What VCs Look for When Investing in Bio and Healthcare

Right, so welcome back. In this next panel features bio and Healthcare investors from Andreessen Horowitz, Coastal Adventures, and Ben Rock. They are some of the most respected firms out there. So, before we bring them up on stage, I wanted to introduce you to our moderator, Ethan Pearlstein.

So, Ethan is a YC Alum, and he's a founder and CEO of Perlara. Perlara was the very first bio public benefit corporation. They focus on helping families find cures for rare diseases. He's also co-founder and CEO of Maggie's Pearl, which is a clinical stage joint venture that is currently sponsoring a phase three clinical trial at the Mayo Clinic. He is also an active seed investor himself.

So, I would like to introduce Ethan, Camille, Vanita, and Morgan. Welcome, you can go next.

All right, welcome everybody! It's a pleasure to have this responsibility to moderate this great panel. So everyone, settle in here. I’d like for our distinguished guests to introduce themselves. So maybe we'll just start in the sequence here. Cami, sitting next to me, please go first.

Hi guys, it's Cami Samuels, and it's a pleasure and an honor to be up here talking to you. I'm going to tell you a little bit about myself as a human first, a little bit about Ben Rock, and then a little bit about my approach to Venture. As a human, what I think is relevant is first I grew up in New York City but have lived in San Francisco forever, and I'm now dyed on the wall Californian. But I lost both my parents at a young age to the biggies—one cancer and one heart disease. I have a son with autism, and I myself have a rare disease. So, Healthcare is deeply personal for me. So don't just look at what I say through the lens of cynical Venture capitalists; please look at me as someone who really wants to get products to patients.

Ben Rock has been around since the late 1960s; it's one of the original Venture firms. We have right now about 6 billion under management. We were lucky enough to be a part of some of the earliest companies in biotech like Biogen, Ethic, and Gilead, and then on through Illumina and 10x Genomics, and so on. And I feel like I'm very much standing on the shoulders of giants working at Venrock.

I myself am most in love with just complete medical needs, so I do a lot of orphan disease investing but just diseases for which there aren't great therapies. I major in therapeutics; I minor in consumer health and medical devices. Thank you!

And Vanita, representing the notorious A16Z.

Thank you, Ethan! I was waiting for how much shade there would be on this panel from Ethan. That was a compliment! Well, thank you all for having me. Thank you, Toby, for inviting us all here to get to meet some of you. My name is Vinnie Tagarwal; I'm one of the investing partners at Andreessen Horowitz, part of our bio health fund team.

So similar to what you heard Sorbu describe for YC, we love that structure; we love the idea of dedicated teams, resources, and people really to help great founders in the space like yourselves build companies in very special areas. I'm a physician by background, so I echo what you said about being super patient-focused and ultimately everything that we back, we hope has a transformative impact on patient lives. And we share a lot of the DNA that YC brings to you all. Our firm was founded by technical founders, and that's our mission as well.

And so it's really exciting to be here, and we look forward to working together.

And Alex!

Hi, thank you also for having me, and it's nice to see a lot of my portfolio companies—or our firm's portfolio companies—in the audience, including some that have already exited, which is fantastic. The firm, because of interest, as probably many of you know, broadly invests in everything from consumer technologies, consumer food tech, things like impossible foods, all the way through to aerospace companies like Rocket Lab, but also companies like DoorDash and GitLab and all kinds of things.

But I lead our health and bio investing practice, and for us, that's everything from healthcare services, AI radiology, drug discovery platforms, deployed healthcare, digital health, and some devices. And by personal background, originally, I was a physician-scientist; I was an AI researcher and then kind of moved into biomedicine, but I've been at Coastal Ventures for seven years now.

Fantastic! So let's dive right in, and we'll just sort of continue that order: maybe Cami, Vanita, Alex, as we go through these questions, and if you have nothing to add, or we can, of course, you don't have to speak; we can go to the next person then go to the next question.

So first up—what do you look for in an early-stage deal? Anything specific about the entrepreneur, the company itself? Do you have a certain investment thesis?

Sure, so I already hinted about urgent medical needs. Early-stage technical founders tend to emphasize near-term risk and de-emphasize long-term risks. I don't love investing in a big commercial scrum 15 years from now, right? So I'd rather take on a meaty technical risk, looking to de-risk it relatively early in the investment cycle.

