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Comment by boltzmannbrain | Hacker News Reader

Life Sciences VCs that incubate and spin-out their own companies put serious muscle behind the startups, in two main areas: money and leadership. The article notes the first, going on to suggest large upfront financing is no longer necessary, but glosses over the second. In biotech it is still very much the status quo to have seasoned execs leading startups. Not because younger founders are incapable, but rather this is what pharma execs want to see, and have connections with. It's hard enough for a startup to get pilots and deals with pharmacos, exponentially so if the founders just took CS 270 with the CEO's grandkid.

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I think that the phenotype of biotech founders is changing and will continue to change. Some of the early stage biotech VCs who built their businesses around funding ex-Genentech execs are beginning to fund younger founders (although they are still open to replacing them with experienced execs post Series A).

More $10B+ biotech companies have been built by younger (under 40) CEOs than experienced CEOs. The dogmatic preference for experienced CEOs in biotech is a relatively recent phenomenon (last 15-20 years). It is a function of 1) all the next-gen tech of the genomic bubble of the late 1990s flaming out (gene, cell and antisense therapy v1, genomics v1) and 2) the success of the asset-centric build-to-buy model in biotech VC.

If your model is to fund assets carved out from big pharma, develop them to human POC, then flip them back to big pharma, it makes sense to hire ex big pharma managers to run the company. If your model is to build a large, lasting startup, historical data suggest you are better off with a younger, more technical founder. In a world where pharma is not doing as much startup M&A, where capital is readily available from Series B to public markets, and where you can get drugs approved relatively quickly, more startups have the option of becoming independent companies and not just trying to sell to pharma

Can you elaborate on "capital is readily available from Series B to public markets"?

I am not in this space myself, but I know a few founders who are and the perception is that they face meaningful headwinds from the late stage community due to their age and market preferences for asset-centric startups.

I should clarify that I'm referring specifically to companies developing FDA-regulated prescription medicines, I'm not as familiar with the device / diagnostics / "digital health" markets

There is more capital available in terms of number of dollars invested in biopharma startups. This is true across the board from Series A to IPO stage. 2018 was a record year for VC investment in biopharma. 2019 is down a bit but still shaping up to be the 2nd highest year on record [0]

There is a lot of Series A funding, I referred specifically to "Series B to IPO" because most Series A funding comes from 5-10 VCs who start companies in house. Later stage funding comes from a wider number of investors

The IPO market is also more open now than all but a handful of previous years.

There is also more venture investment in "platform", as opposed to asset-centric companies now than ever before [1]. Of the companies that went public since Jan 2018, ~25% of the programs they are working on are gene and cell therapy. Traditional small molecule programs represent under 50% of programs these companies are working on [2]. Historically essentially all FDA approved drugs are small molecules or biologics, so this shift to gene / cell therapy platforms is pretty significant

That said, a platform is only as valuable as the assets it generates. The value of a drug increases exponentially as it becomes "derisked" through clinical trials, and the value of preclinical or earlier programs is not super high. In many cases later stage VCs won't invest unless there is a fairly derisked asset, or unless there is some really compelling evidence validating the platform (Arvinas is a good example of platform tech that is well validated, they went public at preclinical stage and are worth ~$1B).

This is a function of the structure of risk in drug development and I think that it is rational for more advanced assets to be more valuable than less validated, but potentially more impactful platforms. I wrote an article on the relationships between risk and value in biotech that quantifies some of these ideas: https://www.baybridgebio.com/drug_valuation.html

There is also often a valuation disconnect between tech VCs, who may invest at earlier stages and at higher valuations, and biotech VCs who would ascribe lower valuations and / or require more derisking of clinical risk. The biotech VC market is very hot compared to historical activity, but it is not quite as hot as tech VC in general.

There is def some deep age bias in biotech VC, it sucks and I / my friends experience a lot of it. I think it's an irrational bias and it will get competed away.

[0] https://www.baybridgebio.com/1h2019_report

[1] https://www.svb.com/trends-insights/reports/healthcare-inves...

[2] https://www.baybridgebio.com/blog/ipo_2018_q12019.html

> The dogmatic preference for experienced CEOs in biotech is a relatively recent phenomenon (last 15-20 years).

I guess it's relative, I'm not even 30 :)

FWIW the pushback I get from big pharma is less around age but rather as an AI guy saying "look I solved that thing you've spent 20 years working on."

Yeah that's fair, from ppl I know at AI drug discovery companies it seems like selling to big pharma is tough. Potentially bc the people who assess the technical feasibility of your product may be put out of a job by it :/

Have you tried selling to startups? From what I've heard they are better customers for AI drug discovery services as there is less entrenched interest in manual med chem and they value lower cost / fast iteration more

AI drug discovery is not an ideal market -- crowded, and long horizons to validation checkpoints. Our value prop to pharma is in clinical trials utilities. Relative to drug discovery, better path from pilots to revenue deals, but still cumbersome. Nonetheless your advice to target startups is sound :)

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