I was discussing our investment in Metabolon with someone recently, when I realized how well Metabolon exemplifies our unique approach to early stage investing. There is a tendency in the venture capital world to follow, lemming-like, into copy-cat deals that target whatever happens to be the hot industry — social media being the latest example. This lends a kind of boom-and-bust feel to the venture capital market.
We take a different approach. Back in 2005, everyone was investing in genomic-based personalized medicine, but our analysis of the technical literature suggested that genomics wasn’t going to provide the complete picture to disease diagnosis, progression or treatment. If genomics was truly the key to understanding everything, then why wasn’t personalized medicine advancing faster? It struck us that genomic breakthroughs would need similar support from metabolomics, a field that was attracting very little attention from the investment community at that time.
Metabolomics studies the unique biochemical fingerprints left behind by cellular processes. This, along with genomic, proteomic, and transcriptomic information, gives a more complete picture of living organisms. Our analysis suggested that personalized medicine would reach a plateau, where it couldn’t go any farther without the insight derived from metabolomics and the other -omic technologies. So, we began searching for early stage investment opportunities in metabolomics, which led us to Metabolon.
Metabolomics is beginning to attract a lot more attention. The National Institutes of Health (NIH) has established a metabolomics center, and Metabolon is entering into partnerships with all the top names in genetic sequencing, largely because its head start has made it the leader in metabolomics. This is a great example of our typical approach: To actively seek out early stage opportunities that are going to pay off five to eight years from now.
There are three simple reasons why we’re good at finding these early stage, everybody-else-was-ignoring-it opportunities:
- We have an interdisciplinary team. If we hired only geneticists, they would see the world only from a geneticist’s standpoint. We hire geneticists, biochemical engineers, material scientists, and experts in a broad range of other disciplines. As a result, we see the world more from a systems-level viewpoint, where we see how various disciplines work together to create the whole.
- We read the literature, and we build the academic relationships, so we know where the breakthroughs are happening. There are very few venture capital firms or investors that spend as much time as we do pursuing scientific breakthroughs. Because our team are scientists by training, we read the literature, we understand it and we appreciate the deeper implications of the research. Additionally, we build relationships with researchers and research institutions. There is no better way to understand whether these breakthroughs could lead to successful businesses five to eight years in the future.
- Once we identify a promising field, we map it out completely to understand the best opportunities. It’s never as simple as thinking, “We should invest in metabolomics.” You have to fully understand the field of metabolomics — what is known (and presents an opportunity), what is unknown (and represents a risk), and (most importantly) how the technology or science might best be applied to “the big problems” of our age. This involves deep research by our interdisciplinary teams. It also involves talking one-on-one with the people working in the field. We are very deliberate in our approach, because we are looking for great investment opportunities, not just cutting-edge research.
That is how we identify potentially explosive early stage investment opportunities like Metabolon. We’re not a venture capital firm that tags onto an existing trend. We identify interesting future market opportunities, get out there and find technology to address it or complement it, and invest at the earliest stage, so that when the market develops and the technology matures, we and our investors can achieve outsized returns.