June 23, 2025 • 44 mins
David Berry is one of the most prolific healthcare entrepreneurs of our time.
In this episode, we discuss his transition from scientist to founder to investor, what it takes to scale transformational health companies, and how his firm Averin is helping usher in the next wave of AI-enabled healthcare.
We also talk about his early experience launching a satellite at 14, how he's co-founded over 30 companies—including seven unicorns—and why patents, perseverance, and purpose are the trifecta behind lasting innovation.
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Episode Transcript
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When our mutual friend, Saurav, introduced youto me, he introduced you as the Elon Musk of
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biotech.
Why did he introduce you like that?
You can always think about really bigtechnology problems, but health has a
particular calling.
Right?
I think we all have a story where we've lostsomeone, and usually somewhere along that
journey, right?
Even we tell this part of the story to people,there's a moment where we just, we feel
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helpless.
And sometimes that's because there aren't drugsfor the condition.
Sometimes it's because care is being denied.
Sometimes it's because we can't afford atreatment.
Sometimes it's because it's too late.
A whole set of different reasons for it.
And so I just find it super motivating to tryto find solutions to the problems that take the
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people who are close to all of us.
And it's kind of that foundation where if youcouple that with a willingness to ask really
big questions, and frankly, a willingness to bewrong a lot, importantly, to accept when you're
wrong, great things can happen.
And I think that's kind of been the core of theapproach that I've taken.
That's led to a number of companies that havebeen founded north of '20, I think closer to
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'30.
And it's been a great honor to work with someoutstanding teams that have led seven of these
companies that have founded to become unicorns.
And we've had the ability to bring drugs andother products to market with the vision of
trying to help transform society for thebetter.
I can't do that kind of math on my hands, but Ithink seven of 30 unicorns, somewhere around,
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like, a 22% rate.
What have been the common themes in the sevenunicorns that you've been a part
My thesis advisor back when I was in doing myPhD was Bob Langer and Ron Slicesacker.
And then Bob used to say, you know, allproblems are equally hard, so why not go after
the big ones?
So with that perspective, right, you know, youcan basically look at any of these problems and
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try to come up with some core solution.
But the best way to have great ideas, as Edisonsaid, is to have a lot of ideas.
So the way I think about it is start out, put alot of ideas out there, be willing to be wrong,
be willing to accept that you're wrong.
And the framework here is that what you got todo is just is recognize what is the core of the
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thing that you're trying to do, and be willingto see very, very early on that it's right or
it's not right.
And I'd say one of the things that's happenedin all good companies is somewhere along the
journey, it's probably about nine months,twelve months in, something fascinating
happens.
And that's this moment where you had your idea,you were convinced it was going to work, but
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then something comes up and it was just notwhat you were expecting.
And that's the moment where I think greatnesscan get created, which is that you can find
that nugget because that is truth.
And if you can learn from that, you get theopportunity to point the company in the right
direction.
I tend to think of company creation, it's allabout perseverance.
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Entrepreneurial life gets so glamorized, andthere's so many dynamics you have to fight
against.
People telling you you're wrong constantly,competition, bad luck.
And it all comes down to you willing to make itwork and willing, putting that will to make it
work.
I've seen that so many around entrepreneursmake them almost want them to fail.
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And I think one of the things that Elon does sowell, and I admire him for is just sheer drive,
the sheer will that says, this is my vision,I'm gonna make it work.
And you got to imbue that not just to yourvision, to your company, but to the whole team.
Startups, unlike established companies, aredefault dead versus default alive.
In other words, if nothing gets done, it diesversus a corporation.
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If nothing gets done, maybe it dies over acentury, but it essentially continues to live.
Exactly.
And you can almost think about it as almostlike a gravity that exists around any company,
which is you have to constantly fight thoseforces and cause the company to grow, cause the
company to lift off, cause the company to getinto orbit, and then continue from there.
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And that constant drive, recognizing that look,starting up a company is one thing, getting a
company through a series A is another thing,getting a company through a series B is another
thing.
And as the company continues to mature, thatevolution and that push is something that you
have to continue to do right for the company.
You mentioned that as you're starting acompany, you sometimes uncover a kernel of
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truth that could be the basis of somethingreally big.
It could also be a distraction.
And oftentimes, those labels are put ondifferent changes in strategies in retrospect.
How do you know that something's a great pivotversus a distraction?
It's hard.
Whenever you see something, the question iswhat is the ground truth?
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And I think that's where you have to startbecause seeing something that might just be a
slight tweak on your business model because,Oh, that sale was hard as one thing.
But when you get a piece of data, that's just,it's true, it's reproducible, it is durable,
You owe it to the company, you owe it to thedata to at least do the work and figure out
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what actually might be happening.
And you have to be a little careful, right?
Because when you're managing a company,employees don't want to be whip sawed back and
forth.
It's an incredible distraction.
But at the same time, you got to do the work tofigure out if what you're seeing, that signal
is that signal that drives you into somethinggreater.
