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Noticing some interesting new trends among @ycombinator S20 bio companies that speak to a new kind of biotech founder and a new kind of biotech investor.
Founders are the most fundraising savvy I’ve ever seen in all 7 of my years here in Silicon Valley.
Part of it is second-timers (and a few third-timers) with exits under their belts commanding $20M+ post-money seed valuations and raising $1M-$2M weeks before Demo Day.
Part of it is second-timers (and a few third-timers) with exits under their belts commanding $20M+ post-money seed valuations and raising $1M-$2M weeks before Demo Day.
Even the first-time founders have figured out or have been successfully taught how to engender FOMO by intially demurring an investment offer or by putting the investor on the hot seat to prove their value-add. When I was in YC 4 years ago I accepted any offer from nearly anyone.
The other way these founders are different is their business model sophistication. It used to be that simply getting LOIs or preclinical pilots set you apart from the pack. Now the top decile bio companies have revenues and even proof of concept human data at the pre-seed stage!
On the investor side, we all know about the explosion of microVCs, operator-led seed and Series A stage funds, and the plethora of founder friendly early stage capital.
What’s new is the rise of self-branded solo VCs and rolling funds (thanks to @AngelList) competing for deals.
What’s new is the rise of self-branded solo VCs and rolling funds (thanks to @AngelList) competing for deals.
YC deftly pocketed the value being left on the table by incumbent biotech VCs like ARCH Ventures @atlasventure @ThirdRockV who pass on grad students turned first-time founder CEOs in favor of their EIR pipeline constantly replenished by an endless supply of biopharma execs.
Brand name biotech VCs take their pound of flesh (80/20 equity split) and incubate NewCos in stealth while YC flips the cap table on its head leaving founders in control (20/80 split) with dilution to spare, and no pressure to flip the company for a 3-5X return in 3-5 years.
Founders don’t need traditional VCs to get to a clinical value inflection point because they can raise from solo VCs and value-add angels, they intentionally locate their companies outside of Boston or the Bay Area, and COVID is selecting for leaner, remote-first operations.
I think all of those trends are creating a more robust and distributed (truly national scale) biotech ecosystem.
I also think we’re also seeing a second wave of capital efficiency/lean startup thinking after years of easy access dumb money.
I also think we’re also seeing a second wave of capital efficiency/lean startup thinking after years of easy access dumb money.
The next phase of this evolution will witness the ascendance of the medium sized non-Bay area and non-Boston biotech clusters as well as the emergence entirely new bio+tech clusters across the country.
This is truly biotech’s decade.
This is truly biotech’s decade.
