This post is part of an ongoing series of interviews with investors and entrepreneurs behind some of the most high-profile, invite-only deals on AngelList.
- The difference between biotech, life sciences, therapeutics and healthcare VC
- Why investing at the frontier of life sciences requires multi-disciplinary expertise that may need to come from multiple investors
- Why CRISPR-Cas, a technology to edit DNA, is the biggest thing Jenny’s seen in the last 20 years
Julie Ruvolo: You’re a VC at 5 Prime Ventures, a venture partner with F-Prime Capital and Anterra Capital, and you’ve done seven deals on AngelList since 2014. So, is investing a full-time job for you?
Oh, yes. My job is finding the next great early-stage life sciences technology company and helping them get the capital they need. I have a range of types of capital that I can connect them to. Sometimes that's just me at 5 Prime Ventures, and what I can do via AngelList. Sometimes that's just F-Prime [healthcare], and sometimes it's just Anterra [agriculture]. Sometimes it's a combination. Sometimes it's a combination of all three, as with Caribou Biosciences, where we all invested.
Can we start off with a basic orientation? What is the difference between biotech and life sciences?
“Biotech,” as I initially understood it somewhat literally coming from my academic background in science, I thought was just “biology plus technology.” But biotech actually has a much more specific connotation in the industry. Biotech usually means therapeutics (i.e. drugs), oddly enough. At least half of life sciences or healthcare venture capital investing is in new therapeutics development, i.e., biotech.
That is the reason why I'm careful to use the term life sciences. What I mean by “life sciences” is the broader set of bio-technology that has to do with living systems. So it’s the science and technology of biology, but not limited to therapeutics [drug therapies].
What are your particular areas of interest?
I’m investing at the intersection of applying life sciences technologies like gene sequencing, protein expression, and genetic engineering to opportunities where biology can solve problems. I think we're way behind on applying these same tools and innovations to areas beyond healthcare where biology can solve problems, like agriculture and industrial bio.
Zymergen, where my syndicate invested in the Seed and A rounds, is an example. Zymergen uses some of these same tools [such as genetic engineering] to make chemicals more efficiently, more safely, more affordable.
Agriculture and food are another example. There has been an explosion in the last couple of years of trying to use life sciences tools to do a better job of growing crops, do a better job of making certain food ingredients more sustainably, for example. In the same way that I think the pioneers at the beginning of the biotech revolution took some real risks and said, “It makes sense that we should be able to use biology to solve problems in healthcare and make the world better and make people's lives better and make money and create value.” I think that's what's happening in these other spaces, and so that's my long-term investment thesis.
Do you spend much time thinking about what the near future looks like?
I spend my time looking for entrepreneurs who are thinking about the near future.
I'll come back to Zymergen. When I invested in April 2014, I had been looking aggressively in the synthetic biology space, which is the current term for “genetic engineering plus” – in other words, “Let's make things with biology.” I had seen a lot of ideas that were very exciting, but I would call them “far future.” It’s helpful and inspiring for us to have a sense of where we're going. But it can be very hard to make money, and certainly venture-like returns, in the far future.
So Zymergen caught my eye because they were clearly going in the direction of making things with biology in a way that fits the current constraints and needs of the chemicals industry. It’s dominated by a few very large incumbents who have privileged access to all of the manufacturing capacity and all of the commercial channels.
You don't just disrupt that world; you find a way in the next few years to work with it, and you change it over time. Zymergen’s model of partnering with very successful and skilled incumbents in the space to bring to them the latest in genetic engineering, automation, and big data – to bring that to bear on their businesses, so that it’s a B2B play – was exactly what I thought near future in that space looks like.
You told Tyler Willis in your interview for AngelList Radio that Zymergen is the kind of company that would otherwise be a bit orphaned by traditional VC, and that it was out of the box even for life sciences VCs.
Zymergen brings together the latest in genetic engineering, molecular biology, and genetics, as well as chemistry since they’re engineering pathways to produce chemicals using microbes.
And automation: they ask, how do we engineer 10,000 microbes a week instead of one a week, which is the current pace of the field? And big data: How do you capture, in an unstructured way, more data points on more cells than anyone has ever done before, and capture insights from that and iterate in a way that is very familiar to engineering disciplines, but not really at all in biology?