One of the things that I found is that you wantto not be the person that just changes the
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course because they're bored or because theydon't have what it takes to succeed, but you
also don't wanna be polar opposite, meaningthat you don't want to change because you wanna
stay the course.
How do you navigate that dilemma?
There's probably two different scenarios youcan think about them in.
One is in the context of a company.
So one of the ways that I've tried to solvethis in the past is to actually have a team who
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is specific focus is to look at these newinsights and figure out what they might mean.
I would often call it a strategy team.
So we get an insight that causes an moment.
You can't often moment just go and say, allright, we're gonna go do this without doing the
work.
Then you also don't want to take the wholecompany and have them take their foot off the
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gas pedal and start doing some other work.
So what I found that's really useful is havinga dedicated group of people who can be deeply
analytical, deeply thoughtful, understand thelogic train that gets you there to go and do
that work.
But then what you have to do at the back end ofthat is you've got to draw the conclusion, and
then you have to make sure whatever conclusionit is, is communicated really clearly, I.
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E.
Stay the course, or no, we're making thischange.
But what I always find is that the vastmajority of people, and this often can show up
in a board CEO dynamic or a CEO management teamdynamic, people want to stay the course, they
want to keep doing what they were doing.
Sometimes it's because they had comfort in it.
Sometimes because they just naturally want toresist change.
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Sometimes it's because they don't fullyunderstand what the new opportunity is.
And of course, that's part of the CEO job, isto bring people along the journey and
understand what that direction is.
But it is really important to be able to getthere, convince yourself first, and then bring
teams around you.
Sometimes you just want to go from 20,000,000to 22,500,000.0 to 25 to 27.5, and that just
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feels good for everybody.
Even if you've missed a billion dollaropportunity or a $10,000,000,000 opportunity,
just having that incremental progress, there'ssomething very viscerally satisfying about
that.
It feels safe, it feels safe.
And people will tell you, you always win bycompounding.
But let's get into the honesty of it.
If you compound at a low rate, it's not as goodas compounding at a high rate.
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Is it much more difficult to change thedirection of a company when you actually have a
little success?
Is that really the most difficult part?
It's incredibly difficult to get companies tochange when they're fully going.
And that's why I always think about the earlyphases of a company is so incredibly important,
right?
When you, in the early days, there's not manypeople.
So you have tremendous control over culture,tremendous influence on culture, tremendous
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ability to make sure you're hiring the rightpeople, people who live to those values, to the
goals, to the virtues you're trying to instillin the company, but also people who have a
shared vision.
And the people I think who joined companies invery early days are just driven by this passion
to do something special.
And they're the sorts of people that they'llbring to you that funny thing when they see it.
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And they want to engage with you in thatconversation.
And they're looking for how we can do somethingthat's great.
What happens when a company gets bigger iswell, your systems get diffused, your hiring
gets diffused.
And so sometimes the ability to hire peoplethat are aligned with culture or aligned with
standards or aligned with values tends to drifta little bit.
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Because I have a goal, I have my near term goalthat I'm trying to achieve and I need X, Y and
Z number of people to be able to achieve it.
So I know at corporate we think about this, butin my little world, I think about my end to
your goal.
It just creates this drift.
When you get companies that are at that size,inducing change, of course, is a much more
complicated phenomenon that involves changemanagement, bringing people along the ride.
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And what you find is if you don't do it right,these little silos will go off and keep doing
the old thing, and not follow along the journeyin the way that you're intending the company to
go.
And I actually want to give my brother atremendous amount of credit on this.
When he built TripleLift, even as that companygot to several 100 people, they were really
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strong at maintaining the quality of hiring, atmaintaining the culture, and keeping an
environment that kept the the community focusedon the goal.
And to the point that when they were acquiredby Vista, I think they had one of the highest
scores in Vista's history for how the team wasperforming.
There's a psychological principle callednegative contagion, which is the scientific
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explanation of one bad apple spoiling theentire batch.
One conventional thinking person that is aconformist could actually create a gravity
around him or her to bring the entire companyinto this kind of small thinking.
And that's why I think it's so important.
Preproduct market fit is really where you'recreating the the DNA of the company to keep
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that with truly first principles thinkers, withtruly non egotistical people that can change
course if needed.
100%.
I think when you can find people like that, whoshare the goals of being able to do something
specific that has big impact, you're building agreat team.
And then you get that alignment where peopleare driven by the end result as opposed to the
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means of being able to get there.
And the more people you can find like that in acompany, the latter, not the bad apples, the
better.
You you started $7,000,000,000 companies frombeginning to scale.
Used to be this conventional wisdom that thepeople that started the company shouldn't be
the ones that scale.
Do you find that to be true in that the truefirst principles thinkers can actually scale,
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or is it more that the middle management peoplecan't be early employees?
When you think about what some of thesecompanies do that are able to hyperscale and
continue to scale and continue to grow andcontinue to innovate, you tend to see that
founders are playing a really important role asyou go along the journey.
Because, of course, the founder will help toset up the company in the beginning.
