Startup Investor School: The Basics of Seed Investing(blog.ycombinator.com)
blog.ycombinator.com
Startup Investor School: The Basics of Seed Investing
http://blog.ycombinator.com/startup-investor-school/
14 comments
I am a seed investor, a former academic in the area of biotech, an experienced biotech entrepreneur, and I won't touch biotech with the proverbial 10 foot pole.
The reason why is my fellow investors don't have a clue and so back all the wrong companies. If you try and pick the good ones the end result is they run out of money while the ones that hype garbage to the moon suck up all the cash. I should say this is an Australian perspective and I do realise that in other markets things might be different.
The reason why is my fellow investors don't have a clue and so back all the wrong companies. If you try and pick the good ones the end result is they run out of money while the ones that hype garbage to the moon suck up all the cash. I should say this is an Australian perspective and I do realise that in other markets things might be different.
Australia sounds quite different than the US. In the US good seed-stage startups get a lot of funding (some of these deals are European or Chinese companies but most are US): almost $1B has been invested into large seed ($5M+) and Series A rounds for biotech startups in January 2018 alone: http://newbio.tech/funding.html
And these companies have been getting acquired / going public at very robust valuations: http://newbio.tech/blog/biopharma_opportunity.html
The good biotech seed investors I know have been doing very well and involved in several companies acquired for 10 figure sums
Disclaimer: links above are to my posts / analyses
And these companies have been getting acquired / going public at very robust valuations: http://newbio.tech/blog/biopharma_opportunity.html
The good biotech seed investors I know have been doing very well and involved in several companies acquired for 10 figure sums
Disclaimer: links above are to my posts / analyses
Australia is just getting started developing a investor ecosystem. In the last few years there are a few entrepreneurs like me that have have started giving back to build the ecosystem, but relatively few.
The real blocking point is Series B and beyond where there is very little true VC money. Biotechs really need support at this stage and it forces far too many Australian biotechs to list on the ASX at a very early stage.
The real blocking point is Series B and beyond where there is very little true VC money. Biotechs really need support at this stage and it forces far too many Australian biotechs to list on the ASX at a very early stage.
Are there many therapeutics startups in Australia? I remember seeing a decent amount of diagnostics / device pitches from australian companies (or device firms that listed on ASX) but don't remember seeing many drug developers (not that I have a large sample size to draw from). If there are interesting therapeutics startups in Australia I am sure that US biotech VCs would take a look, as there is a bit of a crowded series a market here (lots of VC money but not many good seed-stage startups) and many VCs are looking to europe for science or startups
There are a few, but not many. You will find it a lot easier to pitch a diagnostic or device startup than a tradition therapeutic startup.
I think the major killer here is the distance - Australia is just so far from anywhere other than NZ.
I think the major killer here is the distance - Australia is just so far from anywhere other than NZ.
You can help the ecosystem (and yourself) by trying to convince later-stage investors why the companies you believe in will succeed. Example: http://paulgraham.com/airbnb.html
I try - I am a member of Sydney Angels [0] who are quite active, but it is a uphill battle. When it comes to biotech here flashy sales pitches are all that matter.
0.http://sydneyangels.net.au
0.http://sydneyangels.net.au
Hope they're better than the SA Angels. Half of these angels orgs function like cabals.
They are OK and getting better. There is a bit of lag on valuation as the old guys keep thinking it is 2005, but over the last 18 months there have been a lot of younger people and people with entrepreneurial background join. If you have a plan on how you will make money then it is worth exploring - at the very least you get to know everyone in Sydney.
The biggest problem is not valuations, but cat herding. As soon as you put a dozen grey hairs in a room you will end up with 13 different opinions. This can make progress a lot slower than it should be.
On the positive we have a partnership with VC fund (SA SideCar) that matches investments by the angels 1:1 with no extra extra due diligence. They automatically follow on in later rounds which is really a massive positive.
The biggest problem is not valuations, but cat herding. As soon as you put a dozen grey hairs in a room you will end up with 13 different opinions. This can make progress a lot slower than it should be.
On the positive we have a partnership with VC fund (SA SideCar) that matches investments by the angels 1:1 with no extra extra due diligence. They automatically follow on in later rounds which is really a massive positive.
I'm a software engineer turned VC. I'm very interested in bio startups but am not sure where/how to start, and don't want to be one of those investors that doesn't have a clue and backs all the wrong companies. If you're willing to share your thoughts on what kind of companies investors should be backing, I'd love to chat. My email is leo at susaventures.com.
Leo I am not sure how much help I can be as the difficult thing about biotech is the huge background knowledge required to understand the science. This is not a small undertaking even if it is very interesting.
One resource I really do recommend is Derek Lowe’s blog In The Pipeline [0]. I have spent hundreds of hours reading through all his posts (he is amazingly prolific) and the very informed (if cynical) comments. It really helped me understand the problems that come up translating a new scientific discovery into a licensed pharmaceutical.
Even if you don’t learn anything you will be entertained by his series on "things I won’t work with” [1].
0. http://blogs.sciencemag.org/pipeline/
1. http://blogs.sciencemag.org/pipeline/archives/category/thing...
One resource I really do recommend is Derek Lowe’s blog In The Pipeline [0]. I have spent hundreds of hours reading through all his posts (he is amazingly prolific) and the very informed (if cynical) comments. It really helped me understand the problems that come up translating a new scientific discovery into a licensed pharmaceutical.
Even if you don’t learn anything you will be entertained by his series on "things I won’t work with” [1].
0. http://blogs.sciencemag.org/pipeline/
1. http://blogs.sciencemag.org/pipeline/archives/category/thing...
Would second Derek Lowe. For newcomers to the space I'd also suggest:
-the "six rules of reproducibility" -- with software, in general if someone writes code that works on their system you can use that code and get the same result on your system. This is far from the case in biopharma, especially w academic findings. Failing to understand the dangers of the "reproducibility crisis" is a common pitfall for non scientists: http://blogs.sciencemag.org/pipeline/archives/2012/10/01/six...
-"software eats the world, but biology eats the pipeline" is a professional drug hunters take on the a16z bio thesis. This post references once by Bruce booth. Bruce booth is far from a Luddite and has invested in several computationally driven drug companies (nimbus being one example) but he suggests that there is a ton of potential, but you need to know the dangers before diving in: http://blogs.sciencemag.org/pipeline/archives/2017/04/28/sof...
-the "lessons for a new medicinal chemist" post is also a great one that shows how hard, yet how fascinating, drug discovery is: http://blogs.sciencemag.org/pipeline/archives/2012/06/08/les...
-the "six rules of reproducibility" -- with software, in general if someone writes code that works on their system you can use that code and get the same result on your system. This is far from the case in biopharma, especially w academic findings. Failing to understand the dangers of the "reproducibility crisis" is a common pitfall for non scientists: http://blogs.sciencemag.org/pipeline/archives/2012/10/01/six...
-"software eats the world, but biology eats the pipeline" is a professional drug hunters take on the a16z bio thesis. This post references once by Bruce booth. Bruce booth is far from a Luddite and has invested in several computationally driven drug companies (nimbus being one example) but he suggests that there is a ton of potential, but you need to know the dangers before diving in: http://blogs.sciencemag.org/pipeline/archives/2017/04/28/sof...
-the "lessons for a new medicinal chemist" post is also a great one that shows how hard, yet how fascinating, drug discovery is: http://blogs.sciencemag.org/pipeline/archives/2012/06/08/les...
I have worked in biotech / biopharma for the last eight years as a founder / venture investor / operator coming from a non biology / chem background. It is an amazing space that needs more smart people from other domains
Most engineers / tech VCs have been making initial forays into this world through bio-IT / software driven drug dev. This is potentially a really promising space, but I'd suggest starting with biopharma bc 1) it has been generating some of the best returns in venture the last few years and 2) being good at bio-IT requires a good understanding of biopharma and drug dev
Biopharma / therapeutics has generated some of the best returns in venture the last few years but is still mostly dominated by specialist VCs and has almost no seed ecosystem (most startups that end up getting venture funding are seeded within the top funds), so there is huge opportunity for seed investors to find the good opportunities outside of the top 5-10 life sci funds. The number of funded biotech startups and seed investors has not increased in a decade despite a doubling in venture funding and the best m&a / IPO environment ever. It is possible for companies to go from seed to IPO in under five years and $5-10B+ m&a in ~5-7 year timeframes (some good timely examples here: https://lifescivc.com/2018/01/two-carts-two-charts-dissectin...)
Finding the best opportunities in biopharma requires identifying the best science. This requires investors to be at least conversational in biology, chemistry and drug development and to utilize advisors / consultants / PhDs to dive deep into specific tech
To orient yourself to the world of biopharma investing, id start by reading more of Bruce booths blogs (he is the author of the post I linked above). He is one of the few life sci VCs who blogs and is also a pioneer in seed-series A biotech investing
Also I'd recommend following biopharma news and funding / m&a activity. If you see any investors / people you recognize in press releases call them up. If you see a deal that interests you, take a look at the scientific publications from the company and reach out to the authors and other scientists in the space to hear their thoughts
Most engineers / tech VCs have been making initial forays into this world through bio-IT / software driven drug dev. This is potentially a really promising space, but I'd suggest starting with biopharma bc 1) it has been generating some of the best returns in venture the last few years and 2) being good at bio-IT requires a good understanding of biopharma and drug dev
Biopharma / therapeutics has generated some of the best returns in venture the last few years but is still mostly dominated by specialist VCs and has almost no seed ecosystem (most startups that end up getting venture funding are seeded within the top funds), so there is huge opportunity for seed investors to find the good opportunities outside of the top 5-10 life sci funds. The number of funded biotech startups and seed investors has not increased in a decade despite a doubling in venture funding and the best m&a / IPO environment ever. It is possible for companies to go from seed to IPO in under five years and $5-10B+ m&a in ~5-7 year timeframes (some good timely examples here: https://lifescivc.com/2018/01/two-carts-two-charts-dissectin...)
Finding the best opportunities in biopharma requires identifying the best science. This requires investors to be at least conversational in biology, chemistry and drug development and to utilize advisors / consultants / PhDs to dive deep into specific tech
To orient yourself to the world of biopharma investing, id start by reading more of Bruce booths blogs (he is the author of the post I linked above). He is one of the few life sci VCs who blogs and is also a pioneer in seed-series A biotech investing
Also I'd recommend following biopharma news and funding / m&a activity. If you see any investors / people you recognize in press releases call them up. If you see a deal that interests you, take a look at the scientific publications from the company and reach out to the authors and other scientists in the space to hear their thoughts
Thanks for the thoughtful comment. I really appreciate it! I subscribed to the blog you linked to and had already started reaching out to some of the investors I know that have worked with bio startups. To address the grandparent comment, a lot of them are like me though: people who are interested in the space and making early investments, but not really knowledgeable yet.
As a programmer, one of the things I got really excited about a few years ago was the idea of building a programming language for biology (which would leverage discoveries like CRISPR), but from what I can tell that is still very, very far away (if it's even possible).
As a programmer, one of the things I got really excited about a few years ago was the idea of building a programming language for biology (which would leverage discoveries like CRISPR), but from what I can tell that is still very, very far away (if it's even possible).
As a software engineer who decided to learn about biotech with absolutely no background, here is how I started:
- Organic Chemistry course on itunes U (don't remember which one, just first 4-5 lessons)
- Introduction to Genetics: A Molecular Approach by Terry Brown
- Virology course on iTunes U, by Vincent Racaniello - https://itunes.apple.com/us/podcast/w3310-virology-videocast...
- Molecular biology of the cell book ( https://www.amazon.com/Molecular-Biology-Cell-Bruce-Alberts/... )
After going through that (took ~3 months full time), I went for a month to the Bay Area, went to Biocurious hackerspace, to get some practical experience, and within a month I did stuff like ordering custom dna online, and putting it into bacteria :)
All the above was sufficient to understand basics of whatever I'm reading now about biotech, and gain extra knowledge when necessary.
Some notes: - Virology may seem a weird addition, but the course by Racaniello is super-fun, and if you understand how viruses work, you will understand how everything else works - If, like me, you were afraid of Chemistry and Biology in high school, don't worry. Organic Chemistry deals just with just four basic elements, and Molecular Biology is really not much different from mechanics - not that much to remember, and a lot to understand. - Even if you complete just 3-4 first chapters of all the above, you will get nice foundations for understanding biotech. - There are bio hackerspaces in major cities in US (not so much in EU - regulations)
- Organic Chemistry course on itunes U (don't remember which one, just first 4-5 lessons)
- Introduction to Genetics: A Molecular Approach by Terry Brown
- Virology course on iTunes U, by Vincent Racaniello - https://itunes.apple.com/us/podcast/w3310-virology-videocast...
- Molecular biology of the cell book ( https://www.amazon.com/Molecular-Biology-Cell-Bruce-Alberts/... )
After going through that (took ~3 months full time), I went for a month to the Bay Area, went to Biocurious hackerspace, to get some practical experience, and within a month I did stuff like ordering custom dna online, and putting it into bacteria :)
All the above was sufficient to understand basics of whatever I'm reading now about biotech, and gain extra knowledge when necessary.
Some notes: - Virology may seem a weird addition, but the course by Racaniello is super-fun, and if you understand how viruses work, you will understand how everything else works - If, like me, you were afraid of Chemistry and Biology in high school, don't worry. Organic Chemistry deals just with just four basic elements, and Molecular Biology is really not much different from mechanics - not that much to remember, and a lot to understand. - Even if you complete just 3-4 first chapters of all the above, you will get nice foundations for understanding biotech. - There are bio hackerspaces in major cities in US (not so much in EU - regulations)
Daniel, help me get into the good deals. I'll fight for them to stay alive!
Just adding my own slight perspective here. We launched a bootstrapped genome sequencing facility August last year. With barely any advertising and word of mouth, we're clearing around 8% MoM revenue growth and are forecasting ~$350k-400k in revenue this year.
Biggest problem? We don't have enough float to keep up with demand. There's significant demand in the life sciences & biotech space right now - especially with the confluence of software and bio. It's been very hard to talk to investors because (no offense) they hear life sciences, bio, genetics, etc. and they turn away because it's out of their comfort zone of investing.
If you're an angel or seed investor, I'd highly recommend diving in and learning more around the problems of the space. They are large, lucrative, and have high probability of disruption compared to current status.
Biggest problem? We don't have enough float to keep up with demand. There's significant demand in the life sciences & biotech space right now - especially with the confluence of software and bio. It's been very hard to talk to investors because (no offense) they hear life sciences, bio, genetics, etc. and they turn away because it's out of their comfort zone of investing.
If you're an angel or seed investor, I'd highly recommend diving in and learning more around the problems of the space. They are large, lucrative, and have high probability of disruption compared to current status.
That's awesome to hear, congrats! Ive been starting to hear a lot of interest in genomics / bio-IT from generalist VCs. obviously groups like a16z and 8VC have recognized this opportunity already (and YC is starting to), but anecdotally a lot of other funds are diving into bio-IT. One of the challenges is that the seed environment hasn't matured yet to bridge these companies to VC funding
It's funny, I talk to people about bio and they say "I'm not a scientist, I can't invest here" however they realize they can invest profitably into things like AI without being data scientists / math PhDs. In many ways, bio is no different than any other technical field: learn enough to be dangerous, know how to lean on experts where appropriate, and you can get involved
It's funny, I talk to people about bio and they say "I'm not a scientist, I can't invest here" however they realize they can invest profitably into things like AI without being data scientists / math PhDs. In many ways, bio is no different than any other technical field: learn enough to be dangerous, know how to lean on experts where appropriate, and you can get involved
Completely agree. A lot of the big VCs are investing in the fundamental biology side of it. However, there is so much room for advancements in the equipment, gene panels, automation, lab analytics, etc.
As an example, we just bought a device called an Eppendorf EpMotion 5075. It costs around $20k and looks like it was something I would have built in high school. Exposed wires, slow, insanely expensive parts. Worst of all: there's no API for us to programmatically connect it with other devices in the lab, such as a DNA extractor.
You also hit the nail on the head with the investment mentality. Know enough to be dangerous. Ask "why" to learn more about the problems. And (IMO) most importantly, realize that you don't have to put down $1M as a seed. You'd be shocked at the ROI on just even $50k...
As an example, we just bought a device called an Eppendorf EpMotion 5075. It costs around $20k and looks like it was something I would have built in high school. Exposed wires, slow, insanely expensive parts. Worst of all: there's no API for us to programmatically connect it with other devices in the lab, such as a DNA extractor.
You also hit the nail on the head with the investment mentality. Know enough to be dangerous. Ask "why" to learn more about the problems. And (IMO) most importantly, realize that you don't have to put down $1M as a seed. You'd be shocked at the ROI on just even $50k...
Out of curiosity, what's your business model and customer base? Do you offer sequencing as a service, have proprietary analytics / software, other lab services, experimental design, etc?
We're an all-inclusive service provider (currently), meaning that researchers simply send their samples in and get insights back. We take care of the DNA extraction, sample QC, library prep, sequencing, bioinformatics, and data storage.
There are a couple clients of ours that we're testing our sequencing as a service where we generate monthly contracts and they get the exact same service, protocols, etc. in record turnaround time.
Client base includes companies like Children's National Hospital, UCSD, Pfizer, USDA. Nothing proprietary just yet (except it being really hard) but we're using profits from services revenue to develop IP-driven gene pipelines and informations. Basically specific gene panels and software paired together. We're one of 2 commercial companies in the country offering HLA-Typing which is the same integrated pipeline as described above.
Additionally, we're passively starting to develop high resolution data sets to ingest into a database at some point around specific novel variants, such as HLA Typing, to accelerate research
The end goal is to virtualize the entire lab so that anyone can start research, whether academic of pharmaceutical, from a home office. This means building a software layer that allows them to directly create, design, and implement protocols that interface with the equipment in the lab. So instead of building a $1M lab, you just log in online and run your experiments.
You can think of it as what AWS did to the data center.
There are a couple clients of ours that we're testing our sequencing as a service where we generate monthly contracts and they get the exact same service, protocols, etc. in record turnaround time.
Client base includes companies like Children's National Hospital, UCSD, Pfizer, USDA. Nothing proprietary just yet (except it being really hard) but we're using profits from services revenue to develop IP-driven gene pipelines and informations. Basically specific gene panels and software paired together. We're one of 2 commercial companies in the country offering HLA-Typing which is the same integrated pipeline as described above.
Additionally, we're passively starting to develop high resolution data sets to ingest into a database at some point around specific novel variants, such as HLA Typing, to accelerate research
The end goal is to virtualize the entire lab so that anyone can start research, whether academic of pharmaceutical, from a home office. This means building a software layer that allows them to directly create, design, and implement protocols that interface with the equipment in the lab. So instead of building a $1M lab, you just log in online and run your experiments.
You can think of it as what AWS did to the data center.
Very cool, i work with a lot of CROs but haven't had a need for genomics sequencing yet. In small biotech companies we rely exclusively on these firms as we don't have our own labs, or if so, dont have a genomics core. There has been an explosion in biotech startups using genomics so would imagine there's a lot of demand for this, and you can make good margins if you are a quality and differentiated service provider. I realize you probably already know this but in the spirit of informing people about bio investing figured I'd share :)
Are you in San Diego by chance (just guessing bc UCSD)? I work with a virtual biotech there and we contract out all of our r&d. We don't do genomics but some of our investors have other portfolio companies that might be interested in your services
Are you in San Diego by chance (just guessing bc UCSD)? I work with a virtual biotech there and we contract out all of our r&d. We don't do genomics but some of our investors have other portfolio companies that might be interested in your services
We're located in Colorado actually. Low rent makes for cheaper rates for our customers.
What's ironic is that even though UCSD has one of the premier genomics cores in the world, their lead time and prices are astronomical. We converted an entire UCSD department from their facility to ours by simply improving speed, price, and turnaround. We're finding that the big facilities have so much overhead that they can ONLY focus on big projects, leaving a huge gap in the market for the smaller guys.
If they're interested, we're happy to have conversations. Our website is: https://www.thesequencingcenter.com We're always looking to connect with other folks who are just annoyed with the general way things are operating.
What's ironic is that even though UCSD has one of the premier genomics cores in the world, their lead time and prices are astronomical. We converted an entire UCSD department from their facility to ours by simply improving speed, price, and turnaround. We're finding that the big facilities have so much overhead that they can ONLY focus on big projects, leaving a huge gap in the market for the smaller guys.
If they're interested, we're happy to have conversations. Our website is: https://www.thesequencingcenter.com We're always looking to connect with other folks who are just annoyed with the general way things are operating.
Awesome, thanks for passing along. We face a lot of issues with lead time for non-genomics applications and if our CRO doesn't have a piece of equipment and we dont have an "in" at ucsd / stanford / berkeley etc, we wait in line. sometimes for months...
will pass your info along, thanks!
will pass your info along, thanks!
How does one start learning about the field - problems, companies etc. I read about immunotherapy back in 2010 but struggled to find companies which were working in this area.
I answered a similar question in this thread but will add a few things if there's an area you already are interested in. Look at the companies in the space that have received lots of funding from good VCs or have exited, and look up their scientific advisory board members. These are thought leaders in particular areas and are often very influential and networked. If you can build relationships with them they can point you to promising companies and proto-companies.
Also dig into the scientific literature (or hire a phd if you don't have a technical background) and connect with leading researchers in the space. Ask them about their work, and the work of competing academics. Do this enough and you'll find interesting science
Also dig into the scientific literature (or hire a phd if you don't have a technical background) and connect with leading researchers in the space. Ask them about their work, and the work of competing academics. Do this enough and you'll find interesting science
I feel exactly the same way about Manufacturing. It's a massive industry, there are a ton of viable new technologies on the market, but very very few investors are even looking at the early stage because they don't understand it. I'm blown away at the new technologies I'm seeing.
100% agree. There's a lot of regulatory hurdles in that field but, much like what SpaceX did, if you can find ways to disrupt it, the disruption is 10-100x better than current state.
Could you expand on this at all and/or point me in the direction of where to read up on new manufacturing technologies?
I'm in the additive manufacturing industry, things are really heating up. But there are plenty of other opportunities in related fields that I've barely heard of. Aerospace, medical, defense, auto etc are all driving some big changes in how their parts are made because of new regulations and opportunities.
> If you're an angel or seed investor, I'd highly recommend diving in and learning more around the problems of the space. They are large, lucrative, and have high probability of disruption compared to current status.
Not an angel or seed investor but how does one start to learn about problems in this space?
Not an angel or seed investor but how does one start to learn about problems in this space?
The bio space is very large, so the first step is to understand the different types of companies. The major groups are roughly:
- biopharma / therapeutics: the largest and most lucrative sector, but also the most specialized (~$11B venture dollars invested in the US in 2017). Basically companies that develop FDA regulated medicines to treat disease. This has been one of the top performing sectors in all of venture the last few years. It's also the most "different" industry / steepest learning curve if you're coming from a tech background. I wrote a post on the opportunity in the space here: http://newbio.tech/blog/biopharma_opportunity.html
- med tech / diagnostics: accounting for just under $5B in 2017 US venture funding, these deal with medical devices (hip implants, surgical tools, coronary stents etc) as well as diagnostics (ranging from standard blood tests to AI-driven liquid biopsies to detect cancer). Investments here tend to be more doubles and triples than the biopharma homeruns. Reimbursement is a key concern here
- bio-IT: this emerging space has received a lot of hype lately (a16z making a large play here, Verily is also in this category). It is a bit of an amorphous term but concerns opportunities at the intersection of biology, chemistry, software and data analytics. The big opportunity here is using tech to multiply the efficiency / productive of drug development and scientific research
To start learning more, id focus on biopharma, as the opportunity here is massive and really understanding biopharma will help you understand bio-IT. Subscribe to the following news feeds:
-endpoints news -fierce biotech -stat news
When you read about an interesting company, dig deeper. Talk to anyone in your network familiar with the company. Read the scientific literature (and look up all the terms you don't know). Email the academic founders to ask about their work. Email founders of competing companies. Really try to understand the appeal of the investment and the rationale behind the science. It is a steep learning curve but enough reps can get you there
Also, follow Bruce Booths blog at atlas ventures. He is one of the leading seed stage investors and also one of the few life sci VCs who blogs
- biopharma / therapeutics: the largest and most lucrative sector, but also the most specialized (~$11B venture dollars invested in the US in 2017). Basically companies that develop FDA regulated medicines to treat disease. This has been one of the top performing sectors in all of venture the last few years. It's also the most "different" industry / steepest learning curve if you're coming from a tech background. I wrote a post on the opportunity in the space here: http://newbio.tech/blog/biopharma_opportunity.html
- med tech / diagnostics: accounting for just under $5B in 2017 US venture funding, these deal with medical devices (hip implants, surgical tools, coronary stents etc) as well as diagnostics (ranging from standard blood tests to AI-driven liquid biopsies to detect cancer). Investments here tend to be more doubles and triples than the biopharma homeruns. Reimbursement is a key concern here
- bio-IT: this emerging space has received a lot of hype lately (a16z making a large play here, Verily is also in this category). It is a bit of an amorphous term but concerns opportunities at the intersection of biology, chemistry, software and data analytics. The big opportunity here is using tech to multiply the efficiency / productive of drug development and scientific research
To start learning more, id focus on biopharma, as the opportunity here is massive and really understanding biopharma will help you understand bio-IT. Subscribe to the following news feeds:
-endpoints news -fierce biotech -stat news
When you read about an interesting company, dig deeper. Talk to anyone in your network familiar with the company. Read the scientific literature (and look up all the terms you don't know). Email the academic founders to ask about their work. Email founders of competing companies. Really try to understand the appeal of the investment and the rationale behind the science. It is a steep learning curve but enough reps can get you there
Also, follow Bruce Booths blog at atlas ventures. He is one of the leading seed stage investors and also one of the few life sci VCs who blogs
With the disclaimer that I know zero about bio (or seed investing, for that matter), I imagine it is like any other field: talk to people doing it.
If you live near an area where it is hot, I'm sure there are meetup-ish things or other social mixers of some sort. Otherwise/also, find the online communities where those folks hang out.
Heck, I've cold-called folks a few times when I had clueless questions about their industry. Once someone thought I was a freak, or maybe a scammer, but most times being direct, respectful and not too dumb led to folks humoring me. Now, I'm not suggesting ringing up a random CEO and asking them for an extemporaneous survey of emerging market opportunities, but, especially with startups, generally folks like to talk shop.
If you live near an area where it is hot, I'm sure there are meetup-ish things or other social mixers of some sort. Otherwise/also, find the online communities where those folks hang out.
Heck, I've cold-called folks a few times when I had clueless questions about their industry. Once someone thought I was a freak, or maybe a scammer, but most times being direct, respectful and not too dumb led to folks humoring me. Now, I'm not suggesting ringing up a random CEO and asking them for an extemporaneous survey of emerging market opportunities, but, especially with startups, generally folks like to talk shop.
What's the name of your company and where are you located? Seems like an interesting opportunity. Feel free to send me an email at andrewmbenton at gmail dot com.
Our company is called The Sequencing Center.
https://www.thesequencingcenter.com
We're located in Fort Collins, Colorado which is great for low overhead costs! I'll send you a note. Thanks!
https://www.thesequencingcenter.com
We're located in Fort Collins, Colorado which is great for low overhead costs! I'll send you a note. Thanks!
Where do you get dealflow as an independent investor in these things? Seems like incubator demo days and shark tank events are brimming with everything but biotech.
There are a few incubators that focus on bio but even these don't specialize in biopharma (vs diagnostics, med tech, software stuff). Biopharma is where most of the venture money is (over $10B in 2017) but most companies are seeded within VC.
So dealflow is very network driven. Life sci VCs, successful biopharma execs and entrepreneurs and academic key opinion leaders are good sources if they are in your network
Getting to know the cell biology / biochem / bioinformatics community at your local research institution is a good way to find untapped early stage deal flow but to take advantage of this you often need to bring some domain expertise or operational expertise to bear, as a lot of the folks in academia can benefit from operations / industry support. If you can speak at a university event or guest lecture in a class that can be a time-efficient way to get into the flow of things at the institution
So dealflow is very network driven. Life sci VCs, successful biopharma execs and entrepreneurs and academic key opinion leaders are good sources if they are in your network
Getting to know the cell biology / biochem / bioinformatics community at your local research institution is a good way to find untapped early stage deal flow but to take advantage of this you often need to bring some domain expertise or operational expertise to bear, as a lot of the folks in academia can benefit from operations / industry support. If you can speak at a university event or guest lecture in a class that can be a time-efficient way to get into the flow of things at the institution
Who are your customers? Normal consumers? Academia?
I am actually looking to get my genome sequenced. I am looking to do ~30X and I just want the fastqs. I am a bioinformatician and can do my own analysis. Is that a service you provide?
I am actually looking to get my genome sequenced. I am looking to do ~30X and I just want the fastqs. I am a bioinformatician and can do my own analysis. Is that a service you provide?
Our customers are academic, pharmaceutical, and clinical research. We don't do any direct-to-consumer sequencing since we're not currently HIPPA compliant.
We also only have an Illumina MiniSeq which is really designed for bacterial, viral, yeast, and targeted human sequencing. It doesn't have the power to do full WGS however we're working on figuring out how to acquire a NovaSeq.
We also only have an Illumina MiniSeq which is really designed for bacterial, viral, yeast, and targeted human sequencing. It doesn't have the power to do full WGS however we're working on figuring out how to acquire a NovaSeq.
Hey, I might have some people interested in this type of investment. Sounds really interesting. You can reach me at zachfeldman at gmail.
Awesome, we'd appreciate any connection. I'll reach out to you from my work email.
Please shoot me a message as well - alex at mystudycloud dot com
You should get in touch with me. You can find my details in my profile.
How/where do you get access to bio seed investment opportunities?
The lowest-hanging fruit is through accelerators / incubators, although no one has quite cracked the accelerator model for biopharma yet: diagnostics / tools / software can be great investments, but biopharma / therapeutics is where the real opportunity is though it is the most idiosyncratic business. While these are more accessible sources, they are also more picked over and investors need to rely on their own diligence to filter for quality:
Indie bio, qb3, Jlabs, illumina accelerator, start x, y combinator are prominent Bay Area ones
The best opportunities come from relationships with influential, well networked academic researchers; venture investors; r&d execs at big pharma; and successful serial entrepreneurs. If you have any of those in your network, that's the best place for high-quality deals. However big VCs often have established relationships with these folks and they will seed the most promising ideas
Universities also have a lot of events supporting startups and these can be a good way to get involved in the ecosystem and build a network. If you talk to enough phd students and postdocs you'll get a sense of what opportunities are out there. phd students and postdocs are an incredibly under appreciated group, and they have a ton of potential to start great companies if they get the right support. If you get smart on the space and make an effort to meet these folks you'll find many seed opportunities
Obviously these are not ideal paths. One of my passion projects is running a program that connects promising young scientists to life sci VCs to explore startup ideas. The main goal is mentoring young scientists as PhD students / postdocs are a woefully under appreciated sector of our workforce, but a few interesting startups have emerged from this as well.
Indie bio, qb3, Jlabs, illumina accelerator, start x, y combinator are prominent Bay Area ones
The best opportunities come from relationships with influential, well networked academic researchers; venture investors; r&d execs at big pharma; and successful serial entrepreneurs. If you have any of those in your network, that's the best place for high-quality deals. However big VCs often have established relationships with these folks and they will seed the most promising ideas
Universities also have a lot of events supporting startups and these can be a good way to get involved in the ecosystem and build a network. If you talk to enough phd students and postdocs you'll get a sense of what opportunities are out there. phd students and postdocs are an incredibly under appreciated group, and they have a ton of potential to start great companies if they get the right support. If you get smart on the space and make an effort to meet these folks you'll find many seed opportunities
Obviously these are not ideal paths. One of my passion projects is running a program that connects promising young scientists to life sci VCs to explore startup ideas. The main goal is mentoring young scientists as PhD students / postdocs are a woefully under appreciated sector of our workforce, but a few interesting startups have emerged from this as well.
Basics of seed investing rule number 1:
Have $1 million in assets outside of your primary home or make $200k+ per year for the last 2 years with the reasonable assumption you will continue to.
Have $1 million in assets outside of your primary home or make $200k+ per year for the last 2 years with the reasonable assumption you will continue to.
I've done >20 seed investments, and here is my Rule #1: you can do seed investing as a hobby, or you can do it as a business.
If you do it as a hobby, count on losing every penny you put in, and treating that as the cost of pursuing your hobby.
If you do it as a business, count on working on it full time, i.e. AT LEAST 40 hours a week, and probably more like 60-80. The competition is fierce. And I would not do it with less than $1M in LIQUID assets which I could afford to lose. The reason you need this much is that in order to have a good shot at a return you need to be able to do two things: 1) invest in a pretty broad portfolio (i.e. at least 10 companies) and 2) have enough money to participate in follow-on rounds so you don't get diluted into oblivion.
If you do it as a hobby, count on losing every penny you put in, and treating that as the cost of pursuing your hobby.
If you do it as a business, count on working on it full time, i.e. AT LEAST 40 hours a week, and probably more like 60-80. The competition is fierce. And I would not do it with less than $1M in LIQUID assets which I could afford to lose. The reason you need this much is that in order to have a good shot at a return you need to be able to do two things: 1) invest in a pretty broad portfolio (i.e. at least 10 companies) and 2) have enough money to participate in follow-on rounds so you don't get diluted into oblivion.
Mileages vary, but I haven't found dilution to be a big problem. Dilution only gets large when companies go through near-death experiences, and those are often followed by real death.
Follow-on investments are economically just like making later-stage investments. The average return can be good, but you can also lose all your money and you need much more capital to participate.
Follow-on investments are economically just like making later-stage investments. The average return can be good, but you can also lose all your money and you need much more capital to participate.
Doubling down on your winners can exponentially lift your returns. When you're an investor at an earlier stage, you have the best information and insight on how the company is really doing (information asymmetry) and have access to deals you would have no access to otherwise. (An angel doesn't get to invest in a good hot Series C unless they're already on the cap table.)
Sure, but if the company does good and you believe in it, why not throw some extra money at it and get a bigger part of the pie :)
Sure. But you should think of it like a new late-stage investment, on par with investing in any other late-stage company whether you were in on the seed round or not. Concern about not getting diluted sounds like a sunk cost fallacy, which can lead to suboptimal decisions.
That was my first thought as well.
Is there any good reason why these opportunities for follow-on investment might have higher expected returns than, e.g. putting the same amount of money into other seed investments? e.g. is it possible that if you participate in the follow-on, that you get some extra leverage to convert your previous shares into a more favourable class?
Is there any good reason why these opportunities for follow-on investment might have higher expected returns than, e.g. putting the same amount of money into other seed investments? e.g. is it possible that if you participate in the follow-on, that you get some extra leverage to convert your previous shares into a more favourable class?
> If you do it as a business
> And I would not do it with less than $1M in LIQUID assets which I could afford to lose.
IMHO -> Rule #2: If you do it as a business, don't use your money and use a standard 2/20 model. Why someone would do seed investing working 60-80 hours a week and use your own capital is beyond me.
> And I would not do it with less than $1M in LIQUID assets which I could afford to lose.
IMHO -> Rule #2: If you do it as a business, don't use your money and use a standard 2/20 model. Why someone would do seed investing working 60-80 hours a week and use your own capital is beyond me.
Maybe for post seed rounds or seed funding greater than $5M, otherwise I don’t understand the need (or rule) for limiting seed funding to accredited investors.
I’m surprised YC has that as a requirement to participate in demo day, seems kind of archaic for a disrupter.
I’m surprised YC has that as a requirement to participate in demo day, seems kind of archaic for a disrupter.
This is an SEC rule for public solicitation... demo days can only be for accredited investors, plus it's easier that founders know everyone has been vetted. I know of accelerators that don't screen the demo day participants, and it's risky.
But there are exceptions to the general solicitation prohibitions.
Maybe they find those exceptions to onerous and burdensome, but in my mind that just means there is a giant opportunity - 90% of the US market is being excluded.
Maybe they find those exceptions to onerous and burdensome, but in my mind that just means there is a giant opportunity - 90% of the US market is being excluded.
Don't a lot of people "self certify" for accreditation?
In my experience, most of this "screening" isn't very deep.
Yes I think a signature of self certification is all that's generally required to keep the accelerator out of trouble, but again there are accelerators that don't even know this limitation exists with the SEC. Blame Shark Tank and general lack of knowledge of investment regulations.
If you don't live in US and you are not an US citizen, do you need to be an accredited investors?
Nah being a seed investor is easy, you just go into Telegram and wire money to anything people say China likes.
And plan on doing >> 10 investments if you expect to ever see a return.
Does anyone know if you can count a business you personally own and operate as part of your assets assuming you use reasonable valuation methods ?
For the ones that might not get it: these are the requirements to be a "qualified investor" in the US. They don't apply elsewhere.
Isn't that just the definition of Accredited Investor?
My tongue was planted firmly in my cheek.
This strikes me as a very odd class for them to be doing.
1. YC has no problem filling up Demo Day, and I know of even high qualify, professional angel investors who don't get the in person invite. So it isn't like they have a shortage of angel investors. If they wanted to have more and more diverse angels at their event, they could just find a bigger venue, which YC seems averse to.
2. Isn't this a big conflict of interest? This is a company teaching me the basics of angel investing who conveniently happens to directly financially benefit if there are more angel investors pumping money into their companies. Now I'm sure the class will be done well because YC generally does that, but I'm surprised YC is even wading into this. Angel investing is either a bad or at best extremely risky way for the average (even rich) person to invest their money in. Hopefully YC has a lot of disclaimers at the beginning of this class about this fact. I'm all for more information being out there, but angel investing is the type of thing where depending on which facts you omit you can make it seem very different from what it is.
1. YC has no problem filling up Demo Day, and I know of even high qualify, professional angel investors who don't get the in person invite. So it isn't like they have a shortage of angel investors. If they wanted to have more and more diverse angels at their event, they could just find a bigger venue, which YC seems averse to.
2. Isn't this a big conflict of interest? This is a company teaching me the basics of angel investing who conveniently happens to directly financially benefit if there are more angel investors pumping money into their companies. Now I'm sure the class will be done well because YC generally does that, but I'm surprised YC is even wading into this. Angel investing is either a bad or at best extremely risky way for the average (even rich) person to invest their money in. Hopefully YC has a lot of disclaimers at the beginning of this class about this fact. I'm all for more information being out there, but angel investing is the type of thing where depending on which facts you omit you can make it seem very different from what it is.
My first thought is that YC considers 2 to not not be a conflict of interest because of 1. They don't need more funds for their startups; this is just a donation of knowledge to the world to help Angel Investors get more money to the right startups, (presumably) making the world better for everyone.
2 is not a conflict of interest because increased capital supply means better terms for their companies. YC's interests lie first and foremost with its own funds (its LPs) and its batch companies. Increasing the competition for dealflow amongst angels does not conflict with _their_ interests.
It will however likely suppress returns of existing angel/seed investors, as deal values are inflated.
Fwiw the timing of this makes sense. We are seeing reports of the angel/seed market drying up as the wave of post 2010 first time angels have lost their enthusiasm (or capital), and seed fundraising in 2018 is much much harder than in 2015.
It will however likely suppress returns of existing angel/seed investors, as deal values are inflated.
Fwiw the timing of this makes sense. We are seeing reports of the angel/seed market drying up as the wave of post 2010 first time angels have lost their enthusiasm (or capital), and seed fundraising in 2018 is much much harder than in 2015.
Commoditize your complement!
Timing could not be more perfect for this. There's a new generation of investors out there. Some flush with cash from crypto trades. Others simply benefiting from the record bull run in tech stocks. That are now seeking to re-invest. Get in on the ground floor. And discover the next great opportunity.
There is a decided lack of investor education. As well as rigor. And opening up YC's methodology will have as large an impact as the introduction of convertible notes. Further, introducing new investors to how their money can be used for maximum impact and progress. Which naturally leads to outsized IRR. Will steer them away from the pitfalls of say, going all in on their best friend from junior high school's BBQ-flavored tequila distillery.
And regarding the sourcing of dealflow. There are definitely myriad untapped ways for the greater YC community to introduce talented startup founders and seed stage investors. AngelList is fantastic. The ability to post MVPs to ShowHN is tremendous. But something like a curated Youtube channel or Twitch livestream where people can pitch or watch demos 24/7 around the world at their convenience would be amazing.
There is a decided lack of investor education. As well as rigor. And opening up YC's methodology will have as large an impact as the introduction of convertible notes. Further, introducing new investors to how their money can be used for maximum impact and progress. Which naturally leads to outsized IRR. Will steer them away from the pitfalls of say, going all in on their best friend from junior high school's BBQ-flavored tequila distillery.
And regarding the sourcing of dealflow. There are definitely myriad untapped ways for the greater YC community to introduce talented startup founders and seed stage investors. AngelList is fantastic. The ability to post MVPs to ShowHN is tremendous. But something like a curated Youtube channel or Twitch livestream where people can pitch or watch demos 24/7 around the world at their convenience would be amazing.
I really hope that they will manage to reach a large audience with this, early stage investors are more often than not even more clueless than first time founders.
Educating both groups goes a long way towards getting everybody on the same page.
Educating both groups goes a long way towards getting everybody on the same page.
YC is surprisingly unambitious. They have access to unlimited amounts of capital and do almost nothing with it. Maybe because they compare themselves to the truly terrible investors they're surrounded by, and so it feels ambitious by comparison?
This announcement should be about a new $1 billion fund that they're going to use to deputize and train a thousand new angel investors. Or at least something big enough to move the needle.
Observing YC's evolution is a bit like watching someone take over Philip II of Macedon's empire and using it to march around Greece in circles.
This announcement should be about a new $1 billion fund that they're going to use to deputize and train a thousand new angel investors. Or at least something big enough to move the needle.
Observing YC's evolution is a bit like watching someone take over Philip II of Macedon's empire and using it to march around Greece in circles.
I would argue YC is extremely ambitious, especially under Sam Altman. However, ambition doesn't have to mean immediately investing billions of dollars in new areas. Huge ambitions can start as small experiments to see what's promising. That's how YC itself started too. Like a startup.
YC's mission is ostensibly to create more startups than would otherwise exist. So how many startups would not exist in 2018 if YC didn't exist? A hundred maybe? The number can't be large because they don't do anything at scale yet.
And yet there's potential for thousands of new startups to exist each year. Most people don't believe this, maybe not even YC, but that's what I'd call lack of ambition.
When ICOs (equity crowdfunding) comes into its own we will have a measure of how unambitious Silicon Valley has been. I predict it will be a shocking revelation.
And yet there's potential for thousands of new startups to exist each year. Most people don't believe this, maybe not even YC, but that's what I'd call lack of ambition.
When ICOs (equity crowdfunding) comes into its own we will have a measure of how unambitious Silicon Valley has been. I predict it will be a shocking revelation.
That's an interesting viewpoint, I appreciate you sharing your opinion on this.
Is there a way to watch the stream without having to be an accredited investor or will the video be posted publicly?
All the videos and transcripts will be posted publicly after the course ends.
Thank you! I see a new link was posted. For others, this seems to be where you can follow public updates:
https://investor.startupschool.org/spectators/new
https://investor.startupschool.org/spectators/new
You just need 2 steps.
Step 1: Be born into money.
Step 2: Put that money into opportunities prescreened by YC.
A lot will fail but there's a few exponents in there too so you can just shotgun anything interesting. Also don't worry if you miss the first round. There's several more rounds before the public gets any chance to invest - if they ever do at all.
Step 1: Be born into money.
Step 2: Put that money into opportunities prescreened by YC.
A lot will fail but there's a few exponents in there too so you can just shotgun anything interesting. Also don't worry if you miss the first round. There's several more rounds before the public gets any chance to invest - if they ever do at all.
Thank you SEC, you made my day.
Please record these sessions and share them on Youtube. YC has done a great job with sharing its content!
Do I have to sign up for the online version?
Sorry about that, that was an old link to apply that somehow made it through our draft! The link to apply is here: https://investor.startupschool.org/register
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Feature request: public transcripts.
We'll definitely have those :) All the content will be made available once the course ends, and that's on the list!
That's a boatload of work. I had them done for the first start-up school, if you want to do that properly it takes quite a bit of time.
Startup opportunity. A way for people to indicate they're interested in transcripts and pledge a specific amount they'd be willing to pay. Once $PLEDGED > $COST_OF_TRANSCRIPTS, pledgers get charged, transcripts get made and emailed.
Username checks out ;)
Good one. I'd use it.
Good one. I'd use it.
Have you looked at Rev.com? Video transcription is $1/min. Accuracy is pretty good too. If you need to tweak it, it's just a text file with time codes.
business(business(business))
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That was an error on our part; somehow our old event link was used. The correct link to apply is actually at https://investor.startupschool.org/register.
Apologies for that!
Apologies for that!
Alright, thank you!
Biotech venture returns have outperformed techs in recent years, with more IPOs, higher m&a returns and shorter time to exit. Counterintuitively for those who think bio is too capital intensive and it takes too long to get drugs approved, the best exits have been early stage deals where under $20-30M is invested
I know a few seed investors who've had several high multiple exits less than 18 months from seed, including one that sold for over $1B in less than 18 months
Despite this exit environment, the number of seed / early stage investors in biotech has not grown in over a decade. VCs have responded by just seeding / starting companies in house, but there are tons of great seed stage companies that just go unfunded bc people are intimidated by biotech