Funding for innovation is of constant concern to the biopharma industry – now more than ever as venture firms evolve under pressure, with some shutting down or merging, others struggling to fundraise, and several exploring new business models. (See BioWorld Insight, Jan. 17, 2012.)

Yet a recent BioWorld Insight analysis showed that, despite the current turmoil, venture investors have become much more willing to support innovation over the past five to six years, as evidenced by a decrease in the percentage of Series A funding allocated to so-called specialty pharma and clinical-stage firms. (See BioWorld Insight, March 26, 2012.)

Even so, Lindy Fishburne, executive director of Breakout Labs, said she sees "a lack of true, cutting-edge innovation." She told BioWorld Insight that she sees no shortage of iterative ideas, but not enough of the groundbreaking leaps than can fundamentally change the game in improving quality of life.

And that's where Breakout Labs, a program administered by the freedom-focused Thiel Foundation, comes in.

The Breakout Labs business model has echoes of both grant funding and venture investment. The program is a revolving fund initially comprised on nonprofit dollars. The money will be awarded via grants to start-ups doing early stage science at the intersection of biology and technology, with the understanding that if the programs succeed, the nonprofit will be due a small amount of warrants in the company and a small, capped royalty.

Fishburne emphasized that Breakout Labs is not looking for a venture-style return. "The minute you go down that path, you stop being able to take the high-risk bets," she said. And while the fund is revolving, it is not self-sustaining – Fishburne understands that the investments will be slow to pay out, if they ever pay out at all, but she hopes progress with some of the programs initially funded will inspire donors to keep the dollars flowing for additional grants.

The first grants were awarded last month, and they went to companies like Immusoft Corp., which is seeking to modify the DNA of immune cells so that they continually secrete therapeutics, and Longevity Biotech Inc., which has created a new class of stable, synthetic biologics.

Breakout Labs grants range from $50,000 to $350,000. Grants are only awarded to companies – university scientists seeking funding must have an LLC or corporation that has in-licensed the program and conducts research outside of the university. But start-ups are not the only types of companies eligible: Fishburne said Breakout Labs has had some discussions with later-stage companies that need funding for a high-risk, early stage program that was shelved due to capital constraints.

But while Breakout Labs does fund biology, the program is more interested in platforms than products, and it won't fund clinical trials, Fishburne said.

"We don't want to be a drop in the bucket," Fishburne explained. Part of the reason Breakout Labs was started was because, even as some venture investors have pulled back from life sciences innovation, entrepreneurs have devised ways to dramatically decrease start-up costs. Some are buying used equipment off eBay, others are leveraging community lab space, and many are taking advantage of computer modeling to replace work previously requiring a wet lab.

"There's an ability to do science at a different cost-structure than you have in the past," Fishburne said.

That's also why Breakout Labs decided to focus on the intersection of science and technology. Although the firm received many intriguing applications for projects in energy or space, "our modest amount of money isn't enough to move those forward," Fishburne said. "This is a place where the amount of funds we can give can be very meaningful."