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A founder will play, will make an importantdecision in setting strategy, trying to define
that product market fit.
What I've seen often is when you then hire aCEO to replace a founder, one of the first
things that that new CEO wants to do, they tendto undo a lot of things that that prior CEO or
the founder may have done, and that createschallenges.
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Now, in some cases, the company may have doneits innovation, and now it just needs to rinse
and repeat.
And in that case, probably a founder who'sgoing to constantly innovate is not going to be
the best way to do that rinsing and repeating,again, because it's a different mindset.
But the reason that hyperscaling companieshyperscale is they're constantly getting that
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data, they're constantly getting theinformation.
They're constantly asking the question, how canwe do better?
And I think what they do really well, is they,these sorts of founders will say, what am I
really good at?
Which is often innovation, visioning, ideation,creation, bringing people along, etcetera.
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And what are they less good at?
Which is, for example, operations in somecases, and they'll surround themselves with
outstanding operators.
So you can get the best of both worlds.
And I think that's a really important dualitythat when you can recognize what one is good at
and what one is less good at, you can make anoutstanding company come out of it, at all
phases.
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Double clicking on this $0 company, thecompanies that start out early and turn into
billion dollar companies, how necessary is aculture of working seventy, eighty, ninety hour
to becoming a billion dollar company?
What found is you can actually get a reallygood read on where a company is going, by how
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long people want to stay working at the companyon say a day to day basis without being pushed.
So I think these mandated cultures of, we'regonna work twenty seven hours a day and never
go home and sleep, when it's mandated, I don'tthink it works well because people burn out.
But when the team that you have has the passionthat they just want to keep working on it, they
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want to make it, they want to solve it, theywant to get it there, you know that something
good is going to come out of it.
And you can actually feel that energy if youwalk into a company where people are acting in
that way with that kind of passion, it's in theair.
And I think people are more excited to go workthere.
They're more excited to work late hours withoutbeing told that they have to.
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And the output you get is, it's not just eighthours plus eight hours, it's much, much higher,
because again, it's all about that drive.
Is that primarily a passion for the mission,passion for personal financial gain, a passion
for problem solving, what underpins that desireto stay late at night?
A lot of it, especially when you're dealingwith health companies, has a big part to do
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with the mission.
But I mean, the other two obviously are a bigcomponent of it as well.
I don't think it's one or the other.
But why would a computer scientist go to ahealth company as opposed to a tech company in
the Bay Area?
It's probably because they're driven by themission.
What would people say from the outside thathave known you really well?
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What would they point to your one or twosuperpowers that has allowed you to start
$7,000,000,000 companies?
I don't know what people say behind my back.
But my favorite line that I've heard someonesay publicly is was actually said by Bob Langer
who called me fearless.
And what his framework on that was, is that youcan pick the problem, but you got to run
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headlong into it.
You got to be able to say, it doesn't matterhow complicated this is.
It doesn't matter that a lot of people saidthat it's hard.
It doesn't matter that it might seemunsolvable.
It's just you go and you push and you try tofind that solution.
And I think that you could call it strongperseverance, could call it maybe an
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unwillingness to let go.
My wife would call it stubbornness.
I think that plays a really big role into it.
I think that phrase that I've used many timesis, you know, if you're running to a brick
wall, the question is, are you gonna hit thebrakes and leave a skid mark or are you just
gonna go right through?
And I always like to think about the latter asthe right option.
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When you're driving into this brick wall, howimportant is it to have a inner circle of other
great thinkers that could tell you, you know,you're smart to be driving at this brick wall,
you have the right vehicle, just go and do itversus kind of doing it as a solo mission.
I remember when I was starting a company calledLS9, a very, very well known professor said to
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me, oh, that idea is obvious, someone shouldalready be doing it.
And one of the things that that made me realizeis, if I can put it this way, great ideas are
obvious once you hear them.
So what do I mean by that?
Well, you didn't know that it was a great ideaand you hadn't thought of it beforehand, but
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once you hear it, it's like, Oh my God, that issuch a good idea.
And I realized that that signal of someonesaying, Oh yeah, that's amazing, but I'm sure
it's been done before, even though they can'tfind it, was a really good signal to finding
really interesting problems to be working on.
Double click on this idea that a good ideasounds obvious.
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Actually found my favorite ideas are thesereally big markets that only five people in the
world know about.
Like, there might be some obscure cybersecurityCTOs in oil and gas that see this one problem
over and over, and it might be massive.
It might be billions of dollars, but only fivepeople are aware of it.
You're almost saying the exact opposite, whichis something that people feel should exist.
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Why do those opportunities exist?
Isn't the market pretty efficient when it comesto venture creation?
I don't know that the market is actually thatefficient when it comes to venture creation,
because the size of the problem is so large.
And there's just a natural framing where peopletend to move from an area they know to an area
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they know to an area they know, it tends to beadjacent.
So can you form great companies by taking astep function innovation in an area?
Absolutely.
But at the same time, you can also look at aproblem in a completely new way and see
something that just isn't being done.
