Venture capitalists start fund for biotech
When venture capital firm Andreessen Horowitz opened its doors in 2009, its founders consciously sought to focus on their core expertise of software and stay away from specialties like biotechnology. But the draw of investing in health care proved too much, and now the firm plans to begin investing in health care, in its own way.
Andreessen Horowitz announced Wednesday that it has raised $200 million for a new fund devoted to startups at the intersection of biology and software, using computers to help devise new treatments and analyses of diseases.
Leading the effort for the firm is Vijay Pande, who has formally joined as a general partner after serving as a professor in residence. Pande founded the Folding at Home
distributed-computing project, which sought to use computer science to address health issues. He was previously a professor of both chemistry and of computer science at Stanford.
To Pande, huge potential lies in the enormous leaps in computational power that have developed over recent decades, as well as the dropping price of such resources. He pointed out how mapping one genome cost $3,000 in 2001 — and now costs a tenth of that.
He acknowledges that Andreessen Horowitz is not the first to move into the industry. The reorganization of Google into a holding company called Alphabet, for instance, highlighted the technology giant’s interest in applying technology to health problems.
But Pande added that the firm would apply its full scale of resources to building its own investments in the space.
“We are really moving quickly to become the place for investments in that field,” he said.
Though Marc Andreessen, one of Andreessen Horowitz’s co-founders, believed at first that his then-nascent firm should not pursue highly specialized areas like biotech, he remained intrigued by potential investments in health. And more and more founders of health-related tech startups kept walking through the door. So three months ago, the firm’s management formally decided that it should create a new fund for health-related investments, but focusing on the software angle. And a natural candidate to lead the effort was Pande.
“He’s extremely authoritative,” Andreessen said. “Founders would try to jump out of their chairs to work with him.”
Setting up the new fund was relatively easy, even though it is a sizable $200 million, the two men said. Most of Andreessen Horowitz’s limited partners agreed to pitch in capital to set up the vehicle.
The fund has already made one investment, leading a $3.4 million seed round for two-XAR, a startup focused on using software to calculate potential links between diseases and drug candidates. The approach is meant to speed up clinical trials by cutting out some laborious lab processes.
For now, the biology fund will be focused on Pande. But the aim, Pande added, is to eventually build a whole team to work around him.