• What Life Science VCs Got Right In This Last Boom

    healthcareIt’s long been the case that life sciences investors don’t get the attention that their more traditional tech counterparts do. They’re underrepresented on lists of top investors in venture capital. They’re also remarkably underfunded, according to institutional investors (or limited partners) who back venture firms.

    It’s the “life sciences guys who are smart as hell,” says one LP who’s grown frustrated with some of the tech-focused firms he has backed because they’ve haven’t produced the cash-on-cash returns he expected, yet who’s exceedingly happy with bets on firms like Third Rock Ventures, a 10-year-old, Boston-based outfit that incubates biotech startups and which took many of those companies public before the IPO window largely slammed shut last fall.

    Taking companies public is “exactly what the tech guys should have been doing,” says this person, who represents a sizable endowment.

    Whether the LP is being completely fair is an open question. Certainly, in recent years, many more biotech startups have gone public than consumer or enterprise startups, with public investors seemingly drawn in part to unprecedented levels of innovation, including new machine therapies and other treatments for a variety of diseases that couldn’t be addressed earlier in time.

    However, even healthcare investors are quick to point out that they took so many companies public in part because they didn’t have much choice.

    More here.

  • Venrock’s Bryan Roberts on What’s Up with Health Care IPOs

    broberts_pressBryan Roberts has seen plenty of market swings in his 18 years as a venture capitalist with Venrock, the venture firm that started as the venture arm of the Rockefeller family and has historically invested in early-stage technology and — Roberts’s specialty — health care start-ups.

    Roberts also has a thorough understanding of what’s happening on the U.S. public markets as the chairman of three Venrock portfolio companies that now trade on Nasdaq: Castlight Health, Ironwood Pharmaceuticals, and Achaogen.

    Given his background, we asked him recently what he’s expecting to see happen in the health care market next year. Our chat has been edited for length.

    Several months ago, the IPO market for health care companies suddenly tightened after a long run. What’s happening?

    Health care has tightened, but we could probably talk broadly about the financing market tightening. With the later-stage stuff getting dicier, I’ve been hearing about more IPOs getting pulled. People are either “risk on” or “risk off,” and we’re beginning to back off from full-throttle risk-on environment. I guess I feel like the last four or five months in both biotech and tech more broadly have been akin to what you might have considered “last licks” in a stickball game as the sun was going down, and that shift predates the mutual fund valuation stuff that came out.

    I don’t know that I have a good reason as to why biotech pulled back specifically other than pricing concerns mentioned by presidential candidates, some high-profile price gouging, and some clinical trials that read out negatively, though that always happens.

    What are you expecting in 2016 and how might it impact your approach?

    Well, for one thing, the changing environment may make me feel less out of step with everyone else. We don’t tend to focus on sectors or stages. I invest really broadly across health care, from genomics to diagnostics to therapeutics, so from a fundamental perspective, we don’t tend to follow the herd. In this bullish market environment, we haven’t been doing growth equity investing. We tend to avoid the party seed rounds done by 15 different people.

    [All that said,] in health care IT, we’ve moved to earlier stage. We’ve started a couple of companies. We’ve moved to pre-product market fit, which is different than how we’d invested in the space 10 years ago. When we invested in Athenahealth [the now publicly traded company that offers a suite of administrative services for medical practices], they had product market fit, but no one wanted to invest in that space. Now, once something has traction, it’s priced very fully. So earlier this year we started a business with [former Facebook CFO] David Ebersman called Lyra Health. We did the same with [former U.S. CTO], Todd Park at Castlight. We’ll continue doing that for some time.

    What does someone need to get a meeting with you?

    More here.

  • As On-Demand Valet Battle Intensifies, Luxe CEO Shifts Gears

    Curtis LeeThe battle to baby your car is heating up. This morning, Zirx, a year-old, San Francisco-based company that will park your car, wash it, fill up its gas tank, and rotate its tires, is announcing $30 million in new funding. The round comes roughly a month after Luxe, another San Francisco-based valet app, raised $20 million. (Luxe has now raised roughly $25 million altogether, while Zirx has raised around $36 million.)

    Yesterday, we talked with Luxe CEO Curtis Lee – a former product manager at Zynga, YouTube, Google, Skype, and Groupon — about the competition, and whether and when these types of companies turn profitable. Our chat has been edited for length.

    You now have 40 full-time employees and hundreds of contract workers parking customers’ cars in San Francisco, L.A., and Chicago. Yet you say that parking cars is step one. What’s next?

    We’re more of a services platform than anything else. We happen to park your car, but we’re already doing gas fill-ups, car washes, and oil changes . . . Your car is effectively an urban locker, and we want to get stuff delivered to your car, as well as do things with it, like pick up your keys, get your groceries . . .

    How do you decide when to roll out new services?

    I’m a product manager. My cofounder [CTO Craig Martin] is a engineer. We worked at Zynga together, and we tend to like to do experimental things often. If they work, we double down. If they don’t, we won’t. And we saw that early on, the primary reason customers decided to use us was for our additional services.

    What are you charging for some of these services?

    Our rates vary depending on the city, but in San Francisco it’s $5 an hour [to have your car valet parked] and $15 per day. Car washes are $40. Gas fill-ups are the cost of the gas plus a $7.99 surcharge.

    Are you dealing with much poaching?