So I'll take the LS9 example.
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This is a company that we launched back in02/2006, and this was back when that first
clean energy boom was taking place, it wasstarting to shape up in Silicon Valley and
whatnot.
There was a lot of investing that was going onto make ethanol, cellulosic ethanol, and other
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such things.
And when you look at the core of that, right,cellulosic ethanol was driven because there was
a replacement of something called MTBE ingasoline.
And the question was, okay, with this growingmarket, can we find an interesting and
effective and low cost way to be able toproduce it?
Corn was an interesting way to do it.
Sugar was an interesting way to do it.
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We saw the trend line, and the question thatcame up was, is there something better we could
make?
And this is one of those things that we asked.
And when we did the work, right, I rememberworking through probably about 140 different
molecules that you could theoretically make.
And the one that we ended up deciding to makewas diesel, not biodiesel, but diesel.
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And when I say it like that, it's like, well,yeah, of course you should make diesel.
But at the time, people were making a differentmolecule called biodiesel because it was
easier, right?
And it was a relatively simple step.
People were making other molecules because theywere straightforward, but people weren't making
diesel, even though again, when you say it'slike, oh, yeah, that is the molecule that we
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use.
It's a massive market.
And if only you could make it, you would say,yeah, let's go make a company that does that.
And that was literally the way that LS9 wasborn.
So it might not be an obvious idea for somebodyto come up with, but once you've gone through
the idea maze and you've gone through all thesolutions and you come up with the idea, at
that point it becomes more self evident versusit's not Exactly,
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exactly.
It's not something that's in the commonparlance that everyone's saying, oh, here's an
idea, But it's when you hear a great idea, youwreck it, you can see that it's a great idea
when you say it, it just wasn't obvious that itwas a great idea until you heard it.
You've returned billions of dollars, and not ona billion dollar, on a much smaller number to
investors.
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You have one of the best, I think, I've everseen biotech.
How did you transfer your skills from being agreat entrepreneur to being a great investor?
I'd say the first thing is I tend to think ofinvesting as having relatively simple
principles.
And these are kind of first principles.
So I know this is gonna sound super mundane,but a return is effectively your exit price
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divided by your entry price.
So often in the venture industry, what happensis the anchoring is around percent ownership.
And so what will happen is you put a little bitof money in the seed, more money at a higher
price in the A, even more money at the B andeven more money at the C.
And that's what people do.
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Often it's justified that, Oh, there's acapacity issue, can't put that much money in
early on.
Fine, I get the story.
But Doug Haines spelled it out really, reallyclearly to me once.
So Doug used to, I think, run the New Yorkoffice for McKinsey and then jumped that over
to Point 70 two, where he was the president.
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And he had the advantage of not being a hedgefund guy when he went there.
So he went around and he asked everyone, whatdo you do?
How does this all work?
Walk me through how decisions are made, whatare the steps that are taken?
And what he pointed out is he said, look, ananalyst will go and figure out, this is a stock
that you should invest in, and here's my pricetarget.
And they'll take it to a portfolio manager andthey'll sell it to them, right?
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Nvidia is trading at 100, I think Nvidia willgo up to 120.
So what a portfolio manager would do is thesame buying behavior that I described.
A little bit of money at 100 as the stock goesup, put a little put more money in as the stock
continues to go up, even more and more and moremoney.
But if you ask the question in the context ofNvidia, it's pretty easy to see, right?
If you're at 100 and someone's convinced thatit's going to go to 120, is it a higher
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probability that it goes from 100 to 110 andgets you that 10% gain?
Or when you're at 110 and you've gottenconvinced because that trend has started to
take place, is it a higher probability thatit's going to go from 110 to now exceeding
their target, right?
And the answer is, of course, the former.
The reason I point this out is, well, itbasically says, we should be thinking
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differently.
It's really about how do we drive multiples,right?
Rather than percent ownership.
And the context on that is, okay, where are thepoints where you can minimize your cost of
entry?
And it shows that there's two points in thejourney of a company.
One is at the beginning, because when youcreate a company, your price of entry is
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effectively free.
It's not exactly free, but it's effectivelyfree.
And then there's a point in the middle of acompany because all companies tend to have
these value curves that go up and then they dipand then they go up again.
And those two represent kind of those reallyinteresting points.
And often, depending on the market, that middlepoint can be what we call growth investing.
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So a big part of the way I've thought aboutinvesting is getting at those right entry
points, but then partner closely with companiesto try to drive paths to be able to get value
to be created, right?
And value increasing sales, it can be createdby advancing through clinical trials, it could
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be through business development partnerships,it could be through IPOs, it could be through
helping to achieve M and A events.
All of those can be opportunities, but you gotto think about the entry point.
And then most importantly, that partnership ofdriving value.
And then the derivative that comes out of that,that's super important, is a really tight
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alignment on the plan, right?
It's one thing for an investor to put moneyinto a company, think they're going in this
direction, management's going that way, andthen everyone gets upset at each other.
And so getting that alignment before you putmoney in is a great way to be able to generate
the sorts of outcomes that you're looking for.