You know everyone says they back great people, big markets, orthogonal and hard technology. On the people side, one I want to say something like vague that may be unexpected: truth-seeking is a quality I look for in entrepreneurs. It emerges often in the first and second meeting, and what I mean by that is nothing's perfect; your deal inevitably has warts. Are you seeing them trying to address them, admitting that you don't know how to address it, looking for help—all that? Because if you are trying to shove it under the rug, which is a natural human instinct, then I won't be able to help you, and I'm worried about the the risks that we're not identifying.

So that's a quality that you may not hear about all the time that means a lot to me as an investor. My very first investment at Andreessen Horowitz was in a YC company. I think Mana was here somewhere, but I invested in Memora Health, and I often look back to the founder qualities, to your question Ethan, that got us excited about an investment like that.

We often talk about a sort of a trope in Venture, but maybe you've heard it before. I thought maybe it'd be helpful to explain something called the idea maze. I think it gets used in this way without people describing what it means, and it sounds confusing, but really it's we like to figure out can we be on an intellectual journey with someone, and what does that feel like? At the earliest stages of company building, most of what you think is going to happen is not going to happen, and I think that's just important to be, as Cami said, honest about and upfront about, and be okay with. Actually, it's really important for us to know that a founder is okay if hypothesis X didn't work out because we don't expect it to work out either all the time.

Sometimes it does; sometimes—well, I think you heard a phenomenal story from the Asher bio founders, and Ivana told just a beautiful story of some things really working out as intended with really great plans, but that doesn't always happen. So if it doesn't happen, we like asking questions about what if this doesn't happen? What if this customer doesn't bite? What if this science doesn't pan out? What if you know you spend this much capital on this experiment? What would you do next as your next experiment?

These are all questions that we call navigating the idea maze, and a lot of that is intellectual horsepower, but a lot of it is personality and your willingness to be collaborative with an investor and bring us along for the ride. Right? You're always going to know more about your science and your space and your technology than we ever will, but we want to be able to share a little bit of what we've learned from pattern matching across a lot of companies and founders. From time to time, that's a journey that we think will be fun to take together, and so I think that's actually probably the number one thing I look for: do I feel like it would be really fun to navigate the company building journey with you.

So I think it means, as Cami said first, most everyone would say that. I've been principal, everyone's looking for a strong differentiated team. You know, is this the best possible team working for this problem? Is there fit to purpose? You know, is this a big enough market opportunity? Because if it's a big enough market opportunity, you can screw up a little bit, which is great for an early stage company, and still find your place.

If it's a narrow opportunity where you really have to thread many needles to get there, that can be hard. But I think one of the things that may be worth just jumping to, I think maybe the elephant in the room that was sort of alluded to in the partnering session, is that I think more than ever—especially for an early stage deep tech company—there is a lot of future financing risk.

As I'm looking at companies now, one of the big questions I have is what do I think about the future financing risk of this company? A lot of that hinges on something Vanita and Cami both were kind of talking about: does this company have full clarity into my weaknesses and is very intellectually honest about this process that I'm going to—you know, that I as an entrepreneur and my team are going to have to navigate?

And not have unrealistic expectations. You know, I hear a lot of companies, and you know, many of you in the audience here a few times, I've heard talk about how everything in your company is great, the team you have in place is the exact one you'll ever need. It's not true in most cases! I mean, you're going to evolve your company, and you have to know what the holes are, what your weaknesses are, and lean into them. Otherwise, it's very hard to address them.

And you know, other things that I also look for, especially in this environment where you're going to need a very strong team to navigate the journey ahead, is we'll often see teams say, "Oh, I just need to hire a couple texts, so I don't need a big option pool." I don't think that's the right way to frame an early-stage company. It needs to bring on excellent talent.

So success as an early-stage company is a consolidation of amazing talent trying to do the impossible. And you really are about consolidating that group to overcome the challenge you have because in an early-stage company you're half-baked or even like one-tenth baked. So you can't assume that everything's perfect.

Can I just build on that, Ethan? Sorry, please! So part of this truth-seeking is accepting the financing environment that you're in and having the mental fluidity to adjust. Right? So for, call it five years, we've been in the land of bacchanalia and the right business model might have been to boil the ocean.

