Andreessen Horowitz is joining the rush of Silicon Valley investors looking for gold in biotech. The renowned VC shop has rounded up $200 million, poached a professor from Stanford University and given him a brief to ferret out the hottest startups at the intersection of software and biotech.
Entering biotech marks a notable shift for Andreessen Horowitz, which for years limited its focus to software startups in a belief that it was best served by staying out of highly specialized fields. But with the line between software and biotech startups blurring, Andreessen Horowitz has decided now is the time to follow the likes of Google ($GOOG) and Y Combinator into life sciences. To guide it through the sector, Andreessen Horowitz has lured Vijay Pande away from Stanford University, where he taught chemistry, structural biology and computer science.
Pande's mix of research interests mirrors the focus of the $200 million fund. Digital therapeutics, cloud biology and computational medicine are the three primary targets for Andreessen Horowitz. Tellingly, traditional drug development biotechs are excluded from the list. In an interview with Reuters, Pande used three words to characterize biotech: "Slow. Risky. Expensive." Pande is staying clear of such firms. The fund's first investment, twoXAR, uses algorithms to find drug-target matches. Other West Coast startups such as Atomwise and Verge Genomics are pursuing similar ideas.
Doubts remain over the effectiveness of these approaches and the chances of Andreessen Horowitz succeeding in life sciences, although the VC shop has proved doubters wrong in the past. If it is do so again, Pande will be key. While Andreessen Horowitz was quick to identify the potential of Airbnb, Instagram and Pinterest, it has little to no pedigree in biotech. Pande, who led the Folding@Home distributed computer-driven disease research project, has a background that suggests he can spot a promising biotech-software startup and a reputation that could prove to be a lure to founders.
The shortage of people with Pande's skill set is one of the constraints on the size of Andreessen Horowitz's biotech bet. "We raised $200 million today, but think this is a very large opportunity and expect that number to grow in the future," Andreessen Horowitz Managing Partner Scott Kupor told Fortune. "We're more constrained by the fact that we don't have five Vijays, rather than the market size." For his part, Pande has clearly bought into Silicon Valley's vision for the future of biotech startups.
"In the past, you had to have many, many people in a room doing research experiments over and over to hope to have success, and that costs money," Pande told USA Today. "But by using robots in a lab and by being able to aggregate data, you're now creating a situation where a few people in a garage could be behind big breakthroughs." This vision is a recurring motif in Silicon Valley investors and entrepreneurs' descriptions of the genesis of biotechs in the future, which they see as coming to resemble the software startups with which they are most familiar.