Why would there be misalignment?
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Is it a risk appetite difference?
Or is it I believe X, you believe Y?
It's the latter often.
And so it may be, you can find companies, forexample, we've seen lots of these, where they
may be selling, for example, B2C, but it turnsout the fundamentals of the B2C business aren't
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as strong.
The underlying product might be very strong,and what they really need to do is to evolve
their model to a B2B or B2B2C.
And those kinds of shifts, if you want to sitthere and hope that a CEO is going to make that
kind of shift passively, that's not going tohappen.
But if you align on that decision ahead oftime, and in fact, you're then underwriting the
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CEO, taking the step that you jointly agree isgoing to unlock value, that's very powerful.
One way that I look at what you're talkingabout, specifically in biotech, is there are
essentially two universes.
There's the business universe where you'reworking on the biotech, there's different
scientific risk, different discovery, FDAfeedback, and then there's the financial
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universe where you have seed, series A, who'sleading, who's all this memetic behavior, and
you want to be able to trade between these twodifferent universes with full information.
So essentially insider trading in the privatemarkets, understanding the science on a basic
level, while the non scientific investors andthe less sophisticated investors are just kind
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of using memetic behavior and looking at eachother to gain conviction.
It's a really good way of putting it.
I mean, if you take it in the therapeuticdevelopment world, right?
Part of what's interesting about thetherapeutic development world is there's a lot
of just binary decisions and binary outcomesalong the journey.
And so for example, you would say we're goingto take drug A and treat disease B.
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And there is a moment in time where thatselection gets made, and then the clinical
trial or clinical trials get done.
And the alignment that we're gonna do A in B isincredibly important.
Now, you might say that's a pure sciencedecision.
The science is really a big part of it, butit's not the only decision.
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I've been told in my career many, many times,there's no such thing as product market fit in
drug development, but that's simply not true.
Because when you look at approved drugs,approved drugs, I think the statistic is only
40% of them ever return the capital that wasactually invested to get the drug approved,
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which is a crazy statistic.
Now we could come up with a number of differentreasons.
Maybe the pricing wasn't right, maybe thepatient population wasn't right, maybe the
sales wasn't done right, but all of those arethings that we would say in the rest of the
world, which we would call it wasn't productmarket fit.
And that product market fit starts all the wayback with drug A to treat disease B.
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Again, so if you get that wrong, you've messedup that back end, you just don't have the
opportunity to do this kind of live testingthat you might have in other places of being
able to say, try selling to a customer.
You can sell surrogates through BD, but youcan't sell to the actual customer until you get
it approved.
From the outside, it seems that biotech is anindustry where you get your drug approved,
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everyone makes a lot of money, 40% of the timethat you get it approved, you don't get your
money back.
What's a way to ascertain product market fit ona drug before spending hundreds of millions of
dollars to get it approved?
It's difficult.
I mean, the industry obviously has not 100%solved this as an issue.
But I think what one looks for, and this is theway I've tended to think about it, is you
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really want to find a drug that has a set offeatures that a patient population is gonna
look for, or is gonna benefit from, and I'lldouble click on that in a second.
You want a disease where a drug that meetscertain standards, will benefit from it, and
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you wanna be able to do it in a price frameworkwhere, you think the market is going to frankly
care.
But some of the things that are reallyimportant that go into that is you need in that
indication to be able to design and execute aclinical trial that will be able to show a
significant benefit in that patient population,one that payers and patients both care about,
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and you need it to be able to be done in a waythat regulators also care about.
And I've seen very often, for example, youwould see someone who might do some studies on
a rat, right?
And they'll show that they treated brain cancerin like three rats and the brain cancer
disappeared.
Disappeared.
Great, very exciting.
(29:45):
And then they'll say, you know what, we'regoing to pivot this whole company to go after
brain cancer.
And while it's a very laudable goal, becausebrain cancer has obviously taken many lives and
it's a very tragic course when you see peoplego through it.
Part of the challenge on it is there's a reasonit's been very difficult to treat.
One is the models aren't very predictive, I.
(30:06):
E.
What you see in an animal is not what goes on.
The diversity of a tumor is not the diversitythat you get or the lack of diversity that you
get in an animal.
And all of these lead to features that make itvery difficult to get your clinical trial to
actually work.
And so you see these companies then making adecision, which where they might have great
(30:28):
technology, it's taking them down a path wherethey're not going to be successful.
And again, so a lot of this, when it comes totherapeutic investing, you need the specialized
knowledge to be able to understand this.
You ask the question of how do I draw surrogateinformation from fact patterns I've already
seen to help me make a best guess?
And then you test that best guess in the waysthat you can.
(30:50):
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This actually reminds me of skill stacking,which is this underappreciated concept of if
you're very good at something, let's say you'revery good you're a very good scientist, and
then you learn venture, that's valuable andcould be very valuable even if you're not the
(31:12):
best venture investor or the best scientist.
