Special Guest Post by Luke Timmerman, founder of Timmerman Report
Vinod Khosla, the billionaire venture capitalist, estimated a few years ago that 95 percent of VCs add zero value to a startup other than cash. About 70–80 percent, he said, actually harm the startups they invest in by providing lousy advice.
When asked to apply the Khosla test to biotech, Bruce Booth, the high-profile partner at Atlas Venture, estimated “20 percent or so are truly value add.”
So who are some of these people who aren’t named Bryan Roberts of Venrock, Bob Nelsen of Arch Venture Partners, or Jonathan Silverstein of OrbiMed? Like Forbes and its Midas List, I don’t have a magic objective formula for evaluating individual VC performance (Whole firms are easier). But after conducting a couple of polls of more than 100 biotech entrepreneurs and investors who subscribe to my Timmerman Report newsletter, I’ve gathered some interesting insights into who the VC players are that create a lot of value.
To get a feel for some of the good-but-little known VCs, read on:
Kristina Burow. ARCH Venture Partners. Burow keeps a low profile, operating in the long shadow of ARCH majordomo Bob Nelsen. But she’s a force behind the scenes. Burow is technically strong as a UC Berkeley-trained chemist. She works on many of the same big idea platform startups as Nelsen, with Vividion Therapeutics (proteome-wide drug discovery), Unity Biotechnology (anti-aging), and Vir Biotechnology (infectious disease) among her investments of recent vintage.
Burow was a co-founder and board member of San Diego-based Receptos. She helped re-boot the company in 2008, with Ray Stevens and Bill Rastetter, combining some assets with another startup called Apoptos. Receptos was acquired by Celgene for $7.2 billion in 2015. That deal gave Celgene ozanimod for multiple sclerosis, a drug that looms large in Celgene’s financial future. Burow’s also been around long enough to learn from some busts, like Sapphire Energy. One entrepreneur said of Burow: “Total rock star. Chemist by training, so ‘gets the science’ as well as anybody I’ve met. Quiet, really hard working…Not prone to self-promotion, just gets shit done.” For more on Burow’s personal story, see a 2010 profile I wrote for Xconomy.
Albert Cha, Vivo Capital. Cha joined Vivo Capital in 2000, and has quietly put together quite a track record. He’s currently on the public boards of Ascendis Pharma (1-year return, +84%); Biohaven Pharmaceuticals (+50% from May 2017 IPO); and KalVista Pharmaceuticals (1-year return, +79%).
This isn’t just a lucky streak.
Cha’s fingerprints are on a steady number of exits over the years, including: Aspreva (acquired for $915 million in 2009), NextWave Pharmaceuticals (acquired for as much as $700 million in 2012), and Ceptaris (acquired for $250 million in 2013). Vivo often syndicates with OrbiMed Advisors. The firm, with offices in the San Francisco Bay Area, China, and Taiwan, has $1.8 billion under management.
“Key player in the growth of Vivo over the past decade as they have built a US/Asia model,” wrote one TR subscriber of Cha.
Ben Auspitz, F-Prime Capital. “Best gene/cell therapy VC I can think of,” wrote one VC.
OK, let’s check that. Auspitz is a co-founder of Dimension Therapeutics, a public gene therapy company. He’s also co-founder of Orchard Therapeutics, which debuted last year with a $33 million Series A and a couple former GSK employees who played key roles on Strimvelis, the EU-approved gene therapy for severe combined immunodeficiency disorder a.k.a “bubble boy” disease. That drug has gotten off to a well-documented slow start, but it’s still a milestone in gene therapy.
Beyond those deals, Auspitz has invested in Ultragenyx Pharmaceutical (market cap, $2.06 billion), REGENX Biosciences (market cap, $833 million), Symbiomix Therapeutics (recently won FDA approval for antibiotic for gynecologic infections), Precision Biosciences, and Unum Therapeutics. He’s currently on the board of Compass Therapeutics, a cancer combo immunotherapy company that raised $120 million last year.
One VC wrote: “Ben deserves to be on the list. Rolls up his sleeves and helps build some companies while also being a whip-smart traditional investor in others. He doesn't wear socks. And was a philosophy PhD drop out.” I’m not sure exactly what the last couple remarks mean, other than the guy doesn’t mind being a non-conformist, which counts for something in a business known for its herd mentality.
Anand Mehra, Sofinnova Ventures. Jim Healy and Mike Powell are the long-tenured, better-known partners at Sofinnova, but Mehra has quietly built an impressive track record.