Today, people need to see you make progress, typically towards the clinic, with at least one program that folks understand where it lives. Obviously, that's a therapeutic-specific example, but breadth versus depth is a real trade-off you have to make. And the right business model also has to fit the right moment. You may—I'm not asking you—we're not asking you to eliminate all your dreams; you just may need to step what in a stepwise fashion wait until your evaluations are higher, i.e., the capital is cheaper, until you do everything you want to do.

And that's an example of something we're looking to see that you're sort of your antennas are up, you've adjusted, and again: dream all you want; I want to dream right there with you, but also adjust.

So yeah, I'm glad you brought this up because I was going to get to this: the question of the current funding climate. I'm sure there are folks who are fundraising or have been fundraising since the early when sort of the music stopped earlier this year. So do you want to amplify anything on that point about what entrepreneurs should be thinking about to survive this winter?

You want to continue, and then we'll go to—

Oh, yeah! So, I actually had an associate come sit in my room depressed on Monday—so a young guy who thought he was going to make his first investment last week and make partner next year. And he was just so bummed about the environment that he's in.

And I honestly started my venture career a long time ago in a first in a boom that went into a downturn within a year. And I actually think it's—you know, you've heard the trope that what the best companies are created during a downturn. I actually think there's a risk that we as VCs or we as entrepreneurs act like Polly High School adolescence if we only live in great times, and learning that not everybody has a Tesla at 16 is actually a really good thing.

So you do have to be clever, so strategics might become more important. You know, strategies about making choices—one of my Saucy sayings is last time I checked it wasn't luxury, it was the motherhood of invention. So take this moment and say: alright, this is what makes for the difference between a good entrepreneur and a not so good entrepreneur is figuring it out.

So maybe it's waiting for three years to work on a third program, or maybe it's, as Ivana said, you know, doing that animal model a little on the come because it'll validate us for the next investing round. Whatever it is, but show progress. And if you need to partner one of your babies—and all your drugs will feel like babies, they do to me as well—you might have to.

I think I would echo what Alex said: just be thinking ahead about the next rounds. One of the things that's challenging in this environment is that pre-seed and seed has not corrected as much as A and B, and I just think that's a harsh reality that we all have to figure out together.

Everyone on this panel actually does a lot of seed investing. Something like 70 percent of the dollars that we invest out of the bio health fund at A16Z is actually first money in, so it's not like we're not right there with you at that point. Your seed investors are in the same boat as you, and you have to figure out how to navigate the future financings together. But the correction is different at different stages, and so that's just something that I think work with investors that you know—just as you're picking them, they're picking you—and hopefully you can navigate that collaboratively as you move forward.

But it's never been more important to, at the time of your seed financing, be working backwards from your Series A financing. And at every step of the way have that kind of approach to it. That's not to say you know sometimes you might be discharging something that feels like existential risk on the seed, and that's why you know you got you're really fortunate to have people betting on you at that stage.

And you may think, "Well, I just can't predict past that." You know, "I don't know if this is going to work; if it doesn't work, I might have to do a 180." Sure, but try to think through, okay, if this does work, here's where we're headed next; here's what we'd have to fundraise to.

I often tell seed founders to make their Series A deck, have it be empty slides, but use it as a way to think through what milestones are going to be really attractive to a Series A investor and record some of the feedback you heard from multi-stage funds and funds that could be investor partners for you at future stages.

Alex, any thought about the downturn or the current climate?

Uh, yeah! I mean we could keep talking to it, but maybe we won't talk about something more uplifting for a second!

Yeah, yeah! So we’ll maybe do a little twist here—all doom and gloom!

Yeah, I don't know! Okay, no more doom and gloom! So YC always tells their founders not to get too discouraged by no's from investors; that investors make mistakes. Can you tell us about a miss that you've had?

I'm going to tell one that's really in the Venrock family. So, I did a lot of work on an investment in a company called Avexis. I was doing supporting, one of my late-stage investment partners, Bonco, and Avexis ultimately got acquired by Novartis for, I think it was nine billion dollars.

And the round that Bonk invested in was the first institutional round, but Roche had gone in there prior, so the first VC round was like at 120 million pre. So I did a bunch of work on it; it had a cop from Long Island as its CEO, and it had twin sisters doing all the sort of RA work, and that was it!