That's an incredibly exciting confluence of perspectives, skills and capabilities. And the team that Zymergen’s founders assembled brought all those pieces together. The challenge becomes finding an investor who can understand those different parts, and I would argue no one investor can. In the same way that you wouldn't look for a single founder who knows all the pieces of a complex, interdisciplinary business, the best investor syndicates are not going to be single-discipline or single-investor.
But ultimately it's the companies that are creating value. I don't want to oversell the importance of investors. It comes down to teams and companies who are doing the day-to-day work for sure. That said, the more help you can put around the table and the more that mirrors what the company needs, the better.
If you are Zymergen, how do you raise money? How do you get investors to bite if they’re not able to even pretend they get it?
One investor might say, “Oh, I totally get your genetic engineering, but I don't understand your data strategy.” And another might look at the data and say, “Boy, the data is going to be valuable, but I don't know how genetic engineering works.” If everyone stayed in their box and said, “I'm not going to invest unless I understand the whole thing,” then none of these companies would get funded.
I think that by banding together with complementary investors, you stand a chance of funding exciting companies for whom no one investor actually understands everything that they're doing.
It feels like yesterday I was learning about the discovery by Watson and Crick about the double helix structure of DNA. And now we’re playing with it already.
Right. Today, work with DNA is just a standard part of the vast canvas of biological research. No matter what biological work you're doing, you could be studying development in the nervous system, cancer, plants. Whatever it is, genetics is now a critical piece of putting together that biological puzzle and sequencing is how you get there.
The ability to manipulate genes is the next wave. But you no longer need to be a geneticist to do it. Anyone who's doing biological research now has a new way to inquire into the relationship between genes and function.
Then you come back to those same principles that happened at the beginning of the biotech revolution: We can make things with biology. We can make proteins that are useful in therapy. We can make antibodies, cells, plants, mosquitoes. We can make living organisms and their derivatives that have a new function or characteristic that hasn't been explored by nature yet because nature hasn't gotten there yet. That's how I like to think about it.
The search space for genes and their function is larger than the atoms of the universe. You can't get there randomly. Nature can't get there randomly. It will never try out all the possibilities. That’s where genetic engineering comes in.
Caribou Biosciences is an excellent example of that. They’re doing something with CRISPR, but it’s kind of beyond me.
CRISPR is a technology that lets us edit DNA. An example application might be: “Given a set of cells, how can we safely manipulate them in such a way that they would have therapeutic value?” building on that initial biotech revolution which was, “Look, proteins and antibodies can be therapeutically useful.” So, for cells and tissues, how do we get better about making the things that the human body might need?
Caribou is commercializing the CRISPR-Cas gene editing IP invented by Jennifer Doudna and colleagues at UC Berkeley. There are other inventors at other institutions, but Caribou has the exclusive license to the UC-Berkeley IP around that invention. There's nothing that I can say about how amazing CRISPR-Cas is that hasn't already been said by both the scientific and lay press, and what I would say is they're not wrong about its importance and potential impact. It's rare when such a dramatic breakpoint happens in life sciences, where progress tends to be more incremental.
The ease and the accessibility of CRISPR-Cas as a tool for changing genomes open up a whole new era. Not just for the scientists who are already doing that work and now can do much more of it more quickly and efficiently. But for many other scientists who weren’t even thinking about genetic engineering, because it just wasn't an option, in the same way that DNA sequencing when I was going to graduate school was an esoteric practice that we geneticists did, and now everybody can do it.
A company like Caribou has the IP and the funding. But what a vast landscape. Where do you go from there?
It is both a privilege and a burden, isn't it, to have such a landscape? A big part of the game is focusing and executing.
Part of the answer is partnering. Even before I became involved a couple of years ago, Caribou put in place a couple of great relationships: One in therapeutics with Novartis, and one in agriculture with DuPont/Pioneer. The Caribou team realized, “We've got a really important part of the puzzle. So do other people. Let's work together on figuring out some of the pieces that don't exist yet, like how do we use this in plants? How do we use this in human therapeutics? What are some of the risks we need to watch out for? How do we develop tools around those risks?”
Another part of the answer is new venture creation. The founders of Caribou partnered with other entrepreneurs to co-found Intellia, which is a human therapeutics company that has a license for particular applications of CRISPR-Cas in human therapeutics. Intellia raised significant venture capital funding and subsequently went public in May 2016. So that’s a great way to take what works in capital formation and rapid R&D and human therapeutics and put it in a rocket ship and send it off.
To your previous point about partnering to form strong multi-disciplinary investor syndicates, Caribou is a prime example: Your three funds invested, plus Heritage Group, Maverick Capital, Pontifax AgTech, Novartis (corporate) and Mission Bay Capital. How did this all come together?
