Funding the Future: Understanding the Stages of Life Sciences VC

Summary

Peter Chhoy: Peter is currently earning his PhD in the Cell/Cancer Biology program at Memorial Sloan Kettering. Before his PhD, Peter worked at McKinley for 5 years. While in his PhD, Peter has been instrumental to the operation and growth of Nucleate, an activator which pairs scientists with business experts and provides resources to develop a company with these newly formed teams. In 2023, he was a venture fellow at Qiming Venture Partners. In 2024, he joined Sinnova Investments. 

Sandra Pérez Baos: Sandra earned her PhD in Molecular Biosciences from the Autonomous University of Madrid, Spain. She later joined the Schneider Lab at NYU as a postdoctoral fellow, where she performed research in mRNA translation and immunology, and helped launch a therapeutics startup in the muscle regeneration space. In 2023 she joined 2048 Ventures, a thesis-driven earliest stage venture capital firm. 
Matias Porras Paniagua: Matias earned his PhD from University of Pennsylvania in 2023 in Bioengineering. He directly joined Insight Partners, a global software investor partnering with high-growth technology, software, and Internet startup and ScaleUp companies that are driving transformative change in their industries. He also has been a Board Observer at Exsilio Therapeutics since May 2024.

Funding the Future: Understanding the Stages of Life Sciences VC

1. For Everyone: Tell us a little about your background.

• What is the title you hold today?

• What stage of a company does your firm invest in?

• How did you develop an interest in investment and what was your career trajectory that led to this position?

Sandra: My PI helped launch biolabs at NYU and also many companies.

Matias: I did engineering at Genentech. I got advice to go to graduate school to get a PhD and explored many careers while in graduate school. I worked at PearVC while in the PhD program and then moved to Exsilio, a private equity team looking at seed to crossover rounds.

Peter: Went to Notre Dame for undergraduate degree. Ximing was where I got experience with Series A and Series B investment. Now I work with clinical stage companies.

2. Please describe what distinguishes the following stages of VC: pre-seed, seed, series A, and beyond series A.

Sandra: The funding stage is related to the milestones you are trying to achieve.

Matias: These are just nomenclature. Series A used to be the first money in the company and now this is represented as seed. Now it is just about the team. Biotech moves in a stepwise function. Bio is science so the steps are experiments and if they work then you can move forward and if they do not work then you fail. My advice is to not look at firms that give a lot of money to companies right away because they will not fund an early company.

Peter: What matters is what you need to achieve next.

3. For Everyone: Through your experience, what are some defining characteristics of a successful life science company which would make them worth investing in?

Sandra: Investing early makes it hard because there is not a lot to see from a company yet. There are three crucial things to look at:

1. Team since they always remain. A team needs resilience, non-linear thinking with expansive vision, and experience as a founder such as a second time founder or long-term scientist in the field.

2. Initial proof or validation like literature that the product will work.

3. Good business model and what milestones are going to be hit.

Matias: For tech, it is easy to tell if a company will work quickly. For life sciences, there is a lot more risk. There is not a typical series A or series B company. Everyone goes down their own path. You need to think about the competition too. We ask ourselves, “Is the founder pithing a story that is feasible given what they have done and plan on doing? How will holes be filled if there are any? Is there a good market for the product?” Not all products will make a good return. We run the math on all the investments we have to make to ensure there is a potential return.

Peter: For a team – truth seeking is important. Is it realistic the amount of capital the company wants? Good science can turn bad. You see successful founders getting investment again and again. The VCs let the science guide them. Sinnova is a company that invests in less risky science. They need to be consistent winners. Timing is also important. Sinnova needs ~3 years to exit as opposed to early investors which can have ~10 years.

4. For Peter: Your focus is on post-IND clinical data. What signal from clinical trial data do you look for to determine that the therapy being tested will succeed and how do you begin a deal with the company who developed the therapy?

Peter: Efficacy, safety, and market are all necessary to think about. What is the value to the patients and what is the modality? Scalability is an important factor to consider also.

Matias: There has to be a way to pay for the science. Gene therapy is an example of a technology that is hard to make companies from because there is not a lot of demand for them due to the low prevalence of the disease in the population.

5. For Sandra: As a seed stage investor, how close do you work together with the founders of a company to ideate or plan the scientific validation that is the focus at this stage in the company’s creation?

Sandra: 2048 Ventures does not micro manage. They meet with the companies every week and will give them advice. One thing that needs to be clear are the milestones they want to hit. Always interested in the plan B so that when the company is fundraising they will be able to get it. They also help with IP and are always there for the company if needed.

6. For Matias: Early series A companies have already received some funding that increases their potential to develop further. How do you and your investing team identify the companies that are NOT likely to continue this initial success? How deep into the science does your team go to decide this?

Matias: Have to look deep into the science. Need to look at the team – reliability and feasibility. VCs talk a lot so there is a vibe check with other investors. These conversations with existing investors can make or break a company if the previous investors are planning to invest in them again or not.

Peter: It depends on risk and how much you are willing to take. Novel chemistries are being created that are exciting and will allow for new products to be created.

7. For Everyone: What advice would you give to a student or postdoc interested in a role in VC?

Peter: Be well networked. Fellowships are great. Your network is #1 and helps you fit your science into the broader spectrum of the scientific market. Jobs are sometimes not advertised so it is who you know for how to get a VC job sometimes.

Matias: There is an increasing trend for PhDs being able to find more diverse jobs by learning what they entail. Matias likes to ask people what they do and how they got there. A lot is how you pitch the story to what you have done and how to go forward. Fellowships are the best way to begin. Firms want people who know that they are investing in companies, not science projects. You can get to VC after working in industry as well. Venture is not exactly as it sounds. There are many levels. If you start in venture out of undergrad, it is hard to move somewhere else.

Sandra: Emphasis on network. VC is opaque. There is no right or wrong path. However, it does depend on what type of VC you want to work with. You need exposure to venture as well. Sandra learned this through Nucleate and tech transfer. Also learning the business language and financial accounting, economics, and being confident during interviews is important.