How Fred Hutch spinout LabKey bootstrapped its way to compete in health care’s big data

LabKey started as a project on the Fred Hutchinson Cancer Research Center’s Seattle campus, shown above. The team would work there for a decade before relocating to its own office a few blocks away. (Fred Hutch Photo / Robert Hood)

Thirteen years ago, the Fred Hutchinson Cancer Research Center spun out a small startup with a mission to help researchers get a handle on all the data that medical devices were generating.

That company, LabKey, has since grown from six to 50 employees and counts Merck, MIT and Britain’s public health agency as clients. But the company never strayed far from home, now occupying an office a few blocks from where it was born in Fred Hutch’s Seattle headquarters.

LabKey’s story contrasts sharply with that of Juno Therapeutics, an immunotherapy company that spun out of Fred Hutch, raised millions in venture capital, and was bought by Celgene for $9 billion in January 2018. To this day, LabKey hasn’t raised outside funding, following its own path to success in a competitive area of technology and life sciences.

The company’s geography was important to LabKey’s start. Its founders were a group of software engineers, several from nearby Microsoft, who in 2003 started working to help researchers sift through data on proteins in order to better detect early-stage cancer.

LabKey co-founder Adam Rauch. (Photo courtesy of LabKey)

“This was the beginning of big data,” said LabKey co-founder and VP of product strategy Adam Rauch. “It was also the beginning of a journey to be able to do collaborative research.”

Researchers needed a platform that would allow them to query large datasets and share data securely between organizations, and LabKey planned to build it. Rauch and other former Microsoft employees Mark Igra and Matthew Bellew brought decades of experience working on the software firm’s Excel, SQL Server and Visual Basic applications.

“They weren’t looking for an opportunity, it was more of a problem that they wanted to help out with,” said LabKey CEO Michael Gersch. “They said, ‘Yeah, we believe in this. This is a cause.’ ”

The team reported to Martin McIntosh, a Fred Hutch researcher who was using proteomics, the study of proteins, to detect cancer. McIntosh asked them to work on a problem that both his team and the industry faced: some of the world’s smartest people, doing critical research, had junk for software.

LabKey CEO Michael Gersch. (Photo courtesy of LabKey)

LabKey Server was from the beginning open-source, and the company earned revenue by working as a consultant. If an organization wanted a new capability, it could hire LabKey on an hourly basis to build it. All upgrades were then added to the platform for everyone to use.

The 500 research organizations and thousands of individual users that now use LabKey came mainly through word-of-mouth referrals. “We don’t have any traditional salespeople,” said Gersch. The company didn’t disclose revenue figures but said that it consistently achieves double-digit annual growth and has offices in San Diego and London.

Over the company’s lifetime, the volume of data in medical research has only grown.

“The problem now is how do you separate the noise? And how do you find the correlations? And how do you take the data to answer questions? That’s where we come in,” said Gersch.

The medical data space is large and crowded, counting IBM’s Watson Health and UnitedHealth Group’s Optum as two of the major players. Amazon recently revealed a service to mine and decode medical records using artificial intelligence.

LabKey has also moved into AI, using natural language processing help extract data from doctors’ notes in a way that can be analyzed. Despite prominent competitors, LabKey’s main competition in the research realm is often in-house tools that organizations have built themselves.

LabKey’s original model essentially gave away a free tool with the option to pay for support and services. That allowed the company to refine the product in close collaboration with their users. But the model also led to unpredictable revenue and limited the company’s ability to invest in new features. Under Gersch, who joined in 2015, LabKey launched a premium tiered subscription service, although the core open-source software remains free and is regularly updated.

“Shifting to a revenue model that has more consistency has helped us grow,” said Gersch, who estimated that the number of organizations using LabKey has roughly tripled in the past five years.

LabKey’s recent and ongoing partnerships involve working with Just Biotherapeutics to create software specifically for biotechnology research and development teams. Genomics England uses LabKey’s software in a massive population health project that focuses on DNA data.

“We’re doing a fair amount of work with [National Cancer Institute] in terms of the cancer registries with the natural language processing workflow,” Gersch said. “We just recently did a great project with the FDA … to support mobile data collection in a secure and collaborative environment for researchers.”

The main challenge for LabKey is transitioning from a platform operator to a product-focused software company, Gersch said. In addition to the core product, LabKey Server, and the software it created for drugmakers, the company is working on a workflow tool to manage samples and specimens.

Despite that shift, LabKey’s motivation hasn’t changed a bit. “Every one of our customers you would want to be wildly successful,” said Gersch. “Because they’re helping humanity. That’s what’s so neat about what we get to do.”