Mehra serves on the board of gene therapy pioneer Spark Therapeutics (market cap, $2.65 billion), participated in the firm’s investment in immunology drug developer Prothena (market cap, $2.16 billion), and invested in Parkinson’s drug developer Civitas Therapeutics (acquired by Acorda Therapeutics for $525 million).
The corporate VC firm formerly known as Google Ventures started investing in biotech shortly after the financial crisis of 2008, when valuations were down and decades of biomedical research was beginning to mature. That was smart timing. The other smart thing was hiring Krishna Yeshwant. He’s got the ideal background for GV, with a Stanford undergraduate degree in computer science, followed by an MD from Harvard Medical School and a Harvard MBA to boot. But as a VC, domain knowledge is important, but your relationship network is king. As a VC, Yeshwant has put down roots smack in the middle of Kendall Square, and put together a portfolio that any big-name standalone VC firm would envy.
The portfolio has more than its share of winners.
- Adimab (an antibody discovery unicorn, valuation over $1 billion)
- Foundation Medicine (cancer diagnostics firm worth $1.7 billion)
- Editas Medicine (CRISPR genome editing company, $1 billion market cap)
- Alector (Alzheimer’s drug discovery, recently secured $220 million AbbVie partnership)
- Flatiron Health (oncology database for physicians, researchers and companies, $328 million raised)
Unlike most on this list, Yeshwant has been quoted once in a while by popular media like Business Insider. He’s not a completely invisible man. One fellow syndicate partner noted that if that’s a disqualifier from the “VCs who matter but you never read about” list, then you could consider GV’s Blake Byers as an honorable mention candidate. Yes, he’s the son of Brook Byers, the guy with his name on the door at Kleiner Perkins Caufield & Byers.
The younger Byers has been with GV since 2010. His portfolio includes Cambridge, Mass.-based Magenta Therapeutics and South San Francisco-based Denali Therapeutics, the neuroscience platform company run by Genentech vets and lining up for an IPO.
Thilo Schroeder. Partner. NextechInvest. Based in Switzerland, Schroeder has quietly built up an impressive record since 2012. He’s worked his way into deals for Blueprint Medicines, Kura Oncology, Peloton Therapeutics and ImaginAb. The first two public companies are worth $2.5 billion and $418 million, respectively. Dallas-based Peloton raised a $74 million Series D round in March.
Schroeder has a PhD in biochemistry, and operating experience working at Micromet, the Germany-based antibody developer that was acquired by Amgen. Said one high-profile biotech VC: “Oncology specialist, young guy, trying to build a fund and make a name for himself. Hard to do any which way, even harder from Europe. Traditional investor mode, but smart, good guy, and has made excellent picks.”
Heather Preston, TPG Biotech. Fred Cohen gets most of the attention in her shop. But Preston has an impressive track record from her work with Alder Biopharmaceuticals (migraine drug developer worth $673 million), Aerie Pharmaceuticals (eye diseases, $2.2 billion), Otonomy (ear diseases, $159 million), and more. “Hard working, diligent, and incredibly smart. She also tries to be supportive of management (providing contacts and help where needed),” wrote one subscriber.
Boris Nikolic and Julie Sunderland, partners, Biomatics Capital. These two worked together for seven years in different entities for Bill Gates. Sunderland oversaw program-related investments (grants and equity) in global health, among other things, at the foundation. Nikolic oversaw traditional financial investments, through Gates’s family office and another entity, in companies like Foundation Medicine and Editas Medicine.
Both saw big opportunities cross their desks, at the intersection of biology and information technology. They decided to break out on their own in a traditional venture firm, and raised $200 million. Their portfolio to date includes Grail (the early-cancer detection startup that spun out of Illumina, eGenesis (modifying pigs for organ transplantation), Denali Therapeutics (neuroscience) and Aledade, a company that hoovers up data for accountable care organizations (ACOs) so that independent physician practices can better comply with regulations and deliver “value-based” care for patients.
Bob More of Alta Partners, who previously worked with Sunderland at the Gates Foundation, said:
I love Julie Sunderland. She’s fantastic. Julie is the reason I went to the Gates Foundation…Her passion. Her intelligence. Her diligence and her integrity. She’s one of the best thinking people I know. She has huge empathy and compassion. She cares about doing the right thing. It’s not wrapped up in her ego. All of those things in the long run are going to make her a good VC…She understands she’s a coach, not a player. Time and again, this business is about investing in people. She gets it.
He added: “Julie and Boris went out and worked their asses off to create a new fund. They scraped and created a group of people who are betting on them.”