So it violated sort of every stereotype of like what VCs are supposed to invest in, and so I ended up kind of copping out and being like, "Too expensive, doesn't have the right CEO, not going to invest." Now, I got carry in the public fund because I helped doing the work, but I didn't put the early-stage fund's money in it saying it was too expensive, and it ended up being a really nice outcome.

And I will have to say, so the disease SMA kills children at 14 months old, and they have before and after videos for Avexis, and there's not a dry eye in the house. So here I am, the person who wants to really make an impact on kids in particular, and I missed the boat there.

There are too many—any honest investor will tell you—there are too many misses to name. Like a no does not mean that it was kind of the most thought out correct answer; they're empirically false, right? Most of the no's are false because many of you will succeed in extraordinary ways.

So that's just—I think the spirit behind your question was, you know, how do I interpret a no? And it absolutely basically doesn't—the binary doesn't mean much. I think what's worth paying attention to are, you know, people's thoughts on what made them hesitate and what might be actionable advice—even that I would say a lot of it is probably not actionable because, again, we don't understand your businesses as well as you do.

I'll give—um, I won't say—I didn't tell Sorby I would tell her about this, but I don't know—I would say this, but I missed Sorby's first couple of financing at her company. It was a phenomenal med device product; I was super excited about it. So we passed all the idea maze tests and everything that one could possibly put into a diligence process, but at the time our fund—I was at another fund—and we didn't do med device.

So, sometimes just remember that your investors have certain mandates with their LPs and certain—you know, kind of areas in which they plan to or, you know, think that they want to invest, and it might just not align with where you are, but sometimes that can still mean that you become friends with them and spend—hopefully work together in lots of ways.

So I think that's it; it’s—I think that's a good example of where keeping in touch can really be great from a personal level, even if you connect with folks who get to a no. Don't take that grudgingly; just recognize that they have some of their own constraints.

And then another example I'll share since I'm on a panel with Alex is a DNA sequencing company called Ultima that Costla was in very, very early. I finally, after many years of trying to invest in this company, we came in via our growth fund at Andreessen Horowitz. We're incredibly excited to back the company, but you know that was a really, really different technology.

And so I think you can't expect every investor at every stage to get it and be right there with you on seeing the potential for a technology—in the DNA sequencing space in particular. There are a lot of what investors call dead bodies; there are a lot of companies that didn't make it, and so having awareness about why that is the case, having an explanation for why that might be the case and why you might be different—what your unfair advantages can really help combat the biases that some investors will bring to those decisions. And guilty myself of having those biases—see? It happens to the best of us!

Alex?

It was like one that did—I think it strikes all. I always think about is recursion because we saw that right when it was coming out in the seed stage, which was right in my strike zone—thought it was very interesting, easy for me to evaluate, one that I knew you know the space really well—but my partners really had had poor experiences building complex companies like that in, let's say, unusual ecosystems.

And there was a lot of skepticism that they would bring in—you know, there also, there was like even more—even though I think now that the fight for AI talent is hard, there were just fewer people coming out of school and everything at a time, so would they get the AI talent that they needed and the biopharma talent to move to Salt Lake City? And that was the reason we passed.

And I've sort of—like I think I was maybe too weak-willed or something to fight against my partners and say, "Yes, I think they can do it!" And now, in a post-COVID world, I think it would be a little silly to think you could only build companies in certain areas, but at the time there was a lot of bias on—and that was something that was going to require a lot of on-prem in the dev huge facility now.

So that's one. I was just looking in my email and our notes on Asher and Vinod Coastal, and I are emailing back when it was a YC company, I guess, in the whatever batch in '19, and we were both like this looks really interesting, even though I was like, yeah, I could easily be a one on this.

It seems really cool, and there’s a lot back and forth like, well, there’s a lot of activity in the space; we are not experts in the area that they're doing, but we did a little quick background of how many companies and how many drugs there were in the space. We don't know enough to feel confident, so we didn't feel like this was an area of our expertise, and you know, so we missed out. I guess the company seems like it's doing great; it's a good company!

Awesome! So let's now go from the other tack. So when you get really excited about a company, can you share with us what happens behind the scenes a little? What happens in those Monday partner meetings? Can you talk about the diligence process? Or how do you engage your partnership when you're trying to—when you're the one who's sort of bringing the deal to the partnership?

Do you want to start this time, Cami?

