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This article was originally published by UMass Amherst in May 2015

LabCloud:  Fast-Growing Laboratories and Vendors Eager to Reach Them

Research labs spend more than $35 billion a year on laboratory equipment and supplies. But as big companies restructure their research and development to reduce costs and risks, they rely more and more on research done by smaller companies. These smaller labs are a hard-to-find and valuable population for the makers of lab equipment and supplies.

Nowhere is this emerging market more apparent than at LabCentral, a coworking space in Cambridge for two dozen startups. Together, Lab Central and LabCloud are learning how to meet the needs of these fast growing labs and lab supply vendors eager to do business with them.

The VDC interviewed LabCloud founders, Igor Romashko and Charles Beyrouthy, to get a more in-depth look at the lab management software company and its progress-to-date.

VDC: What’s ground breaking about LabCloud?

CB: I’ll let Sonya from New Worker magazine answer that:  “LabCloud isn’t the first to take a shot at this market.  Other companies (e.g., Y Combinator-backed Quartzy) offer online lab notebooks and procurement but it is difficult to create the right combination of infrastructure, utility, and intuitive integration with laboratory tasks, all in a tool that scientists enjoy using.”

VDC: What was your inspiration for LabCloud?

CB: We realized that the fastest growing demographic of the life sciences space was startup labs comprised of less than 35 people.  These labs did not necessarily have the infrastructure in place to run as efficiently as possible. Many lacked a LIMS (Lab Information Management System), and given their size, cost-effective access to multiple vendors of labs supplies.  We saw there was an under served market opportunity and we decided to provide a solution to address it.  In a nutshell LabCloud created a solution which provides a LIMS to these small labs and just as importantly, a means for lab supply vendors to reach this very fast-growing market. LabCloud’s platform provides a win-win for these two entities.

IR: It was to create an operating system for the lab because what’s out there just doesn’t work. All of the parts can interact, enabling startups to achieve Quality By Design instead of the ad-hoc research methods in place at most small labs. But that doesn’t mean that the software can’t be intuitive at the same time.

CB: For me, this project was personal because after working in lab after lab, this issue became an impediment to my success and one of dire importance.  And in that light, when we built our platform, we built it with the vision that a scientist lives and breathes their work and so should the software he or she works with.  It is tapping into the inner subconscience of the scientist and not necessarily changing what they do, thereby disrupting their workflow, but rather how they do it.

VDC: How’s your design partnership with LabCentral going?  

CB: Over a $1M worth of lab consumables, equipment and office supplies have been processed through LabCloud’s solution and both the labs and the vendors are thrilled with their experiences and the outcomes.

IR: We learned a lot from working with them and developed a whole new business model that we are now deploying outside of LabCentral. It was a crucial point in the history of our company and we are glad we made the choice to work with them – we learned a lot and it shaped our business into what it is today.

VDC: Why are you are flying under the radar?

IR: It’s a question of timing for us.  We can see demand growing for our solution and we have to make sure we are able to support this large pent up demand and volume of transactions before we make this publicly available. The fact is we have an overwhelming amount of interest. We want to make sure that we can provide the same high quality experience to all of our clients.

VDC: How did LabCloud evolve since it has been at the VDC?

CB: John Hamilton has been outstanding and has been a great inspiration to all of us.  He is an amazing mentor that is patient, understanding, and willing to go beyond the call.  We liked him so much, we asked him to be on our board and he agreed.

IR: They have asked the really hard questions, and we are glad they did. It takes a lot to take an idea and make it into a product, and it takes a lot more to make a product into a revenue-generating business.

VDC: How did you guys meet?

CB: We met in the fall of 2007 at UMass Amherst and based on having a lot in common we became friends very quickly.

IR: After graduation I reached out to him about what I was working on and he said, “I wish I had this when I was in college.”

VDC: How do friends deal with business disagreements?

CB: It is a respectful environment but one with some great debate leading to great results and, and yes, the occasional row.  At the end, he is also one of my best friends, and while business is involved, I believe we can take on any challenge together.

IR: Well, we both realize that the other has a point. The key is to come to a mutual consensus and we both know that.

I’ll start off with this. I am not in academia and do not have a PhD. I am an engineer and scientist who turned into an entrepreneur with a background in academic and industry research. My job is to work with organizations in research. I started a company to build a product that will change the way science is done and turn a profit. I started it with my co-founder because I cared about science and wanted to see organizations succeed among the myriad of operational issues they encounter in their labs on a daily basis. I find it exciting to see products that change the lives of people and how they work, in whatever industry they are in, which is why I have find companies so fascinating. But are all organizations in science and research approaching innovation the same way? To that effect, I would like to have a frank conversation on the following topic; are academics producing the kind of results that are producing products that government, industry and the general population demand for the betterment of everyday life?

