✒️#3 - Science isn't broken, but it could be better
New science and VCs under the microscope
Good morning!☀
Here's your weekly roundup of the most interesting things I've read, learned, or listened to. Relevant breaks from the endless news cycle to feed your brain and help us all stay interesting.
🧪New science
Biotech is front and center today. In investors’ hearts, on CNN, coursing through my veins (👋 Pfizer). A fascinating angle to scope biotech through is in how we innovate in the hard sciences. “Science is broken” rhetoric proliferated for a while. It’s not broken. We’re just not innovating on the structure of discovery the same way we’ve innovated on many other aspects of society.
Traditional biotech comapanies spend years and hundreds of millions to develop a single asset that will end in a binary clincal/regulatory outcome. But today, we can apply software engineering to biology and biochemistry to arrive at working hypotheses much cheaper with higher degrees of certainty thanks to the ability to rapidly and cheaply iterate. Innovations to how we make new discoveries are coming both publicly and privately.
Public - Convergent and New Science are two organizations that will make huge strides here. I’ve met with both Adam (Convergent) and Alexey (New Science). They’re both geniuses who will do exactly what they say they’re going to do. They’re creating ways to spin up research teams like start-ups to develop tightly scoped research for public good and get creative scientists out of academia riddled with politics and tenure ladders and into running their own labs.
Private - we’ve become so good at commercializing exising technology that venture capitalists are now competing with venture debt and revenue-based financing (e.g., Pipe). But a few funds (e.g., Lux, Cantos, Fifty Years) continue to look further out the curve and fund new biotech/synbio platforms that are doing for the sciences what we’ve done in the rest of tech.
See my Twitter thread that expands on this idea.
🤷♂️VCs don’t count your chickens. LPs are looking deeper.
Speaking of VC. 2020 and 2021 saw wild IPOs/SPACs for late stage private companies. That’s been a boon for VC fund returns. Funds that were expected to return 1.5x are tracking at 3x. And LPs love the boosted returns. But LPs aren’t just satisfied that investors are getting these good returns. They’re looking into why they’re getting these returns. LPs want to back managers with repeatable strategies, not just great luck. Here are four questions LPs are asking:
Luck or strategy? Looking at the top 30 IPOs and who backed the companies to determine who got lucky and who consistently performed
Company flipping or sustainable businesses? Tracking post-IPO valuations to determine who got lucky from a crazy IPO market v. who backed sustainbly good businesses.
Who’s the real long term investor? Perhaps public market investors are becoming longer term investors than private investors, which would be a reason for high public valuations. In that case, time to double down on private assets when great companies are a bargain.
Where to recycle the money? High returns have generated a lot of cash for LPs who are eager to recycle that back into VC funds, but with (1) more emerging managers, (2) more SPVs for VCs to secure ownership in larger rounds, and (3) funds coming back quickly for subsequent funds, that money isn’t guaranteed to go back to the same VC funds.
✒I'm currently working on:
A series of pieces on my big bets. Areas I believe in most and put my own money toward. A couple I’ve written about briefly (agriculture, biotech) but most I haven’t (quantum computing, water, microchips, gaming, media). If any of you are experts in any of these areas, reach out and let’s dig in.
This stuck with me:
We can still have nice things:
— Nico
www.nicochoksi.com | @nico_in140
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