Yeah, you're always less—

No, I guess, you know, one important thing to remember, of course, is it varies if you do different stages investing or different types of investing. It can actually vary tremendously. So, you know, many of the early-stage companies right out of YC, companies raising a couple million dollars in an area that we already feel like we know something or we're just kind of doing a small seed investment, that can be a very quick decision-making process, all the way through to we have SPACs induced background mergers and 250 million dollar deals, which, as you may imagine, requires a lot of work over a month sometimes.

So there’s a huge spectrum, and there are also different styles of companies. So deep tech companies where we have to do a lot of IP work, that is a whole different process. And we actually recently hired a full-time JDMD IP attorney to help us with due diligence on particularly bio bio and healthcare related IP questions.

So I want to give you a—it’s hard for me to give a simple answer because there's so many different styles of companies that require different kinds of questions. And like I said, an early-stage company, there’s often not a whole lot of their due diligence and it may just be we have some thoughts about the founders and roughly the problem they're working on. All the way through to like very serious metrics about, you know, very sub-cohort analysis in particular, growth in different markets and time to payback in different capex investments that take a lot longer.

No, I'm just going to say I agree that there's dramatic diversity in the process! I think most venture partnerships—even though they seem large—like ultimately you’re going to converge on one or two people who are going to spend the most time with you and really kind of ultimately advocate for an investment.

And you know, I think sometimes venture partnerships feel large, or you feel like you have to convince a lot of people, or at a partner meeting you're worried you didn't get in front of everybody. This is a human business! Ultimately, you're going to get to know a couple of people who shepherd you through and to whom you should be able to ask questions, and they'll ask you back questions.

And so I think that's just one thing I'll point out is that partner meetings at most of our funds are an opportunity for us to collect input from our full partnership, but ultimately it’s always going to be one or two people who hopefully go deep with you on the idea that you're bringing to the table.

For me, the biggest thing I look for at seed stage is what to the discussion before—it kind of plans for the next fundraise, ironically enough. It’s a question that comes up across our partnership very, very early, and sort of unfair advantage. Right? Like a simple answer to the question, why is this company unfairly positioned to win in the space that they’re talking about going after? Sometimes that can be as simple as the people, and sometimes it’s something really, really technical; it’s a creative assay that they’ve invented, it’s the ability to do more with less capital and screen a very large space, for example, to learn some SAR insights in a very short amount of time.

But I gotta have an answer, actually, to that question to feel comfortable at seed stage. It’s like: why do you want to be president? You have to know that one. Is there everything we do is geeky tech? I don't say deep tech; I just say geeky.

So when, even on the tech side, all of our companies are geeky. We generally don't participate in the, like, consumer VC one week to term sheet process. And so we tend to take two to three months getting to know a company—I'm sorry, I know that sucks, but we do—and there are just one or two or at most three people doing deep diligence.

And then the process at Venrock—I can't hide behind my partners when I pass because I could be the only person in the partnership that loves the deal and I could do it. So some—I prior to Venrock, I was a managing director at Versant Ventures. At Versant, it was a group decision and we have actually had really nice outcome deals where the rest of the firm functionally vomited on it.

So, every firm has its own culture and style. Venture firms are like marriages; you have no idea what's going on inside them unless you're inside them! So expect a different process in each firm. If you've got deep tech, most of you do, it's not going to be an overnight process, and particularly in financing environments like this.

All right, maybe let's get—let's return to the saucy questions! So where do you—I’ll make it saucy even if it's not done! Where do you situate yourself on the biotech-tech-bio continuum? And you could reject the assumption or the premise of the question—but I know that, you know, this is a founder-led movement or the Tech-Bio movement. This is marketing itself, and branding itself is different from biotech.

So I guess how do you see yourself in this?

We should ask you to answer that one first!

Or do I see you guys? I need a definition! Oh boy, it's like a spelling bee. May I have the definition please?

Well, we know what biotech means, right? I guess, right—traditional life science investors? Do we agree on what that means? And that's—you know, biotech is shorthand for that.

And I guess tech-bio is, I don't really know... biotech include genomics?

Sure! Okay, so tools are in biotech, in your mind? Different people don't include—I do not just... I'm not just a therapeutic snob!

Yeah, and then tech-biotech means, I mean AI and biotech... again, that's definitely a strain. I mean I identify more with the operational side of it—like it's more about the founder-led and the profile like the PG thesis. But yeah, I mean I know it means...

I don't want to get into a whole debate about AIML, but yeah, so my sense is that there are a lot of things that have been confounded in these spectrums of founder-led, not founder-led, tech-bio, biotech. Like at the end of the day, I think, you know, Sorby said it well in her discussion, you know these are all of the companies in this space do converge on a very special regulatory pathway and a very special set of constraints that the world uses at some level to decide whether or not the thing is working.

And so as a result, my feeling is I reject the dichotomy! I humbly reject the dichotomy! I mean, I think, you know, founders are important for every company. Show me a company where the founder didn't matter; the founder could be a senior management executive or the founder could be somebody who just finished their PhD in a lab—we've got all in our portfolio—and they always have CEOs. The one thing that's clear is that the founder always matters.

And so I think that's a shared theme. I think, you know, kind of—someone mentioned the great blog post on, you know, YC bio and what might be different about funding biotech companies in a more tech way—and that references potentially a lower amount of capital required to stand up a company.

I think there's something interesting right there; that there's something to that, and I think some companies will have a certain set of achievements maybe that are possible that are tech-enabled or that may be more capital efficient than a traditional biotech regime. Maybe, maybe others won't that are still really exciting companies working towards therapeutics.

Daphne Kohler, in our portfolio, often says, you know, machine learning is going to become something like a computer. It will be impossible to say, "I'm a company and I like refuse to use the technologies and the tools that are available." And like that's how I feel about technology.

That doesn't have to be your—the first three words of your pitch—but it'd be kind of crazy if you refused to apply novel analytic regimes to the data you were collecting and that's why every large Pharma company is talking about that too. So I reject that!

Noted! Cami?

Yeah, I think his additional biotech VC put a little too much emphasis on experience in hiring CEOs, and maybe that's why you create that dichotomy, but we are known for founder CEOs as an example, even though—and you know, we were the first investors in Illumina with this long history in doing so.

I think that as long as genomics and tools are under biotech—and don't shoot the messenger—we're deep in healthcare IT as well, right? Then honestly the what we're looking for and how we support these companies in any way we can looks exactly the same.

Any thoughts, Alex?

Or Pluto a planet? I don't know!

Is it $800 million Arch LED initial financing? A seed round—you know, some of these things—it took very hard. I mean, we were investing in fundamentals and companies and the team in place and the market they're in is, by the way, I do think what is AI is a whole other separate thing.

I do think it is important; it is actually, although let me step back, it is pretty important. I think where it's most important is in the later stages when you're dealing with investment bankers and analysts, and they're trying to put you into sector buckets.

And there are some very substantial differences and very important branding that you may want for your company at that stage more so than now at the seed stage. What you think your company is and what brand you use for it now may evolve, and you may have strategic reasons for how you position your company three or four years from now when you are trying to talk to invest in bankers and they're going to put you in a report and try to look for comps in your sector.

Here then it’s actually pretty, I think it's more important than it is probably now.

Maybe—I don't know! I guess do you agree?

All right, keep going, keep going!

I see—I think, how you describe yourself should—even if you're in deep tech, should speak to investors' hearts, not just their minds. And you need to journey through the gunk of understanding what your business is and get to the simplicity on the other side of complexity, and it may change!

So you may define yourself as an AI company today, and by the time you go public, you may be an immunology company, but to the extent that investors are lazy—and many of us are—it's helpful to be able to categorize you.

So maybe we can go back to just some brass tax fundraising questions. So given the current climate or looking ahead, what are the sort of milestones you're looking for for a seed stage company and for the A round, for the B? And you don't all have to answer.

One of the things you can kind of consolidate the current zeitgeist I'll tell you what we look for in our companies when we build them: if it’s a therapeutics company, we look for usually de-risking on whatever the key risk is because it might—our companies are usually platform therapeutics companies.

We usually look for some animal data, even if this isn't the final drug that's going to go into patients. Ideally, we get to development candidate, but that's rare. But the most important thing is my ass will be in your conference room on a whiteboard helping you prioritize indications, because we really want you to not only be boiling the ocean but figure out how you’re going to apply it!

In our healthcare IT companies and genomics companies, there's a little bit—there's a little bit of nuance on that. There's usually one fundamental risk that we need to de-risk in healthcare; maybe we need a payer customer already.

