February 24, 2013 | Read Time: 2 minutes
Immusoft could revolutionize medicine—or it could go kaput. The company, started by Matthew Scholz, a computer scientist, is attempting to “program” human cells so that they become miniature drug factories and deliver treatments to patients.
It’s a wild-eyed idea that may not work—which explains why Mr. Scholz initially had trouble winning investments from venture capitalists and a grant from the National Institutes of Health.
But it’s exactly the kind of company that Breakout Labs, a year-old program at the Thiel Foundation, likes to support.
Breakout Labs made a grant of more than $300,000 to Immusoft, and it has given similarly large grants to 11 other companies in the past year, adding up to grant awards of close to $4-million.
Mr. Thiel, the billionaire co-founder of PayPal, wants to help entrepreneurs with proposed innovations in science and technology to pursue long-shot business ideas that are years from actually turning a profit.
“We often see the big breakthroughs come from the nontraditional path,” says Lindy Fishburne, executive director of Breakout Labs.
If Immusoft succeeds, and begins to make money, some of its profits will flow back to Breakout Labs, through royalty payments and options to buy stock. Ms. Fishburne describes Breakout Labs as a “revolving fund,” and any return it receives from the companies it supports will go right back out the door to other start-ups.
“It’s a philanthropic return that will allow us to fund more research,” she says.
Toward ‘Reinvention’
Bizdom, a nonprofit operating in Detroit and Cleveland that provides selected start-ups with $25,000, mentoring, and connections to well-heeled investors, also receives some compensation for the help it provides.
Bizdom, started in 2007 by Dan Gilbert, the billionaire founder of Quicken Loans and the owner of the Cleveland Cavaliers basketball team, requires the start-ups it works with to give Bizdom an 8-percent ownership stake.
Mr. Gilbert started Bizdom to help the two struggling cities reinvent themselves. His business interests are primarily based in Cleveland, and he grew up in a Detroit suburb.
“We think we’re at an early stage in helping these cities turn things around,” says Ross Sanders, Bizdom’s chief executive.
Cycle of Support
Bizdom is working with 19 businesses in Detroit and 16 in Cleveland. Already, several companies—such as Campus Commandos, which helps other companies market products to college students—have become profitable and are paying a share of profits back to Bizdom. Bizdom will use that money to support new companies in 2013.
Bizdom typically works with companies that are still in a very early stage and not mature enough to attract attention from venture capitalists or “angel” investors, Mr. Sanders says. The 8-percent ownership stake, he explains, compensates Bizdom for the risks it takes in supporting unproven entrepreneurs.
“We’re doing the heavy lifting at the very earliest stage,” he says.
