People searching for long-lost facts about their ancestors is a hobby that ranks close to gardening in popularity, but what if the “family tree” in question is corporate instead of human? Those stories can also come alive.
Such was the case recently when nearly 150 people gathered in Madison to mark the 30th anniversary of an improbable venture capital investment in Third Wave Technologies, then a new company founded by two UW–Madison professors with the goal of producing diagnostic tests to detect genetic markers for diseases.
That $300,000 first-round investment by Madison’s Venture Investors LLC, itself a relatively new firm, proved to be financially successful over time. Just as important, that 1994 investment and a preceding change in how the university community handled such discoveries were seminal events in the growth of Wisconsin’s life sciences “family tree.”
As those who attended a Dec. 2 panel discussion were reminded, Third Wave’s growth and 2008 sale to Hologic for $580 million led to the rebirth of Exact Sciences, which was a nearly destitute company in Boston until former Third Wave executives Kevin Conroy and Maneesh Arora moved it to Madison. Exact Sciences is a molecular diagnostics company that specializes in cancer screening and diagnostic tests, such as its Cologuard “test in a box” for colorectal cancer.
Arora founded Elephas Biosciences, also in Madison, in 2020; it is also finding success while attracting investor dollars. Elephas is building an advanced imaging platform to predict how cancer patients will respond to immunotherapy.
In addition, at least six other Third Wave executives have gone on to lead current or acquired Madison-area companies in the biotechnology space. About 60 former Third Wave employees work for Exact Sciences today.
In addition to advancing molecular diagnostics and making money in the end, Third Wave was successful in another way: It was an early example of why venture capital firms, almost entirely clustered on the East and West coasts in the early 1990s, came to discover Madison. The only other biotech example at the time was Fitchburg-based Promega, which raised money mostly in the early 1980s and remains a leader in the manufacture of enzymes and other biotech tools.
“Before that, it was really difficult to get people to look at the Midwest and Madison, in particular,” said John Neis, managing director for Venture Investors. “We were literally flyover territory.”
Neis moderated a panel that included Conroy, Arora and three other central figures in the Third Wave story — scientists and professors Lloyd Smith, Lance Fors and Jim Dahlberg. They recalled how a breakthrough in their research only came after a “failed experiment” led to a different and ultimately successful approach.
In fact, it was a hallway conversation at the Wisconsin Alumni Research Foundation (WARF) between Smith, Dahlberg, and WARF staff that caught the ear of Dick Leazer, who later served as WARF’s managing director. Since its formation in 1925, WARF had patented university discoveries and licensed them only to existing companies with a track record. With a background in med-tech companies, Leazer took a chance by licensing the inventor’s discoveries to what was to become Third Wave. In exchange, WARF took an equity stake in the new company.
Third Wave quickly developed tests for human papillomavirus (HPV) and cystic fibrosis, the value of WARF’s stake in the company grew, and the foundation forged agreements with about 20 other startups by 2000. Today, there are about 100 such examples to demonstrate how university research can — and does — lead to economic growth.
“The new startup initiatives remain true to the founding aims of WARF: delivering scientific research to the marketplace and returning proceeds to the university,” wrote the foundation’s public affairs associate Kevin Walters.
Panelists discussed challenges they encountered along the way after Third Wave’s founding, such as seven intellectual property lawsuits — each defeated. As Neis noted: “It was a wild ride for us, but we never left the tracks.”
What can today’s entrepreneurs learn from Third Wave’s founders? The advice offered on stage included: Don’t be afraid to think big; surround yourself with great people; if something fails, maybe it’s suggesting other pathways; create meaning; create a sense of belonging.
In the genealogy of startups in any sector, that’s timeless advice.