My first relationship with Caribou was when they invited me to join the board. I think that the rationale was that I was an investor who understood the science and appreciated the breadth of potential applications and wasn't pushing them to go into healthcare only.
I joined the board in September 2014. One of the first things we talked about coming from my background is at the time they didn't have any traditional institutional investors; I said, “It's going to be a good idea to start building your institutional capital base so let's look for those.” The goal was to tee up some good institutional investors to be part of that conversation.
I introduced them to F-Prime and was delighted to see that relationship take off. F-Prime were also excited about the breadth of opportunity that I saw, so they came in for the Series A, as did I. That's where I said, “I'm thrilled to be part of the company. I would be delighted also to be an investor.” And because of the relationship with the company, that was where my initial investment came about.
How big was your round on AngelList?
It was $500K. It was the largest investment I had done on AngelList by then, by about 2X, and was bigger than my syndicate at that time.
I was excited enough about what Caribou was doing and thought that the rest of the world would be, too, so I asked for that as an allocation and then really pushed to fill it by reaching out to my existing syndicate and to people who are off the AngelList platform and bringing them on. I used that opportunity to build my backing as a testament to the quality and type of opportunities I look to invest in.
That's huge. Nicely done.
Thanks. Again, it’s a testament to an incredible company and amazing technology. I'm just happy to get to participate. But there was a lot of hustle to make sure people understood that this is the biggest thing I've seen in my world, to say, “If you're at all interested in investing in this space, pay attention. This is exciting. It’s a big deal.”
You also took an allocation in Caribou’s $30M Series B a few months ago.
My syndicate had a pro rata allocation in that, which was great. There was certainly demand from the syndicate for more, so I went to the company and said, “Just so you know, there is more than enough demand here to fill a larger amount.” So we increased the amount to $1M and filled it in less than 24 hours with demand entirely from my backers.
Who are your backers?
It's a real mix. There are people I recruited onto the platform from the world that I know, both tech and life sciences investors and entrepreneurs, and people who have found me on AngelList and are excited about what's happening in the life sciences space but don't necessarily have the background or the dealflow.
There's been some amount of diligence by my backers on me. I always try to make myself available in the same way that I would do for an LP. I’m happy to tell a backer about my track record, how I think about diligence, how I think about entrepreneurs.
What I don't do is let syndicate members talk to companies, because part of my job is to spare the entrepreneur's incredibly valuable and limited time. The whole point of a syndicate on AngelList is that startups can get access to early-stage capital coming through one lead investor instead of managing a bunch of individual investor relationships.
Does bootstrapping apply as a concept when you're talking about hard science? It's not like you're tinkering in your garage with your biochem set.
Mostly not. When you’re working at intersections of engineering and molecular biology and data, there’s a certain amount of work that just has to get done that costs several million dollars before you start making revenues.
Plus you have to fund your way through all the regulatory layers.
If you're in the healthcare or agriculture setting, yes. And how do you bootstrap through that?
Thinking out loud here, does that mean healthcare startups take longer to get to market? How does that affect a venture fund’s typical ten-year cycle?
That's part of why life sciences VC often is healthcare-related because it does take big chunks of money in a certain amount of time to bring a new drug through development. That's a good fit for VC-type bets, that is, “I'm going to put in a significant amount of money and hope we all spend it wisely, and then we get something valuable on the other side.” That can include going through a regulatory process [e.g., to develop a new drug therapy].
One of the differences between my world and much of tech investing is the extent to which the consumer is part of the equation. I would far rather deal with the FDA than consumers. Consumers are a mystery to me! And some people are brilliant at understanding where they are, what they need and where they're headed, and building businesses against that and iterating quickly. That is a model, and it is different from most of what happens in life sciences. We're dealing with laws of physics, and the laws of laws, and laws of the regulatory agencies, much more than whether individuals will make a buy decision.
Is there an argument that life sciences is more straightforward than evaluating consumer opportunities?
It is for me, but that’s subjective. It’s a function of what expertise a particular investor has – whether that’s scientific or technical, or in consumer markets, or something else. When evaluating an investment, I need to look at scientific data, which I’m trained and experienced to do. Then, when a team comes in and says, “Here is the science we've done so far. Here is the science we need to do.” – well, evaluating what’s been done so far gives me a sense of the odds of success of the science that is yet to be done.