But as you start to stack more skills, if youlearn regular product market fit and regular
kind of venture strategy on top of the biotechventure strategy, you start to get these
unusual stacks of skills that allows you to beworld class in what you're doing even if and
this is not you.
(31:32):
But even if you're not the world class at youryour core skill, you could actually stack
skills long enough to be really good.
A good example of that is Elon.
He stacked being an engineer, then being goodat fundraising, then being a good writer, being
good at media.
And nobody would really say he's like the bestwriter in the world or the best on media, but
stacking these skills together has made himextremely formidable.
(31:56):
I think it's a great observation.
And I think that the more you can bring variousforms of expertise together, of course you get
the benefit of pattern recognition thattranscends fields.
And I think that's exactly what's occurringhere.
I mean, to me, part of the difference betweenhealth and not health is that health has all
this jargon that often people will pay $100,000in order to get a plaque that goes on the wall.
(32:18):
And what is it?
It's a vocabulary list.
Okay, that's a little bit more diminishing thanI intend.
But at some level, that's part of what createsthat into a specialty is understanding that
jargon, understanding that nuance, but the samebusiness rules are effectively applying over
time.
There's also a very unusual skill, which isextreme domain expertise and ability to explain
(32:43):
it on a very simple term.
So this, like, PhD understanding with seventhgrade communications.
That's exactly right.
When you find people who can do that, it'samazing.
So biotech over the last decade hasunderperformed and has not done great as a
venture class for LPs.
What has been the reason for that?
We can look at it on a couple of differentlevels.
(33:07):
When you look back at biotech 2019 to 2021,things went smashingly well.
We'd say the same in most domains, I think weall know the basis for that.
An unusual amount of money was printed in azero interest rate environment.
So where were people going to put money forgrowth?
(33:27):
They were going to put it in tech and biotechnames.
And we saw a massive amount of money move intothe markets.
And of course, a massive amount of valueappreciation in the markets.
So I think that's, if I can put it simply, itincredibly exciting.
I think what happened, of course, course is asthe world changed, the companies weren't as
(33:49):
caught up to their valuation as they wanted tobe.
And so more recently, we've seen a very strong,I think the word is correction that people like
to use, where of course a lot of that value andthen some has been erased.
And so when you look at where the biotech worldis and the health world is, I tend to think of
it as being in two different environments.
(34:09):
One is when you have generalist investors whoare in, and one is where you don't.
So in 2019, 2020, 2021, a lot of generalistinvestors were going into biotech.
In 'twenty two through present, they're simplyput, are not.
But the interesting thing is, I think when oneis focused, whether it's on drugs or whether
(34:31):
it's on health associated technologies, whenyou're really focused on high quality companies
that have that product market fit, have thatmoat, right?
In that case, it might be patents or somethingalong those lines, have a great team.
Even in markets like this, they are doing greatthings and they're creating tremendous amounts
of value.
And so I think it really becomes that questionof making sure you can find those great
(34:54):
companies that can continue to outperform whengenerally is a bad environment.
Is there a supply and demand aspect wherethere's less capital now in biotech VC so that
should increase theoretically, at leastreturns?
Or are there other dynamics driving the marketsand valuations today?
(35:18):
Today versus last year are very interestingquestions.
If we look at the biotech world versus thehealth large world, I'll give you two different
frameworks.
Biotech today is incredibly complicated,because not only do you have to deal with
science and regulatory and commercial and allof those framings, And then you have decisions
(35:38):
around the cost to be able to move from A to B,and whether you can actually generate real
value that comes out of that, which is typicalbiotech.
But now on top of this, we have the questionsaround what things like the impact of
negotiations secondary to the InflationReduction Act are going to mean, what this
potential most favored nation is going to mean,what some of the tariffs are going to mean.
(36:02):
And so if I oversimplify it, it's very hard tocalculate an NPV or a DCF in biotech today.
It's very hard to be able to do that.
In health, when you look at it, right, I thinkwhat's really interesting is you look at the
health world, there are four major drivers thatare leading to a foundational transformation of
(36:25):
20% of our GDP.
And it's happening incredibly quickly.
And these are things like AI, things likedecentralization, A progressive shift from
things done in a hospital to things being doneby a specialist, from a specialist to a
generalist, from a generalist to a consumer,consumers seeking an unusual interest in their
own health, and frankly, change in the way thatpayments are being done across the entirety of
(36:50):
the health system.
Again, all of this is happening incrediblyquickly.
And so part of what's exciting from myperspective is, sure, some of this requires
that specialized knowledge, but I think what'shappening is amazing companies are getting
created.
And these companies when they're created andthey're growing, are unlocking tremendous
amounts of value.
(37:11):
And I think what's been interesting is you cansee these companies in an environment where
couple outstanding outstanding management,outstanding ideas with, frankly, leadership
that's associated on the financial side.
And these companies, I think, still have thesky as the limit in an environment that might
otherwise be
Tell me about Avren Capital.
(37:32):
I launched recently a firm called Avren Capitalthat I'm very excited about.
I launched it with my brother.
