Trends Watch: Investing in TechBio

EisnerAmper’s Trends Watch is a weekly entry to our Alternative Investments Intelligence blog, featuring the views and insights of executives from alternative investment firms. If you’re interested in being featured, please contact Elana Margulies-Snyderman.

This week, Elana talks with Loretta Tioiela, Founder and Managing Partner, Next Sequence.

What is your outlook for investing in early-stage techbio companies? 

We see techbio and the shift accompanying it as the greatest opportunity of the next industrial revolution.

We are living right through the coming of artificial intelligence (AI) and 2023 alone has been a very interesting year with the attention of mainstream media definitely pushing forward the focus of users as much as investors to the application of AI closer to home. We argue nonetheless that the next industrial revolution will not only be supported by AI or quantum computing alone, nor will it only be the era of biotechnology. We strongly believe that it will be a singularity in time as it will be the nexus, for the first time in human history, of multiple major technology branches coming together, through the convergence of computing and biotechnology, and more specifically synthetic biology.

Where do you see the greatest opportunities and why? 

Traditionally, biotechnology has been an industry reserved to highly specialized investment firms, structured to support highly scientific research due diligence, strong needs for intellectual property, and patent strategy while having to support companies over a ten-year period of research and development (R&D), requiring high capital expenditures (CapEX) -- all amounting each year in average to 20% of revenue.

What we have been observing through the deal flow of more than 1,700 startups that we have built up over the last past four years tells us a different story. The convergence of computing technologies with biotechnologies is giving rise to a new generation of biotech companies that are now called techbio companies. They differentiate themselves in many ways from the traditional biotechnology companies. When you think biotech, you think obviously of the traditional drugs and therapeutics industries but techbio companies present this very unique view of biology that goes above and beyond as they see the opportunity to rethink everything that human beings and our societies produce or consume through the lens of biology which leads to a new type of startups building in adjacent industries such as biomanufacturing, food and agriculture and on into unexpected industries in consumer goods such as cosmetic products or fashiontech. What’s interesting here is that it's opening up biotechnology as an investment industry to a plethora of new potential business models, business models much more focused on the end-user and therefore consumer-centric rather than the traditional B2B play that we have been used to in the pharmaceutical industry. These sales lifecycles are much more versatile and dynamic and are a new field to explore, opened to the creativity of the startups.

What are the greatest challenges you face and why? 

These techbio startups are at the heart of the bioeconomy and what makes them interesting is their ability to address some of our biggest societal challenges from fighting genetically transmitted diseases and pandemics to preventing ageing and climate change. Consider the timeline we are looking at. Suddenly we are not talking about decades of R&D but more about the timeline to which we have gotten used to software as a service (SaaS). This jump has only been possible through the convergence of computing technologies and biotechnology. The progress in computing has brought in the capability to search within massive amounts of experimental data, separating the noise from insights leading the way of the research focus. But that requires that these startups are able to leverage these new computing technologies such as cloud computing, or even quantum computing. This is where things get tough as most of these startups are coming from an academic background in biotechnology and haven’t been trained to leverage these technologies. That’s the reason why we decided to build a unique accelerator fund, Next Sequence, dedicated to investing and accelerating these unique biotechnology companies by training techbio founders and their teams through providing state-of-the-art computing technologies that will supercharge their research. It’s definitely a titan-esque task for a bold vision that requires bringing forth massive investments very early on to an emerging firm in a very technical field.

I like to say that we need to have “strong beliefs, loosely held” -- the process requires us as an investment team to never lose sights of our grander vision to find, invest and scale-up the most disruptive startups of the next industrial age while accepting that this is yet an emerging field and thus we need to be light and versatile enough to adjust as we build.

What keeps you up at night?

When I think about techbio, I obviously think of a transcendent future where most of the world's problems would be solved. It’s however a very naive and utopian view, and far from the challenges that the industry will have to face. Synthetic biology is by essence the idea of redesigning and reprogramming life and is therefore a very sensitive subject in terms of policies, ethics, cultures, and religious perspectives. It will require a strong dedication to transparency and communication between stakeholders and the end-users of these technologies in the same way that we have to now battle the implications of the advances in AI.

As investment managers, that means that we will have a role to play in the way that by searching, selecting, investing, and supporting which technologies and startups will be the one defining what our world could or could not be. This is a very humbling responsibility that deserves a pause to be acknowledged and to be thought through so that it is not the responsibility of an individual but rather the wisdom of the many.

The views and opinions expressed above are of the interviewee only, and do not/are not intended to reflect the views of EisnerAmper.