Jean George, general partner, Lightstone Ventures. George has made the Forbes Midas List in the past, but for whatever reason, doesn’t seem like she gets the same credit as others in that club. Some of it may have to do with starting over with a still relatively young fund that doesn’t seem too focused on marketing its general partners. During 2012, when tech investing was hot and biotech had momentarily fallen out of favor, George had enough sense to stay the course when the time was right to plant biotech seed corn. She joined with fellow life sciences partners (Mike Carusi, Hank Plain, Chris Christoffersen, and Jason Lettmann) who split off the diversified funds ATV and Morgenthaler, to raise their own life-sciences focused firm, Lightstone.
Over time, George’s portfolio has matured as one would hope. At last count, it includes eight public companies – Acceleron Pharma, Calithera Biosciences, Catabasis Pharmaceuticals, Flex Pharma, Five Prime Therapeutics, Zeltiq Aesthetics, Verastem, and Portola Pharmaceuticals. George is based in Boston, but knows her way to the West Coast where three of those portfolio companies are based. People tend to speak highly of her when they’re not self-consciously on the record. One person familiar with her approach wrote: “Her goal is always to be the first person the CEO calls if there’s news or some issue to discuss – very entrepreneur-focused.”
Roger Kitterman, managing partner, Innovation Fund, Partners Healthcare. Sshhh. Don’t tell anyone that Partners Healthcare is in the venture capital business. Investing in inventions to turn them into products that make money? He’s been doing it with a $140 million fund started in 2008! Partners Healthcare Innovation Fund II just closed with $171 million in new capital to invest, with $105 million from Partners institutions, and $66 million from outside sources.
Quick, someone in the Longwood Medical industrial-complex call the conflict-of-interest cops!
TR subscribers will detect the sarcasm. My view is that conflicts aren’t automatic disqualifiers, and there’s a way to disclose and manage many potential conflicts. It also would be inappropriate and dumb to operate science and medicine in a completely walled-off silo so we can make sure taxpayer funded research never contributes to improving health outcomes the way industry can. Thankfully, Kitterman has a perch that enables him to see some of the awesome potential coming out of the great Boston hospitals, and structure deals with entrepreneurs and VCs who can go the many extra miles to make ideas become real.
Kitterman has shown he knows how to navigate the distance between academic medicine and the investing world. Even though Partners doesn’t write the biggest checks, it is wired into outfits that do. Magenta Therapeutics, RaNA Therapeutics, Spero Therapeutics and many other companies bear Kitterman’s fingerprints. “Roger gets the science. Very well respected in the rarified Cambridge VC community. That's important for a startup,” one entrepreneur wrote. Another said: "always willing to make a connection, introduction or offer any insights when we need it."
Larry Lasky, Partner. The Column Group. TCG has an appetite for leading-edge science, stuff that’s risky and can take a long time to pay off. Dave Goeddel is the famous partner, but Lasky also has serious science chops, dating all the way back to his work in the trenches at Genetics Institute and Genentech. As a VC at Latterell Venture Partners, US Venture Partners, and now TCG, Lasky has compiled a list of winners that includes Intellikine, OncoMed Pharmaceuticals, and Proteolix. He’s currently on the boards of ORIC Pharmaceuticals, Effector Therapeutics, Revolution Medicines, and Accent Therapeutics. He’s on the scientific advisory board of Gritstone Oncology, the personalized neoantigen cancer vaccine developer. “One of the best oncology/immunology VCs in the business. Very science focused and generally low profile,” wrote one Timmerman Report subscriber.
OK, so there’s a group of VCs with a record of adding value. Now you may wonder where you can meet some of the best men and women in biotech investment. One of the places to find those partners will be at Biotech Showcase, coming up Jan. 8–10 in San Francisco. The organizers tell me more than 3,800 attendees are expected to attend, of which more than 900 are qualified/vetted biotech investors who collectively oversee more than $334 billion in capital.
I will personally be there participating in a Media Roundup session with some of my fellow biotech journalists, and then doing a special signing of my book, “Hood: Trailblazer of the Genomics Age,” during the closing reception. Next month, it will be honored as one of the 100 Best Indie Books of the Year by Kirkus Reviews, a service that reviews 13,000 books a year. I’m thrilled by this award, which should help the book cross over to non-scientific audiences. Signed copies will be FREE to all Biotech Showcase attendees on a first-come, first-served basis after the closing media panel on Jan. 10. I hope to see you there at one of the best partnering events of the year.
Interested in learning more about active family offices in biotech, and what they are looking for? Click below: