Jenny Rooke of Genoa Ventures joins Nick to discuss Seed Investing at the Intersection of Biology & Technology. In this episode, we cover:
- Her background in genetics, physics, computer science… and how that lead to venture.
- How was it to work with Melinda and Bill Gates?
- You also successfully built the largest life-sciences syndicate on Angellist that is also one of the highest performing syndicates of any sector… I just took a peek at the rankings this morning and both New Stack and Genoa are in the top 5. Of course those rankings are done based on follow-on rate… so, it’s nice to see we are in good company, up there w/ you Jenny… but talk a bit about why you started with a syndicate and how you’ve been able to drive such high performance.
- You launched the Genoa fund last year… Syndicate and fund now?
- “Genoa ventures invests in early-stage companies innovating at the intersection of biology and technology”… Jenny, what does that mean to you and what types of companies are you looking for?
- Adverse effects from Theranos?
- How and where do you source dealflow?
- Talk a bit about your evaluation process and some of the unique things that you do when vetting prospective portfolio companies?
- What’s your take on VCs that pick a focus area and stay distinctly in their lane vs. those VCs that may have a focus but tend to dabble in variety of other areas?
- A position I’ve heard from many tech VCs is… “There are additional layers of risk in life sciences… the science itself, clinical trials, regulatory approvals, etc. that don’t apply w/ traditional tech startups… making it a very difficult category to successfully invest in”… Jenny, agree or disagree?
- What’s the biggest hindrance to either more or faster advancements in the life sciences space?
- With regard to life sciences… What’s required, in terms of progress, to raise a seed round… what about a series A?
- How do you help your founders navigate the fundraising process where many VCs don’t understand the science?
- Have you invested in startups where the chief scientist is CEO? If so, how to you assess for and/or help coach the commercial skills and leadership skills required to build and scale a venture-backed startup?
- How do you think the usage of automation and data will play a role in healthcare, therapeutics or other sectors?
- If early performance is an indication of long-term results, Genoa is well positioned as an emerging brand in venture… but I’m curious to hear what winning looks like for you? How are you keeping score on yourself and portfolio you’re building?
- Talk about some exciting new innovations or trends that you’re seeing. Where do you think they will have a big impact and when?
- Jenny’s love for science and interest in advancing the field, to make a real impact in the world is what ultimately got her into investing – as a way to support the next generation of business builders who are trying to solve problems with science and technology.
- Working with the Gates Foundation, Jenny began thinking about how to deploy capital through science, to retire risk and get to milestones, without being constrained by the 7-10 year VC timeline, and measuring returns by lives saved/impacted rather than cash on cash or IRR.
- Jenny thinks of her Angellist syndicate as a nano version of investing. What is most exciting to her is the opportunity to connect brilliant companies, such as Zymergen, with good sources of early stage capital while they build out the team and prove out their vision.
- Jenny thinks about biology and technology as forces that have historically been separate/independent, but today they’re increasingly colliding. She uses Illumina as an example, the leader in DNA sequencing. They are advancing the playing field of science but not typically well understood, because the underlying technology itself is not biology, instead it is applied in biology.
- The long term thesis at Genoa Ventures is to think about biology as a technology, and as a result create a variety of types of solutions that will impact healthcare, agriculture, chemicals and beyond.
- An important lesson to be learned from Theranos is that these really compelling visions with compassionate leaders are still subject to the laws of physics and regulatory requirements.
- Jenny emphasizes the importance for investors and entrepreneurs in the life sciences space to know what specs of the challenges you are trying to address can be innovated through and overcome with passion, but also know which ones are actually barriers you must pass between.
- An important element of her evaluation process is to continually improve at the first pass triage. Before interacting with a founder. she often asks herself if the deal is realistic for the firm, taking into consideration her responsibilities with her current portfolio companies.
- What it takes to get a deal done goes so far beyond the technology, the thesis, or the team, but also what size of investment the company needs right now and whether or not that is a good match for where the firm is and it’s fund cycle.
- For companies that do not fall into a traditional venture sector, one of the best ways to ensure you reach success is to build a syndicate around yourself that reflects your unique, inter-disciplinary nature and complexity.
- There are no shortcuts to developing a proper toolkit for science based risk evaluation and mitigation. It takes a great deal of time and effort because of the nature of its complexity.
- Jenny believes we are just at the beginning of a revolution in better tools to advance the life sciences and tech space. When we can develop a better understanding of the science and generate that information, it will inevitably lead to better products.
- The challenge to more rapidly developing advancements in this space, is that the budget and spend on tools are a fraction of the overall spend on healthcare or research.
- What Genoa often looks for in opportunities to potentially lead, is the ability for a company within the first round period to substantially de-risk on the technical side, prove their approach is not going to violate the fundamental laws of physics and also generate a blocking IP thats part of their intellectual property.
- Part of our job as investors is to help the company think creatively about how far they can get along the goals of retiring technical and market risks, without necessarily having to run a fully developed and funded commercialization effort yet.
Transcribed with AI:
welcome to the podcast about investing in startups, where existing investors can learn how to get the best deal possible. And those that have never before invested in startups can learn the keys to success from the venture experts. Your host is Nick Moran, and this is the full ratchet
Welcome back to TFR today Dr. Jenny rook joins us.
Jenny is the founder and managing director of Genova ventures, which invests in early stage companies innovating at the intersection of biology and technology, with a focus on research tools, molecular diagnostics, synthetic biology, AG, biotech, and industrial biology. In today’s interview, we discuss her background in genetics, physics and computer science. The backstory behind founding Genoa ventures, how she built the largest Life Sciences syndicate on AngelList and maintains it as one of the highest performing syndicates of any sector. Why Genova focuses on companies at the intersection of biology and technology, the effects of the Theranos implosion on the industry, her take on the focused versus generalist VC, how she accounts for additional layers of scientific and or regulatory risk, the biggest impediments to advancement in life sciences,
the milestones and requirements needed to raise a Series A in the space if she backs scientist led startups, and we wrap up with a discussion on how she defines success for herself and gentlemen, here’s the interview with Jenny rook of Genoa ventures.
Dr. Jenny rook joins us today from San Francisco. Jenny is the founder and managing director of Genoa ventures Genova Ventures is a Silicon Valley based venture firm with investments in zymogen, caribou Biosciences and ion path among others. Previous to Genoa ventures, Jenny worked at Fidelity biosciences, a Cambridge based healthcare VC, and later the Gates Foundation, where she managed and deployed over 250 million in genetic engineering, diagnostics and synthetic biology. She has successfully built the largest Life Sciences syndicate on AngelList. That is also one of the highest performing syndicates of any sector. Jenny, welcome to the program.
Thank you, Nick. Glad to be here.
Yeah, talk about a bit about your background in genetics and physics, computer science. And you know how that kind of led you to a career in investing?
Yeah, so as you mentioned, my background is really deep in the sciences and scientists to still at heart was studying physics and computer science as an undergrad at Georgia Tech, and had never been particularly interested in biology, it seemed like this kind of squishy, descriptive, not particularly rigorous discipline, but that was just because I was looking at it incorrectly. And took a took a class where I was exposed to genetics for the first time and just completely fell in love with with genetics. For me it is that the intersection and the embodiment of that, that quantitative information, rich, rigorous science that I had been training in, in math and physics, computer science, but it’s, it’s embodied in the physical world. And that’s just so exciting. So really, ever since then, I’ve been looking for ways to one advance the field, there’s so much we still don’t know. And to find ways to be useful with it to, to solve problems, and then help people and make an impact in the world with with the science of genetics and related disciplines. So there were a lot of steps along the way to get additional skills and going into management consulting, to learn what business was and know how to think about strategy, building a startup to really learn operational experience, but then eventually settling on investing as a way to bring all have those skills together to help the next generation of business builders who are trying to solve problems with science and technology, which is what I love to do.
Awesome. Tell us a bit about how you how you started working with the Bill and Melinda Gates Foundation.
That was certainly not an expected step. I will tell you I had I really didn’t know very much about the organization other than its, you know, great reputation. And I had had been in venture for a couple of years by that time, like you said at Fidelity Biosciences in the Cambridge area. I was just kind of cutting my teeth I would say in venture after a couple of years, I had led a couple of deals as kind of getting the swing of things and and this opportunity to join the gates foundation arose right at the right time where what they needed was someone who had deep expertise in genetics specifically, and also had a strategy toolkit and investing experience who was comfortable deploying capital. And that’s a pretty unusual intersection. There’s more and more now. But at the time, this was over 10 years ago, that was a pretty limited set of people. And so I reached out to see how I could be helpful. And what I learned was, they were making really exciting bets, broadly in the areas of engineered biology, genetic engineering, synthetic biology, to solve the big problems that that that organization has, has set out in their mission to address like eradicating malaria. And I found that really compelling to kind of bring that toolkit that I had developed to bear upon their goals. And as a fledgling investor, I was really curious what it would do to my development as an investor or someone thinking about how to deploy capital through science to retire risk and get to milestones. If my timelines were different if they weren’t constrained by the kind of 710 year VC timelines, and if the way I was measuring returns was different, which was in really lives saved and impacted, as opposed to cash on cash or IRR. So it was a really interesting variation to me on the investor role. From my own personal development, as I still trying to try to learn to be the best kind of investor, I could be to modify some of those parameters and keep learning. Awesome,
awesome. So what what are Melinda and Bill like in person?
There are every bit as extraordinary as their reputations that would lead you to believe. Good,
good. So we mentioned this in the intro, but you have one of the most successful syndicates on AngelList. Regardless of sector, I think I just took a peek at the rankings this morning, in both in both new second gen are in the top five. So we feel like we’re in good company with you, Jenny, can you? Can you talk a bit about why you started with a syndicate and how you’ve been able to sort of drive such high performance early on.
Yeah, I’m so grateful for AngelList for going out on the limb and really innovating how early stage capital formation can be done. It was right at the right time. For me, I had left the Gates Foundation, I had moved to the Bay Area in 2013, to really give back and to the world that I most love. And it’s kind of the best fit for my metabolic rate and pace, which is just that early stage startup where, you know, people are passionate about solving a problem, and they’re moving really fast, and you’re going lean. That’s where I love to operate. So I came here and I was finding great companies and helping connect them to capital, I started working again with my previous employer fidelity now called f prime capital as a venture partner. And so was really back in that ecosystem. But But what I found was a real gap in the marketplace for companies that were life sciences, but weren’t necessarily healthcare or the next therapeutic. And you know, as you know, I’m sure that the VC landscape is pretty siloed, or traditional VC, you’ve got your healthcare VCs, and you’ve got your tech VCs. And in the five or six years since then there’s been more incursion from one side or the other into the middle, but it’s still pretty white space. Meanwhile, there are more and more companies coming along, that are definitely biology based. And so you have to have the expertise in the toolkit that I learned from Fidelity biosciences, for how to evaluate them, how to help them how to navigate that risk. But you have to be up for a journey that is something other than the next therapeutic that’s gonna go through the clinic. So I kept finding companies that I was excited about that just weren’t a match for either of the kind of traditional sectors in BC. And so it’s right around that time that AngelList started the syndicates program, where as you know, a syndicate lead could bring to the AngelList investor community and opportunity. Explain in a Deal Memo, why the lead was investing and why they were excited, basically the investment thesis and invite others to join. And so I think of it as, you know, a nano version of venture where I as the GP, I’m going to my backers and the syndicate my nano LPs to say, you know, this is my thesis. I’m the manager here I’ve expertise to evaluate the deal. Who’s with me it just kind of deal at a time and on a smaller scale. So I was able to the most exciting thing about all of that, to me was that I was able to connect some awesome companies with early stage capital at that time. Were there no work, good venture sources? And so you mentioned zymogen, you know, invested in the seed round at a time. And no, they just didn’t make sense to to either healthcare investors or most tech investors. Other companies since then, like like Zephyrus, where they only needed seed size check, to be able to leanly develop a product get into the customers hands and exit. And that, you know, that’s not a great fit for like a traditional $500 million healthcare fund. So it was so exciting to be able to use syndicates mechanism to connect those kinds of companies with some early stage capital, as they were building out the team as they were proving out their their vision. So it happened again, and again, I just kept finding exceptional companies kept using Angeles as a way to capitalize those early deals. And that’s what brought us to today. So I did about 10 deals on AngelList from 2014 to 2017, prior to launching Genoa last year.
Wow, awesome. Awesome. Yeah, I was talking to a series a VC recently that was telling me that they do. You know, they invest out of a fund and in recently added SPV side cars. When he heard my story about our timeline is almost the same as yours. You know, we did 10 deals from 14 to 18. And then Then close the fund. But he said, Oh, you guys did it the opposite way. And I was thinking, well, not really, we just kind of built it bottoms up. But hey, whatever works for you, right? Yeah,
was sort of the OG way to say, really focus on the companies. What did the companies need? How do we get them the right capital, the right stages? And then if that turns out to be scalable and better executable using the tools of venture with a blind pool fund, and LPs and capital calls, then great, let’s do that. But, you know, for me, and it sounds like for you, it’s never been about VC VCs sake, or the prestige or the sexiness of being in venture or having a fun, it’s like what are the right tools for the job to help the best companies build what they want to build?
First Principles? Exactly. Yeah. So do you still syndicate alongside the fund?
You know, I haven’t so far, certainly the fantastic backers, who are part of my syndicate on AngelList. They have, of course, pro rata rights in many of those deals. So there are a few deals that I still run on AngelList, to make sure they have access to their follow on allocations. But I’m not currently doing any new deals on AngelList, I’ve got kind of my hands full, starting over and then, and raising a fund. But I do think it’s interesting, you know, think in the longer term creatively about capital formation and all the different tools that are available, and whether there might be companies that come along, that are not a fit for our fund our core fund, but might be a good fit for for AngelList. I think that’s something interesting to consider. And then the main issue that one runs into is just the bandwidth and kind of having the discipline to make the now the fund and my investors my number one priority, like I’m accountable to them and to returns and so, you know, my next available unit of work and thought that needs to go to that as opposed to to any other kind of investment.
Good, good. So you talked earlier a bit about the thesis and this whitespace that exists between, you know, the life sciences and the technology. On the website, it says Genoa ventures invests in early stage companies innovating at the intersection of biology and technology. I’d like to understand better what that means. So you know, what is what is the prototypical company that’s kind of at this intersection, you know, you could give us examples or explain to us kind of more in depth about the, you know, the types of companies are looking for better on thesis for general?
Yeah, absolutely. So for the Matthew, folks out there, if you think about biology and technology as an independent axes or vectors, I think of this as a kind of cross product situation where biology and technology are these forces that have historically been kind of separate or independent, but they are increasingly colliding. And so you get kind of vectors coming off of that in a few directions. So one of them for us, is that incorporation and increasing incorporation of other kinds of technology into the practice of biology and biology based businesses. And so you know, a simple example that probably anyone who’s been tracking this space knows about is Illumina, which is the absolute leader in DNA sequencing. So is this a biology company? Well, absolutely, they are the underpinning of so much that’s happening in genetics and genomics research in genetics based clinical practice diagnostics, discovery and new medicine. This is definitely a life sciences company and increasingly a healthcare company. But is it a therapeutic? No, it is not. Right. Its product itself is a collection of, of chemistries of hardware optics, of data sciences. So those are the kinds of companies that I’ve always loved as a scientist, because they’re making science go, where they’re really advancing, where we are the playing field of science. But they’re also typically not terribly well understood, because that the underlying technologies themselves are not necessarily biology. They’re applied in biology. And I would say also, their business model on like a therapeutics company looks more like a tech company in that they are products that need to be launched with product life cycles with customers that need to be acquired and served very different from like a therapeutics company. So that’s one sort of direction. We love those kinds of companies, and particularly happy to lead first round investments for those kinds of companies. So that other direction that comes out of the collision of these two forces, or the intersection of biology and technology, we think of as biology as technology, where the biology itself is increasingly not just understandable, but engineer trouble. So the headline example here that I think people are more and more familiar with are is CRISPR casts, based gene editing, and the ability to go in and manipulate the DNA, say, of a cell, they might be using an experiment, and to be much more precise, and, and deliberate about how you’re, you’re changing the DNA of an organism of Excel. So that’s, I think, very visible. But I would say this, this kind of harkens back to the work he did at the Gates Foundation, which was, believe it or not, pre CRISPR era gene editing, right, there are other systems for doing gene editing and, and for genetic engineering, and we’ve been doing it you know, for decades now. And a lot of that work was, you know, again, not just in, say, the latest therapeutics, but in things like crops with increased nutritional content for better health, or the Engineered Mosquitoes that now people have heard about for controlling Zika or Dengue gay. So that’s a space that I think it’s less well developed for for venture investing. But our long term thesis is, and thinking about biology as a technology is going to result in a no pun intended a whole new crop of types of solutions that will have impact not just in healthcare, but in agriculture and chemicals and beyond love
it. And I don’t want to focus on the negative per se, but does a company like Theranos does that it feels like to me that that’s the intersection of biology and technology. Is there any negative blowback in sort of the ecosystem at large and in venture funding? Because of you know, this, this one company’s probably overhyped demise?
Something I’ve said about Theranos would set which sounds cheeky, it but I’ll stand by it is no one in my industry ever thought Theranos was in my industry? Oh, interesting. What I what I mean by that is, it’s really exciting. I would say the positive part about Theranos to two positive things, at least one is the mission, I think, really captured the imagination of other types of investors and the public well beyond the traditional healthcare sector at the idea of bringing better health care to the point of individual patients and consumers do that more efficiently. That’s awesome. We all want that. And I think you’re absolutely right to call out that mission as being squarely in Genoas focus area that is absolutely technology, driving biology making biology based solutions more available, more effective. So we’d love that. I will tell you before Thera knows I’d seen approximately 1000 business plans or pitches, Along those lines, wow. Yeah, so. So it wasn’t a new idea by any means what was sort of new about it was how it somehow became so visible to a much broader audience, and captured a lot of dollars to go along with that attention. So the demise was not unusual, either. Of those approximately 1000 plants, very few of them have have made any kind of headway, and certainly none of them have achieved the full, full potential. So that’s not unusual. That’s not terrible. And we celebrate trial and error in this space. So that’s all fine. So what again, what made it kind of special or unusual is just the scale, and in some ways, the scandal of the demise. But the positive part of that, as well as I think, for everyone who was paying attention, also learned, hopefully, are had the opportunity to learn a really important lesson, which is that these really compelling visions, with passionate leaders are still subject to the laws of physics, and indeed, to the laws of our nation’s. So the regulatory requirements as well. And so you can’t, you know, passion and spend your way through some of those laws, they’re either the way the world works physically, which is not subject to hacking, or they are the way laws and regulations were, which are there to keep patients safe. And we probably don’t want people hacking them. So, you know, I think that was an important. Again, an important lesson for for either investors or entrepreneurs who are interested in the space is to know what specs of the challenges that you’re trying to address, can be innovated through can be overcome with passion and know which ones are actually barriers that you must pass between you must navigate among. So given all that, I mean, to answer your question, I don’t think there has been much impact in in our space. I don’t think there’s been blowback back amongst investors who are investing in that space, because again, we didn’t think that this was no, there was clearly a mismatch between the story and the technology from the beginning. For anybody who has expertise in the space, it has, I think, been helpful and that it has cooled some of the exuberance amongst non expert investors, which is probably to their benefit as well. Very
good. Yeah, it’s interesting, because I think I have to find a new analogy, I, my big product success and a former life was a automated micro fluidics solution for water analytics. And ah, yes, for a while there, the analogy I used is, do you know Theranos? We did Theranos for water. Oh, now to my detriment, it’s it’s not an analogy that really works. So
yeah, that’ll backfire.
Fortunately, the science worked in our case, but oh, well, there you go. Yeah. So So Jenny, you mentioned these, you know, 1000 pitches that you saw that we’re kind of reminiscent of, of that business. Tell us a little bit about how you use source deal flow, and where you find the opportunities that you invest in.
One of the benefits of doing this work in response to a need in the marketplace is that our we have really robust and exciting deal flow that that finds us that word gets around that if you’re doing something bio based, and you want an expert investor who’s not going to make you do therapeutics should probably go talk to Jenny, and see what she’s up to at Genoa ventures. So that’s fantastic. And certainly really happy to have, you know, referrals through investors in our network entrepreneurs in our network, or even just people who read about what we’re doing and for whom, that it really resonates. And they say that that’s that intersection that I’ve been at and have been looking for a home. So we get a lot of inbound. I love to try to be responsive to the community and ecosystem. And so I speak on panels and help mentor at places who have, you know, entrepreneurs of this type. And so I think that that helps get the word out as well. And then just like anybody, of course, we’re, we’re excited and curious about various advances in science. And so we’re constantly reading and going to conferences and talking to other innovators. So I’d say it’s a range, just like for anyone.
Judy, can you can you talk a bit about your evaluation process and maybe some of the the unique things that you do when vetting prospective companies?
Sure, happy to think anyone who Who has been an investor for a while realizes that, that an important element of the evaluation process is to is to get better and better at first pass triage. And that’s not just for our own sanity and and time, but also for the entrepreneurs. And it is, as a scientist, as a lifelong learner, it is always tempting to take that first call, and then to take that second call and learn more. There’s so many compelling things going on out there. But one of the things I tried to you know, really, honestly ask myself at the beginning of getting to interact with a company is, is this a doable deal? Right now, for me and for Genova given everything else in the portfolio and everything else that’s going on? And sometimes the answer is no. And it’s often I mean, most of the time, the answer is no, and most of the time, no, is not even a function of the company. Right? So I would say, that’s one thing to know, if someone is out there pitching, you know, if you’re pitching, you’re gonna hear a lot of noes. And the adage of it’s not you, it’s me, is actually probably true in many cases that has people, you know, not not get too discouraged and keep on going. What does
that mean? Is it just a bit too far afield from a thesis standpoint? Or is there you know, another factor that most often, you know, it’s just not something that you could do right now?
Yeah, I think it’s such a mix of things. That was one of the surprising things about going from day one, as a fledgling VC to call it, you know, day 365. And beyond is realizing that what it takes to get a deal done goes so far beyond just the the the technology, or the thesis or the team, you know, all of those core pillars of a great opportunity. It’s also know what, what size investment does the company really need right now? And is that a good match for where the firm is in its fun cycle? What are the key elements of the technology innovation? And do we happen to know anyone that we can call to get a quick read on that, or we we need to do some problem solving to figure out what that is? Is it similar to something else we’re looking at in a way that is either constructive or destructive. And then also remembering that the people on the venture side are also people and so they have things like vacations maybe coming up, or no other things going on? Can their family or other things just going on at the firm, now they’re building businesses too. And so whether there’s enough kind of mental space to get a deal done in the timeline that is relevant to the company, right, which is the most important thing is they’re trying to get, you know, certain amount of capital and a certain amount of time to keep building the business. So there’s such a, there’s such a whole host of factors, that there may not even be, you know, any particular feedback that comes with the No, no, just not a fit for us at this time. And that can seem so evasive. But sometimes it’s you have to realize that the default is no. And so just getting over that that hurdle is is hard enough itself, right?
Yes, we we did talk about focus a bit. I’m curious to hear your take on VCs that pick a focus area, in stayed distinctly in their lane, versus others that may have a focus but tend to dabble in a variety of other areas. You know, what’s your, which side of the fence Do you land on?
You could probably guess, given away I’ve been talking about this. So can the listeners too, you know, I think there are different models available to different styles of investors and different areas of investing. But I am have a very strong belief that if one is investing in a in a specialized area that is complex, that the way to be great at that is to really focus on that. And that’s I think that’s probably true, most pursuit. So if you want to be an Olympic level athlete, you’re probably not dabbling in other pursuits, really focus them on being the best at the best of that. And so, I would argue that being good at investing in highly complex kind of technical areas is sufficiently hard that I can that you can only be good at it by focusing on it. Which is not to say that there are not that there’s not value that tech and generalist investors can’t bring quite quite the contrary. A. So I think for companies that are in the white space who don’t necessarily fall into a traditional venture box, one of the best ways to ensure their success is to build a syndicate around them that reflects their own interdisciplinary nature and their complexity. So we love to catalyze syndicates, where we’re bringing in a tech investor who’s really on the edge of the latest computational tools, and is going to help the company think about that as applied to their biology based business, or an investor who really understands the chemical space or the Ag space, but maybe doesn’t have the deep biology expertise that we have. And so I think that complementarity can be a great way to make sure that, that a company has expertise in the various pillars it needs. But then again, none of those examples I’m talking about is a is a dabbler. It’s, it’s
got it got it, you know, a position I’ve heard from many VCs is that, you know, they’ll say that there are additional layers of risk in life sciences, you know, the science itself, clinical trials, regulatory approvals, et cetera, et cetera, that don’t apply with traditional tech startups, making it a very difficult category to successfully invest in, you know, beyond developing a deep expertise, like, like you just illustrated, do you agree that, you know, by focusing on sort of the center intersection of biology and technology, there are many other layers of risks that that one has to evaluate in order to be successful investing in the area?
Well, I do think any sector specific investing, or technology specific investing brings in risks that are specific to that area. Yeah. So so for sure. You know, if we’re investing in a company that’s going to do clinical trials, then then there are risks around clinical trial design and recruitment and regulatory, that one would not have to navigate. If we weren’t in this space. I don’t know that it’s more or less, because, conversely, one is launching consumer apps, there’s a whole set of risks around consumer adoption, that that, frankly, I’m not an expert in seem pretty, pretty hard to me. So I think, you know, I’d want to give props to, to areas that maybe it’s not as obvious that they also involve deep expertise, and, you know, years of experience that pride, you know, better judgment, just because all of us is, in some one way a consumer doesn’t mean that we all know how to do consumer investing, I would say, you know, in the same way that just because all of us at some point interacts with biology or healthcare doesn’t mean we all know how to do that kind of investing. So I think each has, you know, risks and skills necessary to navigate those risks. I do think that developing the toolkit for science based risk, evaluation and mitigation takes longer. There are no shortcuts. I’ve had people say, Oh, is there any like book I could read that would kind of catch me up to speed along the lines of your six year PhD in genetics, and I was just offensive? Do you think it took me six years because I wasn’t smarter wasn’t working at it, though. It just really takes a long time to figure this stuff out. Yeah. And so So I think that is that is true, I don’t know if it’s more or necessarily harder, but it is more complex, and therefore it takes more time to do the work.
What do you think is the biggest hindrance to either more or faster advancements in the life sciences, technology space?
Well, I’m definitely seeing it through my lens and through my passion, which is that if I flip the question around the most powerful lever we can pull to more rapidly advance basic sciences and science plays bass disciplines, like health care is better tools. So you know, just kind of bringing it back to DNA sequencing. When I was getting my PhD in genetics in the 90s, I was able to focus my work on the sequencing and characterization characterization of a single gene, right, that was just what was possible in that era. And that was because I was literally pouring my own sequencing gels, right. You could only get a few 100 bases a day out of a sequencing experiment, right? And now it’s, you know, 1000s and 1000s of genomes could be sequenced in the course of one’s PhD or in the course of a clinical trial right so Excel Writing and that is all because of tools advances. So I honestly think we’re, we’re just at the beginning of revolution in, in better tools. Fundamentally, they’re all just better microscope, right? When we can see what’s going on in there, whether that’s literally see it or kind of metaphorically see it and generate the information, then that’s going to lead to better understandings and insights and science and and also, ultimately better, better products. Now, a challenge to that is the budgets and the spend on tools, of course, are a fraction of the overall spend on healthcare or on research. So it doesn’t lend itself to like big venture wins, you know, there not a lot of billion dollar exits in life sciences tools. But that’s fundamentally why launched Genoas so that we could stay small and generate venture quality returns on these kinds of opportunities. You
know, I’ve never spoken with somebody that operates early like you do in this, this category at large funding early seed rounds, and helping founders kind of navigate this fundraising process. We actually, we just had Ashraf rest on recently, and he was talking about the different phases and gates for b2b SaaS, which I think is, you know, very well established. But for, you know, a sector or category like life sciences, it’s, it’s clearly a different set of phases of gates and milestones. Can you talk about how you think about that? And, you know, what, what does it take in terms of progress to raise a seed round? And? And to move on to series? A?
Yeah, it’s a great question. Of course, there are different answers, depending on what kind of company we’re talking about. Because our lens on the world is technology based, you know, we have, we have different kinds of companies, they might be a diagnostics company, or they might be, you know, agriculture company. And so the answer is going to be very different depending on what what the product is and what the market is, obviously. But just as an example, since we’re talking about life science tools, and because we, we are so excited about them, I’ll focus there as one way to think about value creation along the journey there. And so what we’re often looking for in that first round, that that we like to lead for these kinds of companies is the ability for the company within that that first round period, to substantially de risk on the technical side, where they’re able to show that their approach to, let’s say, generating genomic data or generating protein data is going to work, it’s not going to violate those fundamental laws of physics that we were talking about. So that, you know, their innovative idea about you know, how to analyze biology, better or faster or cheaper is actually going to work. And it can be messy, you know, it can be a prototype, it can be something that, that only they can use, because they have to, you know, hold it together with one hand while turning it on the other. But, but they can show that it can work. And that’s it, you know, it’s a huge step forward to go to that proof of concept. To that that’s critical. And usually, one way in which our investing is more like traditional healthcare investing is usually there’s generation of blocking IP as part of that intellectual property, that’s going to give the company a sustainable advantage as well. So that’s something we’re looking for as well, either they’re coming in with that, or they’re generating that during the proof of concept. So
are those requirements after the seed round, or in order to get the seed round?
It can depend on the complexity of the technology that we’re talking about. So I like to, I like to begin with the end in mind and work backwards. So if what we’re trying to do with that first round, whether it’s called seed or a, you know, we’re flexible, there’s lots of considerations there. But let’s say it’s a seed round, what we’re trying to do at the at the completion of the seed round is that the company is in a good position to raise a Series A because they’ve shown their, their technology works, they have proof of concept for that. And they have some headway on building an intellectual property barrier around that. And so whether that all happened within the seed round, because they were super nimble and efficient, or whether before the seed round, they spent, you know, 10 years in academia, doing the research filing the patents, you know, that can that can vary really depending on the the nature of the science and how complex it is, and also how experienced the team is. So it’s, it’s really about can they get to that outcome by the end of that first round, that’s going to enable them to raise the next round to go Start putting products in customers hands.
Got it. Got it, we operate in a completely different area than new. But we think about it much the same way we, we start with, you know, the end in mind and try and work back and say, in 1218 months, where do you need to be in order to? You know, raise that up round? Yeah, more than double. So in light of that, in order to get the series B, I’m sure there’s a wide distribution of progress. But are you expecting some level of commercialization before a B round occurs? Or, or not?
Yeah, it’s typically I would say, yes. And I think you’re, you’re wise to couch it as some level of commercialization because, again, we’re helping the company think about what it’s going to take to raise the next round from a great investor, attractive valuation. And that investor is generally going to assume we retired technical risk, more or less, and is now thinking about market risk. And so they’re asking, Is this the right product? Do people want it? Can they use it? Once they’ve got it? Are they? Are they going to buy more? Are they using it at a rate that’s going to support the business model and the pull through revenues? So, you know, obviously, the farther along? One is the company isn’t commercialization, the more those questions are retired, but a clever company working with limited resources, which is what startups are, might say, well, what are some of the best proxies we can create that help give someone conviction that the answer to all of those questions are yes, and so that some level of commercialization might be as limited as we’ve placed six of these products with some of our most compelling customers, we represent our go to market customer types, and they’re all wildly happy, and they’re telling their colleagues, and they’re using it on a weekly basis, and they’re happy to buy reagents, these kinds of things. So I think part of our job, it sounds like you do this as well, part of our job as investors is to help the company think creatively about how far they can get along the goals of retiring those risks without necessarily having, you know, run a full fledged fully funded commercialization effort yet,
right. Love it. Jenny, have you invested in startups where the chief scientist is also the CEO? And if so, how do you assess for indoor help coach the commercial skills and the leadership skills required to build and scale a venture back startup?
Yeah, I think this is so this is so hard. And, and it is a it is a struggle I relate to, again, having to be a scientist, and I love the science, but also recognize that what we’re doing in this model of venture funded startups is, is building businesses, first and foremost, that are creating value, people are getting paid for that value. So I certainly have seen and I think we’re seeing more and more technical founders who are able to fully embrace the CEO role and realize that that is different from being the CFO or the CTO, and are and are willing to go that direction and say, that means I have to hire a new CSL. Because, you know, can’t I can’t do both. It can’t be me. It’s not not because I don’t contain multitudes, but because they’re two different roles. And no one’s going to be great at doing both roles at the same time forever. And so I certainly, I certainly do see it happen. I will say it’s, it’s rare. And I think it’s particularly rare for for someone who is maybe coming out directly out of a scientific role, like maybe out of their postdoc, for example, and are starting a company, it would be anyways unreasonable for that to for us to expect them to know what that means to be to be the CEO, when they’ve never had a job before. So if I think about the set of things I just did not know or understand or appreciate. When I came out my PhD and went into management consulting, it’s kind of staggering. And so I certainly would have had no business running a company when I didn’t know what an operating model was, for example. So I think it’s really tough. But I do think that if a founder, the technical founder wants to go in that direction and knows they have a lot to learn, and has the kind of innate capabilities and that’s, that’s not destiny. That’s just do they have The capabilities to learn and the drive to learn, and I’m happy to to help coach in that direction. I do think it’s really important when one of my lessons learned, frankly, as an investor, is to have this conversation with those founders, probably from the beginning and just say, you know, a real question for any startup CEO is how far can they go before the right thing to do for the company, is to bring in a more experienced chief executive. And that’s particularly true for technical founders. So let’s talk about what the risks are. Let’s talk about whether you’re comfortable with that. And, and let’s begin planning for how we’re going to handle that if and when it becomes a thing that we’re all excited about. Because it’s the best thing for the company, I think it’s just really important to to just have a frank conversation about that sooner rather than later.
Well, if you know if early performance is an indication of long term results, which is not, which is I would say Genoas is well positioned, as you know, an emerging brand and venture but but I’m curious to hear more about what winning looks like for you, you know, how do you keep score on yourself? And in your own portfolio?
No, it’s such a good question. It’s something I’ve been thinking about myself, because I’m, I’m quite motivated by winning, I’m quite motivated by by highest scores. And, you know, in school, it was, you know, easy to stay motivated by that. Because, you know, every, every other day, there’s a test, and you can make the most on the test, and more than everyone else, and I love that. And, of course, as we as we become grownups, and as we take on bigger challenges that have 710 1430 year arcs, right, there aren’t as many interim gold stars and participation trophies. So, so I think, you know, designing for ourselves, what what winning looks like along the way that would be consistent with long term winning is really important for our own motivation and, and for encouraging others. So for me, the number one thing is the companies and the teams that are building them. And so it is, it feels like winning for me, when I hear one of my CEOs say, we are so glad we had Jenny as our seed investor, because look how well the series A turned out, or Jenny really helped us think about how to design the beta program so that we can efficiently get those answers and really engage with thought leaders. And we’re just so glad she helped us with that, that that feels like winning, because that is doing the thing that I set out to do, which is providing the best quality capital and value add, I know how to do this set up companies. Of course, in the longer term, if they launch products that customers use and scientists use to make discoveries and advanced science, then that’s kind of my my long term yardstick as well,
love it. Love it, you know, these, I don’t know what it’s, it’s like in the valley, we have invested in companies that have Valley based investors. But you know, there’s a lot of investors across the country that have invested in some of them are our portfolio companies that critique them constantly, and criticize and tell them how to run their business. And it’s just, it’s really nice when a founder, just expresses so much appreciation for the, you know, the goodwill that you’ve shown and the positive acts that you do for them. And I think these founders really appreciate it when they can build these trusted, credible relationships with with investors that, you know, they don’t have to bristle or worry every time they hop on a call with you. Yeah,
and as someone who’s now, you know, starting a firm myself and raising a fund and having to be on the other side of the table, I honestly don’t think that building a venture firm is anywhere near as hard as building a venture backed startups. So let me start with that. But that being said, there are some some analogies and and it’s certainly the it’s certainly exhausting and discouraging, pitching. You know, you get a lot of nose and so to have some investors in your court who say, yep, that’s normal. No, no, no, don’t sweat it. We’re gonna keep looking for the ones who get it. You’re doing a good job. Yeah, this is hard. You could just rip, you know, reflect the ways in which building new things is hard. It takes an enormous amount of of energy and conviction. I think having having investors in my court and some wonderful LPs, I think, really get us and are going to be with us for the long haul, certainly motivating for me to be that kind of investor to my companies as well.
Jenny, if we could cover any topic here on the program, What topic do you think we should address? And who would you like to hear speak about it.
I would like to hear us as an industry talk more about the other end of the capital formation process, which is exits, and liquidity. Given some of the trends around larger funds and different kinds of investors, there is a need for both founders and early stage investors to have other options besides m&a or IPO as a way to generate liquidity. And I think that there could be a really thoughtful dialogue around that recognizing that when assets or companies move from kind of the venture stage to later stage, really more like a private equity play, it might be very appropriate for early stakeholders to find good, non disruptive ways to exit, I think that’s going to be really important. If we want to keep early stage capital formation healthy and vibrant, there have to be kind of ways to, you know, let my, your your in my syndicate backers out, when they’re, when they’re happy with their returns, you know, five to seven years in, there should be a constructive way to do that. So I’d love to hear us as an industry talk about that, and find options like secondaries that can can meet that need that can create opportunities for great, great funds, who are focusing on that can kind of remove some of that stigma by by taking it head on and saying, let’s, let’s make products that solve this problem.
Anyone in particular that you you’d like to hear from them on that? Well, I
think Ben black and Akkadian is being very thoughtful about this. And so he’s certainly someone that I’d like to hear talk more about it and like other people to hear him hear his opinions. And you might actually ask some of the big later stage investors to ask the soft banks of the world, you know, what kind of liquidity for early stage investors and founders, can you imagine being acceptable to you as a later stage investor? How do we build that into our our overall plans? viewpoint?
Jenny, what investor has influenced you most?
I will say the founding team that fidelity Biosciences was cheating a little bit, so I’m picking a handful of them but Steve Knight, Robert Weisskopf, then Austerlitz had the privilege of joining them as they were really establishing fund one at Fidelity now called f prime capital. And so that’s where I learned my my toolkit for being really rigorous and thoughtful about evaluating early stage Life Sciences based opportunities. It’s also where I learned my culture, which is a great sense of humility, thoughtfulness, and helpfulness and engaging with with companies and realizing that none of us has all the answers and we’re trying to learn together.
And then finally, what’s the best way for listeners to connect with you?
Best way to connect with me is probably through LinkedIn, I’m easy to find Jenny rock Genua send me a message there. We’ll figure out the right next steps. All
right, well, she is Dr. Jenny rook Jenny, thank you so much for coming on. I’m, I’m so happy that Sian suggested that we connect this was this was a really fun interview to do. And I just really appreciate all your candid responses.
Thanks so much, Nick. I really enjoyed it. Great questions. And I think it really helps that we seem to have kind of shared philosophy in our early stage investing and how we interact with our companies, even coming from obviously very different sectors. So that’s always a pleasure. I couldn’t agree
more. Thanks so much, Danny. Thanks, Nick. Take care.
That will wrap up today’s episode. Thanks for joining us here on the show. And if you’d like to get involved further, you can join our investment group for free on AngelList. Head over to angel.co and search for new stack ventures. There you can back the syndicate to see our deal flow. See how we choose startups to invest in and read our thesis on investment in each startup we choose. As always show notes and links for the interview are at full ratchet.net And until next time, remember to over prepare, choose carefully and invest confidently thanks for joining us