Lux Capital on Healthcare Investing
Adam Goulburn, PhD is a partner at Lux Capital. The Pulse had the opportunity to have a wide-ranging conversation with him about his firm’s investment philosophies, their process for incubating companies from scratch as well as some of the key trends they are closely following and investing in.
Adam, can you share more about what Lux Capital does and your focus?
We’re a Seed and Series A firm. We want to be the first institutional check into transformative opportunities where technology is the moat or barrier. An internal mantra is that the best way to predict the future is to invent it, and the entrepreneurs and founders that we are partnering in and investing with are creating the future.
In terms of my background I have a PhD in cell biology so I’m naturally drawn to life science and health opportunities; Some themes I’m generally interested in are the digitization of healthcare; genomics; coding biology; the microbiome; bionics and cyborgs; brain-computer interfaces; regenerative medicine; synthetic biology; human performance and nutrition. Having said all that, all our partners are generalists and seek out opportunities in areas that they (and we as a team) are passionate about. For instance, as an Australian I naturally love all things sport and have invested in and sit on the board of a drone racing startup, which is creating the sport of the future.
You mention being the first to invest in an idea, how early does that mean?
As mentioned before, our sweet spot is Seed and Series A. We’re a little different to some other early stage firms in that we’re also comfortable incubating and starting companies from scratch. We’ve done this across the board from a nuclear waste clean up company to a series of drug discovery platform biotech companies. Sometimes we’ll take operational roles for these companies but the ideal is to find the entrepreneur as fast as possible to take lead. Usually these newcos come from moonshot, contrarian themes and theses that we develop internally.
How do you get comfortable incubating ideas and why do you get involved at such an early stage?
We’re comfortable in the process of incubating ideas and creating newcos but these companies still remain high risk, high beta ventures. There’s not a set template or framework that we follow. We know that aggregation of key talent in the area we’re incubating is a must as is locking up as much IP as you can if the technology or part of it is coming out academia. Each partner at the firm has themes and theses that they are developing which could be anything from circadian rhythms and body clocks to human animal communication or tattoo technology. My general process is to speak to as many smart people in the space that I’m interested in, in order to up-level my own base knowledge but also to start bringing together relevant talent that can be a nucleus of a company. We feel like newco incubation is a real differentiator for our firm to push into highly contrarian, under-capitalized areas.
What current trends are looking at in healthcare investing?
We invest broadly across the healthcare industry and our portfolio is quite diverse. We see continued automation of surgical procedures hence our investment in Auris Health. Clinical development and the clinical trial process is in desperate need of rethinking and it’s clear that the key stakeholders are starting to think about how technology and high quality data (clinical and genomic) play a role in creating efficiencies and lowering costs in these areas. We’ve made a number of investments in this arena including Science 37 and RDMD. We also see a greater distribution of healthcare services away from the traditional brick and mortar experiences that patients have experienced to date. This might mean technologies to digitally navigate patients through the healthcare ecosystem in a much more consumer friendly manner (ie Pager) or moving clinical coordination services into lower cost settings such as at home like our investment in Hometeam.
What about pharma are you most interested in?
One company that we recently incubated is NY-based Kallyope, which is a drug discovery company targeting the gut-brain axis. We believe that this circuitry is a totally untapped therapeutic target for metabolic and brain disorders. That company is now 60 plus people and quickly pushing towards the clinic. In the last couple of years we’ve seen a number of biotechs employ machine learning and AI to their drug discovery processes and we’re incredibly excited about our portfolio company Recursion Pharmaceuticals in this space, which is using computer vision in a high throughput highly automated manner to uncover unique drug candidates to rare diseases. We’ve also invested in Senti Biosciences, a company that is using synthetic biology to program living cell therapies and add an extra layer of intelligence to these cellular therapeutics.
What areas are you most excited for going forward?
We’ve been developing a thesis in chronobiology and circadian rhythms for a number of years. Every cell in our body has it’s own clock. Our organs are cycling and oscillating at different rhythms. And we’ve generally thought that ‘time’ as a parameter has been ignored in medicine and clinical decision-making. The obvious target here is inventions for jet lag or night shift workers but every drug target in our body is cycling at different time points so generally chrono impacts most therapeutics. Other areas we continue to explore include single cell sequencing, where every cell in our bodies is being re-classified in terms of their transcriptome. The way we define humans on a cellular level is being re-written with this technology. I continue to believe that nutrition is one of the most under-invested fields in biology. Food and beverage companies are Big Tobacco of today and I see the emergence of new, scientifically driven nutrition enterprises that take mindshare (and dollars) away from the large incumbents. Lastly, we just founded a biotech newco that is attempting to engineer a new modality for gene delivery, which should come out of stealth soon. And every partner is exploring his or her own areas of interest, so needless to say, we have a lot going on.
You work at the edge of academia and business. Does that pose any unique challenges?
Academia is an enormous research engine for this country that we feel cant be ignored. The hardest challenge when interacting with research institutions is distinguishing between something that might be exciting research project and an innovation that has real commercial potential. Obviously the former is not fundable whereas with the latter a lot of things need to go right – from finding the right people to agreeing to economic terms for the technology with the university to securing funding - in order to even get a company up off the ground. What has changed in the last 10 years is that professors have become a lot more sophisticated in their understanding of commercial endeavors that may come out of their labs and are taking a more active role in industry. There are obviously needles that need to be thread with respect to this such as conflicts but on the whole I see real positive in moving incredible inventions from bench to bedside and market with the added benefit that researchers are becoming much more advanced at communicating their work with the public.
Thank you for the time Adam.
You can follow Adam Twitter @AGoulburn or sign-up for Lux’s weekly newsletter at https://tinyletter.com/luxcapital.