    Certainly, other companies are trying, especially because our guys are so obvious on the streets [wearing the Luxe uniform, which are bright-blue jackets]. We’re the only company that shows customers where our lots and our valets are on a map. That makes us vulnerable sometimes, but our retention remains very high. We think [our workforce] is fairly happy. We also have more demand than our competitors, and [valet pay] is hourly based, so [our valets are] not going to make as much money elsewhere. It’s like Uber; people want to work for Uber because it has the [consumer] demand.

    What of allegations that on-demand startups short-change workers by classifying them as independent contractors?

    We’re not obsessed or worried about it. I think it’s more a philosophy thing than the letter of the law. You treat employees – and independent contractors – with respect. It’s not as much about classifications. Who knows what will happen. [Any potential legal changes] aren’t in our hands. But we’re keeping an eye on it.

    Do you pay your valets minimum wage? Do they make much in tips?

    It’s completely optional, but our customers can give tips [via our app] because they were trying to do it regardless, through cash. Our guys make way more than minimum wage for sure because of the demand we get.

    Also, our guys don’t need to own cars. There’s no equipment necessary [beyond a scooter to get to customers more quickly]. Twenty percent of Uber drivers’ salaries go toward wear and tear and gas.

    It’s seems like potentially hazardous work, zipping around town to pick up and drop off customers’ cars as quickly as possible.

    We put [our valets] through extensive training so they understand where they need to drop off people’s cars, as well as make sure they aren’t doing anything that puts them at risk. Our bright blue jackets are also designed to ensure people see them. And we have a valet office where people can hang out and eat free food and relax and, if there are issues, go to office hours and talk with us.

    Your arrangement with city garages is pretty central to your future profitability. Are these typically monthly arrangements for spots?

    We have different agreements with different parking lots all the time — everything from monthly to yearly to daily arrangements. But parking lot owners take care of us and we take care of them, turning over the space enough times that we can make a profit on a per unit basis. The best analogy is to Priceline. For hotels, unused rooms are sunk costs. Priceline has created a billion-dollar business just by providing discounts to customers and getting [hotels paid] for their underutilized inventory.

    Still, some VCs think services businesses like yours are too cost intensive. What are they missing?

    We’re basically creating a behavioral change. Those days of searching for parking, wasting time, wasting gas – they’ll disappear in time. Also, parking alone is a $100 billion market globally and a $30 billion market in the U.S. And you’re seeing tremendous growth of car ownership internationally, including in Brazil, China, and India, all of which are undergoing massive urbanization without enough infrastructure to keep up. There are just huge opportunities for us.

    Will you be fundraising again this year?

    We’re open to raising [again] when the time is right.

    Photo courtesy of Forbes.

    (Bay Area readers, to learn more about the shifts in on-demand startups, you might want to check this out next month. We’ll be there to moderate a panel.)

  • Battery Ventures and Venrock Back 6Sense with $12 Million

    Amanda Kahlow. photoA lot of bets are being made these days on the thesis that most enterprise products don’t make users’ lives easier or help them do their jobs better. “I doubt you could find a single sales rep who really enjoys using Salesforce,” says Roger Lee, a general partner of Battery Ventures. “What a [customer-relationship management] product should do is tell you which leads are likely to close this quarter, what products they’ll buy, how much they’ll spend, and whether they’re candidates for upsell opportunities.”

    Lee — who likens Salesforce’s offering to “basically a filing cabinet” — is putting his money where his mouth is with 6Sense, a year-old, 15-person company that helps enterprise customers like Cisco and Pure Storage to determine an account’s overall propensity to buy, help them predict where their prospects are in the buying cycle, and surface new prospects. In fact, this morning, 6Sense is announcing a $12 million Series A round led by Battery and Venrock. I talked with its CEO and cofounder, Amanda Kahlow, late last week to learn more.

    You say you figured out the market fit for 6Sense at your last company – a Web analytics consultancy – but had to figure out the technology piece.

    A lot of really smart technical founders build [a technology] in search of a business case. We were the opposite. We were a business case looking for a platform. Thankfully, at one meeting with a venture firm, a firm’s CTO [pointed me to] GrepData, a [big data analytics startup that went through the Y Combinator incubator program in late 2012], and when we came together, it was a match made in heaven. I couldn’t be blessed with a better technical cofounder [than GrepData cofounder Premal Shah].

    You have lots of competition. How do you differentiate 6Sense from the many other startups doing predictive analytics?

    We live in a world where people leave behind a digital footprint, and in the consumer world, that helps companies like Amazon know what you want, likely before you know you want it. But in the [business-to-business] world, [no one has yet] solved the problem because of the complexity and irregularity of the data coming in. What everyone else is doing right now is asking: Is this the profile of the right buyer? But they aren’t asking: Is she going to buy now? Our magic is in taking time-sensitive data [and combining it with unstructured data, like activity on thousands of B2B publishers sites] along with [structured] behavioral data to create a behavioral catalogue to make sense of data across the Web.

    Why isn’t Salesforce doing what you do?

    The focus of companies like Salesforce has been around the efficiencies of workflow. Which email should you send next? How do you manage the buyer’s process? I do think Salesforce will want to do [what we’re doing], but it’s not trivial. It isn’t something a smart engineer can do tomorrow.

    This is your second company. You started your first about a dozen years ago, soon after you’d graduated from college. Why not work for someone else?

    I come from a family of entrepreneurs. My dad has been a lifelong entrepreneur, trying to make a go of different software technologies. One of my brothers runs an [e-learning company]; another brother runs a company in the B2B marketing space. [I credit] our dad’s entrepreneurial spirit. We also have a mom who told all of us — almost ad nauseam [laughs] — that we could be anything we wanted to be.

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