It's basically we took the benefit of ourbackgrounds and we looked forward and we said,
look, what is the single biggest GDP growthopportunity and wealth creation opportunity
(37:54):
over the next handful of decades?
As we step back and did that, much like whatAvista would have done back decades ago in
picking enterprise software, we saw it as thatintersection of health and tech.
If you will, watching how tech is transforminghealth and doing it incredibly quickly.
And so we said, what we wanted to do is tofocus very specifically on that transformation
(38:18):
and help to usher in the next generation ofgreat companies.
So we've built a team that's focused on findingand partnering with outstanding companies and
helping them to grow and get into thatexponential phase, which we're incredibly
excited by.
Where we decided to focus is on later stagecompanies.
(38:43):
And part of this is when you look at what'shappened over the last handful of years, we've
seen this massive bifurcation of financing intoearly stage and late stage, leaving the middle,
if you will, of company growth as somethingthat is more devoid of capital than it
otherwise should be.
(39:03):
And now when we've had public markets come down50 to 90% on a certain company basis since
2021, at the same time, with fewer and fewerfunds supporting in that area, we found a
tremendous opportunity to find great companiesthat we can partner with, and help them take
their outstanding visions and make them intorealities as they go forward.
(39:27):
So what we're very excited about doing istaking the company building experience that
Eric and I have, as well as the team around us.
The team as a whole has been involved in about22 unicorns.
And putting that together has given us anopportunity to partner closely with
entrepreneurs, with management teams, to helpus collectively see visions that we think can
(39:49):
help to drive to really, really interestinggrowth points, growth trajectories and outcomes
for these companies.
Give me a type of deal that you would do in acompany that's neither early stage nor late
stage.
We tend to like companies that have not justproduct market fit already established, but
they've taken the product, they've developedthe product, it's on or close to market.
(40:14):
And they have a very clear view of how thisthing is going to be able to have a real
impact.
So for example, we've partnered with companiesin the context, actually of what I was
describing earlier, where they might have had aB2C model, and we saw an opportunity that by
going to more of a B2B2C model, they wouldactually be able to unlock dramatically more
(40:38):
value and do it durably.
And we worked very closely with them duringthat transition.
And they've been, if I can put it bluntly, on atear, and that's been incredibly exciting.
Tell me about your thesis on Alzheimer's.
A lot of people are concerned about familymembers getting Alzheimer's.
Tell me about your thesis there.
Alzheimer's is a particularly scary disease,right?
(41:01):
And I think people are scared of it, not justbecause of what they see it doing to their
family or friends, but what they think of thatit could do to them, right?
Watching people become almost mental shadows ofthemselves, right?
Losing memories, forgetting their loved ones,all of that, it's incredibly scary.
And it's incredibly scary, in deeply personalways.
(41:22):
One of the things that's been happening in thebiotech world, which has been exciting for
frankly, decades, has been the world ofprecision medicine.
So what does precision medicine mean?
Well, often what's done is you can findsomething that allows you to know you're
putting the right drug in the right patient atthe right time.
And that was done, for example, for raredisease, rare genetic disease, and that's
(41:45):
unlocked treatments for things like Gaucher'sdisease, Pompe's disease.
These are, of course, devastating children whoinstead of having a death sentence can actually
live a mostly normal life, which is incrediblyexciting.
That same logic was brought into cancer, andhas been, tremendously impactful impactful
(42:06):
there where untreatable cancers now havetreatments.
People who would have again had a deathsentence have now survived cancer.
It was then moved into inflammation andimmunology, and we've been seeing some
tremendous value created there for patients.
But what's exciting to me is I think we're nowat the beginning of an era where personalized
(42:27):
medicine is possible for Alzheimer's.
So we can take this incredibly complicateddisease and start understanding definable
domains within it, and using that where we canmake sure we're designing very specific
treatments for that specific patientpopulation.
And I think that can open up a completely newera in this disease.
And so it's something we're very excited about.
(42:47):
What would you like our audience to know aboutyou, about Avarin Capital, or anything else
you'd like to share?
We at Avarin are really driven by a future ofhealth and a future of medicine that we're
incredibly excited about.
We think that we're at the precipice of anopportunity to bring a new way that we can
think about our journey through life from ahealth perspective.
(43:11):
And we see that as something that's going to bea really important part of people's lives, but
also an important part of the economy.
And we want to play a major role in that.
We love to partner with people in this journey,and anyone who wants to partner with us, feel
free to reach out.
And how should people keep up with everythingDavid Barry?
You can find me on LinkedIn.
(43:32):
I'm on Twitter.
I'm probably the worst Twitter person or sorry,ex person.
You see how bad I am, on the face of theuniverse.
We also have regular webinars.
We just, had one recently, and we're very happyto share the content that that we've been
producing.
No TikTok skits yet?
Not yet.
Not yet.
Okay.
My my my TikTok ability is worse than my ex.
(43:57):
Well, David, thanks for jumping on, and I lookforward to continuing conversation in person.
Well, thank you for having me.
Really appreciate it.
