours spend pursuing potential drugs, some of which don’t pan out. And then when you finally do discover something, gain FDA approval, and expect to make a reasonable profit, you are blasted by the media for price gouging. Why would any budding entrepreneur focus on bioscience, when there are faster and cheaper ways to wealth in tech? In contrast, tech is capital-light, valued highly by the market, and doesn’t take much expertise to get going.

Think about it this way. Any unemployed guy in his family’s basement can bust open a coding book, learn how to make apps, and start a company. It takes true skill and deep expertise to do the same in the biosciences. Innovations in biology arguably add more to human happiness and lifespan than a new app that remembers where you parked your car.

One is true innovation, the other is mere banality. But when it comes to making money for the lowest investment, there’s no comparison.

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