2018 INC. 5000 RANK: 9
HEADQUARTERS: Solana Beach, CA
YEAR FOUNDED: 2007
2017 REVENUE: $50.3 million
3-YEAR GROWTH: 15,268%
As a scientist, Kevin Lustig saw firsthand how pharmaceutical research can soar into the hundreds of billions of dollars while progress remains painfully slow--the U.S. Food and Drug Administration approved only 46 drugs last year. As an entrepreneur, he saw an opportunity open for the taking.
Lustig, who started out in the sciences field as a glassware washer in a lab at Cornell University in 1981, says there is a more effective way to do scientific research. Pharmaceutical companies can reduce service costs and delivery times by outsourcing tests--chemical synthesis, toxicology tests, gene editing, among others--to different contract research organizations. Finding the right partner, however, can be an arduous task. So in 2007, Lustig and co-founders Chris Petersen and Andrew Martin founded the San Diego-based company Scientist.com, an online marketplace that connects pharmaceutical companies with more than 22,000 vendors and research organizations, with the goal of making the research process more efficient.
Scientist.com lets scientists contact multiple vendors from all over the world simultaneously, get quotes for the services they need, and handle the contracts and payments--a process that previously could take three to six months from beginning to end. Scientist.com claims it helps users do all of this legwork in a day. The marketplace's price transparency also saves clients an average of 25 percent, says Lustig, who serves as the company's CEO.
"We realized that because of some structural changes that had happened in the life sciences industry, that it was now possible to change the way we had approached scientific research," he says. "Because historically, and for me personally, science was very much about what one could do in a lab."
The company has partnered with 16 pharmaceutical companies, including Pfizer and AstraZeneca, as well as the National Institutes of Health. Scientist.com, which landed the No. 9 slot on this year's Inc. 500 list of fastest-growing private companies in the United States, pulled in more than $50 million in revenue in 2017, an increase of 15,267 percent since 2015.
The idea for a "marketplace for scientists" came to Lustig, 54, and his co-founders in 2005 when they realized a technological force was transforming entire industries: Amazon. Then came Airbnb transforming hotel rooms, and Uber transforming personal transportation.
"We said, 'Well, this is easy. What we need to do is build a marketplace for science,'" he says. The initial plan was to carry out many of the experiments themselves. Very quickly the co-founders realized this would be unsustainable. So they pivoted from running their own laboratory to building an online hub to connect scientists and the thousands of vendors already running outsourced tests.
The problem was, they launched Scientist.com on September 15, 2008, the same day that Lehman Brothers filed for bankruptcy. Overshadowed by the financial meltdown, the marketplace gained very little traction. A year later at a pitch meeting, they ran into pharmaceutical executive Mike Snowden, who is now on the leadership team at AstraZeneca; he wanted them to build a private marketplace for his company's scientists. The team spent the next 18 months building the first two private marketplaces for AstraZeneca and Pfizer, charging each enterprise firm $300,000 to $400,000 a year.
At that point, these platforms were not much more than communication channels between vendors and pharmaceutical firms, as they couldn't be used to pay for services. In 2014, the company added preapproved legal and finance agreements--another timesaver--and also created a public platform allowing scientists of any pharmaceutical firm to find research labs and buy their services. The platform also highlights cutting-edge tools in the industry, such as 3-D tissue printing or tweezers that manipulate cells. As on Amazon, vendors can be rated on a five-star scale and reviews can be posted. Scientist.com now makes money by taking a 5 percent cut from what research organizations make on each transaction, which ranges from $500 to $1 million (with an average sales price of $32,000).
In addition to fulfilling a need in the industry, Lustig attributes much of Scientist.com's success to the company's culture and hiring philosophy. Located in a surf town outside of San Diego, the company, which Inc.com recognized as one of the Best Places to Work in 2018, offers numerous perks, including unlimited vacation and flexible work schedules. Lustig encourages employees to go their kids' soccer games and band recitals. According to the CEO, the 65-person company has seen only four employees leave over the past four years.
"Very few people leave because we're a hard-working culture but it's also very nurturing," he says. "When we bring somebody on board it's with the idea that they're gonna stay forever, and we do everything we can to get them into a role where they excel."
Despite the fast growth, Scientist.com does face challenges operating in an industry that is slow to change. It's not an easy task to convince scientists to approach their research in a different way, particularly when they're part of a large company with 10,000 researchers, acknowledges Paul Stone, who sits on the company's board and serves as general counsel for 5AMVentures, a venture firm that invests in life science companies.
Scientist.com also isn't the only company trying to connect drug companies and labs. Science Exchange, founded in 2011, runs a similar online marketplace.
"Kevin has been in this industry, working on varying aspects of efficiency and research, for most of his career, [and Scientist.com is] attracting top talent including big pharma," Stone says. "It tells you something about what's happening there."
With $33 million in funding, the company plans on expanding to scientific disciplines such as cosmetic testing, crop science, animal health, and consumer health. Lustig says the company has signed on several large clients that it will announce over the next six months.
"The focus is on empowering scientists," he says. "That's sort of my life goal, if you will."