Venture firm opens $200m bio fund
Venture firm Andreessen Horowitz put itself on the map with software investing. Now, it plans to take its software-heavy approach to biology and medicine, with a new $200 million fund for the hybrid sector and a former Stanford professor to run it.
Vijay Pande, who previously taught chemistry, structural biology and computer science at Stanford University, is taking the helm of the new Bio Fund.
While much smaller than the venture firm's last $1.5 billion general fund, $200 million amounts to a substantial sum for a fund focused on relatively niche areas such as digital therapeutics, cloud technology in biology, and computational medicine.
In an interview yesterday, Pande said he was eager to avoid the term "biotech", because of the image it evokes.
"Slow," he said. "Risky. Expensive."
Too many companies in biotech exemplify Eroom's Law, he said, meaning that even as technology improves, drug discovery becomes pricier and drawn out. It is the backward image of Moore's Law, the observation that processing power for computer chips doubles about every two years.
Instead, he sees the new fund investing in less capital-intensive companies such as Omada Health, a start-up backed by Andreesen's main fund that uses digital technology to tackle chronic conditions such as obesity.
One of his first investments is twoXAR, a company that uses specialised algorithms to identify promising drug candidates for clinical testing. Because of its reliance on remote servers, he has dubbed the sector in which twoXAR operates "cloud biology".
While many venture funds have lost hundreds of millions of dollars over the years to life sciences, the sector has picked up recently.
Last quarter, life sciences start-ups delivered $1.31 billion in initial public offerings, more than any other sector, and $1.65 billion in merger activity, the National Venture Capital Association said.
Some software-heavy companies in medicine command lofty valuations from venture investors, including doctor-referral service ZocDoc and chip-based drug company Proteus Digital Health, valued at $1.8 billion and $1.1 billion, respectively.
The bio fund will make roughly one Series A investment and 2-3 seed investments quarterly, Pande said. Series A investments generally start at a few million dollars while seed starts at a few hundred thousand.
Pande has worked at Andreessen Horowitz for a year as a professor in residence, connecting entrepreneurial academics with the firm.
In his new role, he becomes the firm's ninth general partner.