Wencroc, a 51-year-old firm that started as the venture arm of the Rockefeller family, closed its ninth fund with $ 450 million, the same amount it had raised for its last two funds. The organization with offices in Palo Alto, New York and Cambridge clearly feels comfortable with fund sizes, but states that the change is otherwise a continuation, given that trends and technological changes occur so rapidly that so-called patterns Recognition can prove to be an obligation if an investment team is not careful.
To learn more about what the team is watching on Wynrock – whose latest exits include last year’s IPL of Cloudfare and 10x Genomics IPO and recent sales of Corvidia and Personal Capital – we were in touch today with long-time partner Brian Roberts, who spent his 24 years in the venture with the firm Has spent a career. .
Our exchange has been lightly edited for length and clarity.
TC: I spoke with my colleague Camille Samuels earlier this year about aging biology. What is the major area of focus for Wencrock and why?
BR: It is one of the many interesting fields of biology in immunology, CNS (central nervous system) and other fields, where there has been little progress and not very good needs.
TC: Talking of need, Camille also discussed why infectious diseases are not good business for new companies, because there are cancer and orphan diseases. As he explained it, with something like coronavirus, it is difficult to get funding before there is a real problem; Once a treatment is developed, it should be sold at a lower price, and then you hope you will not have repeat customers. Do you agree, and do you think it needs to be changed?
BR: Yes, I think things need to change, but there are many issues. In the case of a company I lost a bunch of money on – Echogen, which made a successful drug for a big drug need [but faced] The complex commercialization dynamics in the infectious disease space – and for many historic infectious disease companies, the cost of a drug is borne by the hospital, not billed separately.
It has also historically been difficult for anyone to focus on a lot from a preventive point of view – even in communicable diseases. Kovid, on the one hand, was not a particularly difficult biological problem to solve, but from an investment point of view, the issue was a tailor-made problem for an existing or large company, not a startup. Startups take 12 or more months to find their way through the front door, and the problem is solved by one of the much larger competitors.
You saw it with Modern. Its technology is particularly suited to vaccines – and then an epidemic hit.
TC: Wenrock recently helped establish a new microbiome startup called Federation Bio, the firm’s first bet on space. Why not accelerate in this area, and how would you describe the size of the opportunity? Is this something you want to carve more aggressively?
BR: We spent 12 months or helping to start the federation, with my partner Racquel Bracken acting as the initial CEO. We were not forced by prior approaches and teams, and this is really an intersection of the two motions that involve us in new projects.
In this case, Michael Fishback, a brilliant academic, had generated great data, so we ran it. We recently spent more than 12 months starting a new gene therapy startup in the same way – in the latter case, a pair of great academics produced exquisite cell type specificity – so we went out and did some Found leadership and preferred bus business.
TC: It’s a way to avoid crazy valuations. Where have the most ratings gone?
BR: Everywhere but especially for visible companies – or indeed – reduced binary risk and became a growth phase business [and that’s] Throughout the regions.
TC: You focus on: Biotechnology, Diagnostics, Genomics, Healthcare IT, Medical Devices. What is the biggest trend you are seeing in some of these areas, and where do you think you are spending a little more time in 2021?
BR: Personally, I am forced to value-based care in healthcare these days – meaning it is more efficient, has better results, has a better customer experience – and mostly from point solutions versus full stack platforms. I am also focusing on the biological insights and applications that the new genomics tool – single cell; Gene editing – can bring. Last is [I’m tracking what] Novel therapeutic modalities can actually bring bad diseases. It seems that we are in the first innings of cell and gene therapy.
TC: How do you think the new administration in Washington can affect your work?
BR: I think there will be a lot of talk about changes in content for health care and other stuff, but I think it will be mostly talked about in the Senate given the slim margins as well as fewer and smaller margins. [that Democrats have] at home. I think it would be a positive thing to have a bunch of silly stuff around [Affordable Care Act] Nothing is happening and people can get on with trying to improve and build implementation.
TC: What do you do to reduce the health costs of your own workforce given the recent collapse of Haven, a joint venture of Amazon, JP Morgan Chase and Berkshire Hathaway? Would you like to see Amazon more or less focused on healthcare?
BR: We are long time bears [about its odds] People cited over the past few weeks for a set of reasons [including lack of transparency into healthcare costs].
I would love to see Amazon excel in its brand, delivery logistics excellence, and super-tight margins in healthcare. I don’t think it extends to actual regulatory, confidentiality or risk appetite, but the company can be a terrible pharmacy / pharmacy benefits manager – and I hope they do.
TC: Regarding Wenrock’s new fund, have there been personnel changes? Will the shape change?
BR: We created partners Racquel Bracken and Ethan Butrasky; It is always fun when you can promote awesome young talent from within.
For our high-level strategy, check the sizes, and the steps are all the same. We have raised $ 450 million for each of the last several funds because we like that size and our culture and personality is more focused on performance than asset regulation. It seems really difficult to raise an increasing amount of capital without affecting performance excellence.
TC: Healthcare has never been hot. How much of Wencrock’s capital is focused on healthcare, and will it replace it with the newest fund?
BR: We are pretty bottom-up allocation driven; We invest based on the projects we find and fall in love with. Life science usually ends in about 30% to 40% [of capital invested]. Healthcare IT, based on which you talk in the universe, tends to get into healthcare or technology – I agree that software-enabled services businesses feel a lot more technology than biotech – typically having about a quarter of the fund Is anticipated and no anticipated change. The balance will go to Tech – a primarily technology and data-enabled software and services business.
TC: Wencroc consider forming a blank check company to make the company public, as more VC are doing?
BR: We do not have. It seems to me that most investors who constitute SPACs have done so because of the compelling sponsor economics to acquire public companies in a much more efficient way than a compelling, sustainable mechanism, as they might otherwise. It will be interesting to see how economics change as SPAC versus “great targets” supply and demand and SPACs get closer to the end of their hunting license period.