The Answer; Well it depends. For the majority of scientific research, the National Science Foundation and the National Institute of Health are the largest entities funding academic research in the United States. They have funded everything from the Human Genome Project to the world's first supercomputer. However, in an economy that is desperate for innovation and job creation, the intense directive to these organizations has been to fund organizations that have the potential to produce these results. This falls in direct conflict with the academic status quo.

In academia, the majority of research is done by professors, graduate students and post-doctoral associates with minor contributions from undergraduates and the majority of research in academia can be considered theoretical research at best. In other-words, this is research that may be interesting but does not actually produce a tangible product. Don’t get me wrong, some of this stuff is really exciting. But this is not what science in America needs right now. It’s not something industry is going subsidize and more importantly, the government does not want to either. In America, we need jobs. We need success stories. We need real, tangible innovation. For this, it’s time to look at the statistics. (See here)

So let’s talk about life sciences. In the life sciences, the NIH is the most prevalent funding organization. In academia, a large majority of funding comes from this organization. In 2015, their estimated budget is just above $30 Billion USD. (See here) In 2004, this budget was closer to $40 Billion USD implying a reduction in appropriations at a rate of $1 Billion USD per year. This is not to mention that while a budget may increase a maximum of 0.7% per year, the cost of doing business (or in this case the cost of doing research) is rising at a rate of 2.9% a year. This has created a stir and as a result, organizations in the sciences have been trying to cut their losses. The biggest losers (you guessed it) are academic institutions. A perfect example is the University of Virginia, where their grant awards have dropped from $252 Million USD to $187 Million USD. And federal and state governments don’t look like they are going to change direction on these policies. In short, universities across America are having conversations with their professors on ideas on how to go forward…and it’s becoming difficult.

In this environment, if academia is suffering, who is doing well? One Word: Start-ups. The government has been showing an enormous favoritism to start-ups because of their job creation record. They have been working on projects such as scaling solar power and electric cars. They have been investing in cyber security and strategic defense. In Massachusetts, a cradle of life science, start-ups have been funded by millions of dollars of funding for research and product development in cutting edge drug and medical device research that out paces the best academic research institutions. In addition, they are some of the States’ largest job creators, attracting the best talent from all over the world and making Boston and Cambridge some of the most innovative cities in America. This is not to mention that private companies and investors have been investing profusely into these new companies with the expectation of high returns. The best part; they are just as trained and as capable as their academic counterparts. In an economy where the majority of manufacturing is now being done abroad, start-ups have been driving the resurgence of innovation in America. And this scares academics to no end.

Academics and Industry have a complicated relationship. Industry values the academic world for its achievements and technological know-how which has prompted many successful partnerships. However, industry has been looking for financial returns more than ever. This is why there has been a reduction of partnerships over the past 5 years. Academics (to be honest), have a real reservation of working with industry experts. Within university walls, academics are able to maintain their independence and to some extent, set their own expectations and their own time table. As long as you have tenure and funding, you really have nothing to worry about. When adding a fiduciary responsibility to the mix where they become responsible to a corporation for their results, many academics have expressed the sentiment of enslavement or as one professor put it at a recent university meeting I attended, “we are afraid of being gagged.” I have two words for people who think this way; Wake up. If academics take money of any kind, they should be held accountable. They, like research scientists at private companies, should be responsible for the results they bring.

In short, from a capital standpoint, I believe that academia is no longer fundable (and I don’t think I am the only one). I’m sure this is a controversial comment. Ask a financial capital expert and the academic stock is considered a “long term, high risk” at best (and they are not alone with that opinion). I’m sure this is a controversial comment as well. And yes, there are exceptions. However,the past trends do not lie. Waste and lack of results at these organizations is nothing new and there are multiple papers published on this topic. (See here). This is unacceptable in an industry setting. In that regard (in all honesty), the bailing out of General Motors was a better investment. It saved millions of jobs and tax payers got their money back, something that the majority of academic projects cannot promise. I think it’s time to save tax payer dollars and invest in start-ups and companies who are developing the jobs and the applied technologies of the future. And if academia wants to be a part of this phenomenon (which I think is in the next 10 years is going to prove inevitable), I think academic labs should partner with them. As a matter of fact, I think it should be mandated. And to that effect, university labs will be able to indulge in this emerging market and create a strategy of success for the future.

For example, ask MIT and Stanford. They are doing it already…and they are not worried about federal or state government funds. They are investing into the future by leading from behind and creating a formula to rapidly take technology from their labs and bring it to industry. They are working with start-ups and their founders and succeeding on a tremendous scale. Conclusion: Universities need reform to stem the decline and academics need to put pride aside, build products of the future and learn to work more closely with their industrial counterparts, lest the concept of a research university ceases to exist in all but a few, innovative places.