The following is an excerpt from the new book, Biotechnology in the Time of COVID-19: Commentary from the Front Lines, edited by Dr. Jeremy M. Levin and available for purchase via Amazon Kindle.
The job of an early-stage investor is connecting – people, ideas, patterns – and spotting – trends, themes, hurdles – in the name of accelerating innovation. In my case, it is for the sake of speeding the delivery of new medicines or drug discovery platforms. Over my twenty years as a life science venture capitalist, major trends have unfolded: a transformation of the scientific toolkit (new biologics, CRISPR, next-gen crystallography, computational power, etc.); an explosion of the life sciences workforce; and externalization of research and development to contract firms with deep expertise.
Today we partner with founders to build start-ups both as fully integrated companies and as chimeras of internal and external resources. The latter gives us flexibility and cost savings, and access to better expertise than we might be able to recruit to an early venture. However, given how intimate and iterative discovery science is, these contracted resources become deeply integrated team members in places like China, Italy, Switzerland, and the UK.
So an early spot for me in the SARS-CoV-2 pandemic was the impact on our colleagues at Chinese contract research organizations, who became travel-stranded celebrating Chinese New Year. Even before tallying that half or more of Canaan’s biopharmaceutical investments have international dependencies, we saw the practical and emotional impact on our teammates facing lockdowns and personal exposure. A reporter called about the effect on our portfolio R&D activities. The effect is real, but my first reflex was the human side.
Then came the first US cases and social distancing recommendations. VC firms are partnerships, not companies. But some firms – like ours – are more family-like than others. Though Canaan operates across four physical offices, two industry segments, and three to four generations, our firm is a strong community. We saw the “distancing” signals in New York, Connecticut, and the Bay Area quickly and – with gratitude for our privilege and flexibility – closed our offices and shifted to work from home even before local ordinances mandated shelter in place. We already run our firm with videoconferencing and heavy e-communication (I even wrote a piece about it early in the pandemic), so we pivoted quickly to focus on how we could support the portfolio companies to do the same and to brace for what’s to come.
Twenty-plus years into my venture career, there are certainly prior downturns to reflect on—the whiplash of ’99–’01, the heartbreak of 9/11, the 2008 financial crisis. As investors or operators, many of us have been here before with veins full of adrenaline and cortisol, looking at cash runways, organization charts, and business plans to sketch out Plans A, B, and C. These downturn blows almost always come after a period of sustained growth and expansion, meaning the plans being gutting are particularly hopeful ones. The sails are really full. It is wrenching. The advice we can give as seasoned investors includes:
- Contingency planning is power.
- Extending the runway sooner is better.
- There is grace in communicating honestly
- Being generous where you can is a virtue, but you have a responsibility to the business and to all shareholders.
It is heartening to see the leadership, grit, and humanity across our companies and the poise with which executives are stewarding not only their businesses but their culture. This seems especially true in the life sciences, where humanism is almost as prevalent as genius.
As VCs, we seek to rally that spirit and remind leaders to take care of themselves to sustain their resilience. We marshal resources. We’ve created CEO and founder communities for sharing ideas and best practices; held ask-me-anythings; participated in virtual panels; circulated how-tos on layoffs, crisis
communications, virtual fundraising, hiring without meeting, SBA loan applications, and nurturing culture in a time of distancing. All the while, we’re doing internal impact analyses on the Canaan funds, our own individual portfolios (they comprise our personal track records or report cards, after all), and forecasting changes in potential outcomes.
Our biopharma companies are now planning a return to work in offices and laboratories – beyond the limited “essential” work that they have been continuing to do as permitted under local ordinances. Most discovery-stage companies would say “wet lab” work is at 40–50 percent normal capacity – constrained either by the pace of materials delivery or the pace of conduct of experiments with researchers working in shifts and spaced six to ten feet apart. There is desperation to get back to 100 percent. Estimates are 60–75 percent with wider opening up. Clinical-stage companies have faced a range of realities: those whose protocols require access to a hospital setting, or assurance of an ICU bed in case of a safety event, have pretty much stalled. Those with trials that require few office visits and less complex administration have been less affected and are more quickly coming back online now. Some have accelerated into new COVID-19 treatments. And since a great deal of our portfolio focuses on oncology or other high unmet needs, overall, there is high motivation by all to see patients receive potentially lifesaving, last-resort treatments. There has been much collaboration and creativity.
Partnering transactions have mostly continued. The interplay of start-ups and big pharma to drive innovation continues to be a strong industry trend. We’ve signed two massive collaborations and have two more in the works. The strategics – as we tend to call the big pharma companies – have so far resisted taking egregious advantage of their deep-pocketed, COVID-19 upper hand.
In terms of making new investments, we are fortunate to be a well-capitalized, thirty-plus-year-old firm with strong networks and a consistent and disciplined thesis. In our biopharma practice, we are actively looking for new opportunities with strong science and exceptional founders. We think that if the vision is a highly impactful medicine for patients, a good business case will follow. In light of COVID-19 and the public health and global vulnerabilities this pandemic has revealed, perhaps our apertures will be a little bit wider than before to diagnostics, vaccines, and the data and computational infrastructure for detection, coordination, discovery, and development.
Canaan is already a leader in diversity and inclusion, as half our investors are women and half are immigrants or first generation. As a result, we invest in female and minority founders at twice the rate of our peers. But the racial and economic injustice of COVID-19 is a life and death issue and underscores the urgency of our efforts. Whether higher rates of infection among essential workers, those unable to isolate, the homeless, or the incarcerated or the much higher COVID-19 mortality among those with chronic conditions aided and abetted by unequal access to care and negative social determinants of health – this virus is deadlier if you are black, brown, or poor. One friend lost his father in a federal facility with the highest per capita infection rates in the US. Another spent a family Zoom call – with some sixty participants – explaining advanced directives, while in her day job she lobbies that organ function not be weighted as a criterion for ventilator assignment, because that puts an African American man points behind, before the counting even begins. While I have been a leader in our drumbeat for diversity and inclusion, it is not enough. We must invest in – and represent – underrepresented and use innovation to help dismantle institutional barriers to equity of health and well-being. If we don’t tear them down, we risk propping them up.
While not the direct domain of a seed and early-stage firm such as ours, it does not escape me that literally billions of dollars are being invested to scale COVID-19 therapeutic and vaccine development and manufacturing efforts. The Milken Institute counts some 100 vaccines and nearly 200 treatments in the pipeline. Public and private entities are funding capacity and procurement at risk, even before evidence of efficacy and safety from various early programs. To this, I say: bet on biopharma! It is the richest armamentarium of technologies and talent in human history. Yes, there will be failures. Yes, there will be shortcuts taken with both gains and harms. There will be profiteering and turf battles. But if even one innovation proves out and we stand ready to manufacture and distribute, the returns in terms of human lives and economic productivity will eclipse the dollars risked.
Personally, I am reflecting deeply on what will be different and what will remain the same on the other side of the SARS-CoV-2/COVID-19 pandemic. The past eight weeks have transformed how I work, how I “meet” with known and new colleagues – each conversation is infused with a bit more authenticity and gratitude for our respective blessings and the good fortune of interesting and meaningful work. Like many others, I’ve toddled into new relationship and family territory – with much more, less, and different time together. I’ve loved rediscovering household activities – cleaning, laundry, meal-planning, gardening – previously outsourced or abdicated to long days and a commute. I am sleeping more and exercising more. I live near nature (woods and water) and have been able to access it most days. As I think about our “reopening,” I am thinking about the impact of my old routines and travel on not just myself and my family, but on my broader community and on the environment. How can I preserve some of the beautiful balance that I’ve been given in this strange, unsettling, and existential time? I have certainly found immense focus and productivity working from home, but I also miss my biotech and venture capital tribes – I am excited to see them and to play in this wonderful intellectual sandbox together, in person. At least some of the time.
A final common role of a connector venture capitalist is to be our own hub and spoke, so other corona activities for me have included nurturing several communities – our internal team at Canaan; an alumni group of biotechies who climbed Kilimanjaro to fight cancer; a group of interested philanthropists sourcing PPE; my Aspen Health Innovators Fellowship community of extraordinary clinicians and leaders, which has spawned working groups on testing and equity and privacy considerations in the pandemic; a fundraiser to support local frontline workers; career counseling graduates coming into an uncertain labor market; and stewarding WoVen, our advocacy platform for women investors and entrepreneurs. If there is anything this virus is teaching us, it is that we are a powerful yet vulnerable interconnected, interdependent whole.