Yeah, I think the round sizes are so variable that it's hard now to say what a seed, A, or B milestone specifically is, but I think the mindset that I'd encourage is that every round is about discharging risk. Risk is, you know, inversely proportional to price. And that's just how that's how fundraising—that's the momentum and that's the wheel of fundraising is that every single round you have to be laser-focused on discharging some risk.

That risk could be that you can hire somebody; that risk could be something about your technology, but every single round, that's kind of the steady march, the drumbeat that I find it's really helpful if founders are very acutely aware of.

You know, I’ll give you an example. We invested in Scribe Therapeutics; a really phenomenal founder who came out of Jennifer Doudna's lab, Ben Oaks, and he started the company in his last year of grad school. So at the time it was just him, right? So the first round of financing, a big risk that he discharged was, can he stand up a company? Can he hire people who know more than he does about building a therapeutic? And can he validate the core enzyme that he built?

He ultimately is building a company around the next round of financing required more de-risking. Can you deliver that thing? Can you get to in vivo data? Can you get to—you know—all these other proof points? But a steady march towards, you know, risk discharging helps you raise future rounds.

Yeah, I think that's the most important thing for you all to think about is what is your value-creating milestone? And also, clear ownership in your own mind that you own the value-creating step right? That there's something that you're trying to achieve, and it is sometimes nice in very early seed if there is a clear failure point, because if it's a failure point you're like, "Okay, let’s embrace that, go and do something else," and not kind of be stuck on this path where things haven't quite failed but they aren't quite succeeding. That's sort of the most painful place to be in.

So, last question: everyone says they're a platform company. What truly defines a platform in an era when new modalities are being discovered seemingly at an ever-faster rate? I mean, it's not just David Liu's lab that is publishing a new thing every week in nature. Like that just seems to be—that's just a secular trend.

So maybe we’ll leave with that? Maybe a more philosophical question, and anyone—this is now the free-for-all round!

All right! Sure, I’ll start. So I have a lot of empathy for kind of this feeling that you almost get penalized once your platform lays an egg. And so I just want to acknowledge that I think it's a spectrum, and it's hard to know exactly what is a platform versus a product company.

And the whole point of a platform company is to make products! And you know, but what if you found a product that was too good to leave on the table, but it didn't come exactly from your platform? And so I just think this goes, but for me it goes back to that idea maze.

Help us understand if you do have a product how you get to the next product. If you don't have a product, how does your platform help you get to that first product? Help us understand what your special sauce is: is it target identification? Is it uncovering new biology? Is it creating a modality with a novel mechanism of action? Gosh, there's a really few of those!

How many therapies do we all know of that have a completely novel mechanism of action? Any of that? You know, I think we have a pretty loose definition of a platform as long as we can see line of sight to what comes after the first product you choose to prosecute. I’ve also made money in a platform and a product, so I’ve had lots of wonderful exits—most recently in a company, Corvidia—that sold to Novo on—you know, we had some backup programs, and so on, but it was fundamentally one product that was just doing something important.

I generally do platform companies, but I don't exclusively do it; I try not to bring religious fervor to any of my decision-making.

One last—sorry, Alex, I'm going to say one last thing, which is I think hypothetically the reason investors will often tell you they like platforms is that the cost to stand up a second program should in principle be lower than the cost of that first program. Whether that's for target discovery or for modality design or for clinical studies—

Exactly. And so I don't know if that is always empirically the case, but if you can make a really good argument to that effect, that is the underlying reason people have been attracted to platforms historically.

It's a little bit like in the healthcare world, you know, a CAC argument: like once you get your first... is it going to cost more or less to acquire your next customers? It's sort of a similar thought process as to why investors like platforms in principle.

All right, final word to you, Alex.

Oh, just—well, there's a continuum of how platforming you are, right? And I like to look at companies on that spectrum. If you are fully like you're an antibody discovery platform, right? You just—how productive or how much output can your platform deliver? Or are you really—when you actually say you call it a platform, you really have a stack rank list of discoveries, and the top few are really good, and everything below that is gunk—that's not—it’s kind of on the platformy spectrum that’s sort of not so platformy.

So there's a continuum! And it is nice to have optionality, especially in this market, if you can provide lots of value without taking on lots of risk—binary risk—with a particular clinical program, let's say that's a good position to be in!

All right, let's congratulate these VCs! See what I did there! [Applause]