Trends Watch: VC Investing in Life Sciences and Deep Tech
- Jun 23, 2022
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 Kris Ramadurai, Partner, Harmonix Fund.
What is your outlook for VC?
As a life science, health care, and deep technology fund, we are excited about the next generation of scientific advancements that firms like ours support. Overall, I am optimistic about VC, even given the volatility of the public markets and the reset of private market valuations. I believe the firms that utilize an evidence-based approach coupled with a robust due diligence process and technical domain expertise are cognizant in investing in companies whereby the valuation truly reflects the validation, including good science and engineering fundamentals, a solid path to execution, line of sight to critical value inflection points, and most importantly, a strong team with founders that have exceptional EQ+IQs.
What are the greatest opportunities you see and why?
The cornerstone of our firm's thesis is driving alpha while moving humanity forward. I am particularly excited about the rise of what I call "Deep Biology & Deep Health," which is the convergence of life sciences and health care with deep technology, creating a new generation of technology-enabled companies that are developing novel therapeutics, devices, and scientific advancements. These companies are utilizing full-stack, end-to-end computational modalities that will automate and create products/services that are better, faster, and cheaper; and that will ultimately democratize access to innovation and impact the lives of millions around the world.
What are the greatest challenges you face, and why?
As an early-stage VC firm, we are fortunate enough to source thousands of opportunities but only can make a handful of investments. The decision-making process requires exceptional technical diligence and scientific rigor so that we can actively access and invest in founders and their technologies that we believe have the greatest potential for success. VCs are often very small teams with awesome individuals that frequently have to balance deal sourcing, due diligence, portfolio operational support, board seats, limited partner engagement, and capital raising in an almost parallel fashion, which requires exceptional discipline.
What keeps you up at night?
Over the last 18 months, we've seen a lot of hype in the public and private markets. Companies have had unreasonable valuations without strong fundamentals, including demonstrated product development, product-market fit, or sustainable revenue generation. We've seen many companies rush to go public that were not ready and did not have an actual product/service developed/deployed. For example, I'm more traditional and like to see companies with at least $50 million in revenue or clinical stage asset development programs (ideally Phase 2b) go public. There were a lot of companies that were too early, either preclinical or not making any revenue, going public; and ultimately those companies have faced a substantial valuation decline. This does a disservice to innovation and creates a dissonance in public perception of investors and innovation. Firms like ours want to invest in fundamentally sound technologies and sustainable business enterprises that can be realized for the benefit of humanity.
The views and opinions expressed above are of the interviewee only, and do not/are not intended to reflect the views of EisnerAmper.
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Elana Margulies-Snyderman is an investment industry reporter and writer who develops articles, opinion pieces and original research designed to help illuminate the most challenging issues confronting fund managers and executives.
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