Thanks for listening to my conversation.
If you enjoyed this episode, please share witha friend.
This helps us grow.
Also provides the very best feedback when wereview the episode's analytics.
Thank you for your support.
When our mutual friend, Saurav, introduced youto me, he introduced you as the Elon Musk of
(00:05):
biotech.
Why did he introduce you like that?
You can always think about really bigtechnology problems, but health has a
particular calling.
Right?
I think we all have a story where we've lostsomeone, and usually somewhere along that
journey, right?
Even we tell this part of the story to people,there's a moment where we just, we feel
(00:26):
helpless.
And sometimes that's because there aren't drugsfor the condition.
Sometimes it's because care is being denied.
Sometimes it's because we can't afford atreatment.
Sometimes it's because it's too late.
A whole set of different reasons for it.
And so I just find it super motivating to tryto find solutions to the problems that take the
(00:48):
people who are close to all of us.
And it's kind of that foundation where if youcouple that with a willingness to ask really
big questions, and frankly, a willingness to bewrong a lot, importantly, to accept when you're
wrong, great things can happen.
And I think that's kind of been the core of theapproach that I've taken.
That's led to a number of companies that havebeen founded north of '20, I think closer to
(01:12):
'30.
And it's been a great honor to work with someoutstanding teams that have led seven of these
companies that have founded to become unicorns.
And we've had the ability to bring drugs andother products to market with the vision of
trying to help transform society for thebetter.
I can't do that kind of math on my hands, but Ithink seven of 30 unicorns, somewhere around,
(01:33):
like, a 22% rate.
What have been the common themes in the sevenunicorns that you've been a part
My thesis advisor back when I was in doing myPhD was Bob Langer and Ron Slicesacker.
And then Bob used to say, you know, allproblems are equally hard, so why not go after
the big ones?
So with that perspective, right, you know, youcan basically look at any of these problems and
(01:56):
try to come up with some core solution.
But the best way to have great ideas, as Edisonsaid, is to have a lot of ideas.
So the way I think about it is start out, put alot of ideas out there, be willing to be wrong,
be willing to accept that you're wrong.
And the framework here is that what you got todo is just is recognize what is the core of the
(02:17):
thing that you're trying to do, and be willingto see very, very early on that it's right or
it's not right.
And I'd say one of the things that's happenedin all good companies is somewhere along the
journey, it's probably about nine months,twelve months in, something fascinating
happens.
And that's this moment where you had your idea,you were convinced it was going to work, but
(02:39):
then something comes up and it was just notwhat you were expecting.
And that's the moment where I think greatnesscan get created, which is that you can find
that nugget because that is truth.
And if you can learn from that, you get theopportunity to point the company in the right
direction.
I tend to think of company creation, it's allabout perseverance.
(03:00):
Entrepreneurial life gets so glamorized, andthere's so many dynamics you have to fight
against.
People telling you you're wrong constantly,competition, bad luck.
And it all comes down to you willing to make itwork and willing, putting that will to make it
work.
I've seen that so many around entrepreneursmake them almost want them to fail.
(03:21):
And I think one of the things that Elon does sowell, and I admire him for is just sheer drive,
the sheer will that says, this is my vision,I'm gonna make it work.
And you got to imbue that not just to yourvision, to your company, but to the whole team.
Startups, unlike established companies, aredefault dead versus default alive.
In other words, if nothing gets done, it diesversus a corporation.
(03:45):
If nothing gets done, maybe it dies over acentury, but it essentially continues to live.
Exactly.
And you can almost think about it as almostlike a gravity that exists around any company,
which is you have to constantly fight thoseforces and cause the company to grow, cause the
company to lift off, cause the company to getinto orbit, and then continue from there.
(04:08):
And that constant drive, recognizing that look,starting up a company is one thing, getting a
company through a series A is another thing,getting a company through a series B is another
thing.
And as the company continues to mature, thatevolution and that push is something that you
have to continue to do right for the company.
You mentioned that as you're starting acompany, you sometimes uncover a kernel of
(04:29):
truth that could be the basis of somethingreally big.
It could also be a distraction.
And oftentimes, those labels are put ondifferent changes in strategies in retrospect.
How do you know that something's a great pivotversus a distraction?
It's hard.
Whenever you see something, the question iswhat is the ground truth?
(04:50):
And I think that's where you have to startbecause seeing something that might just be a
slight tweak on your business model because,Oh, that sale was hard as one thing.
But when you get a piece of data, that's just,it's true, it's reproducible, it is durable,
You owe it to the company, you owe it to thedata to at least do the work and figure out
(05:11):
what actually might be happening.
And you have to be a little careful, right?
Because when you're managing a company,employees don't want to be whip sawed back and
forth.
It's an incredible distraction.
But at the same time, you got to do the work tofigure out if what you're seeing, that signal
is that signal that drives you into somethinggreater.
One of the things that I found is that you wantto not be the person that just changes the
(05:36):
course because they're bored or because theydon't have what it takes to succeed, but you
also don't wanna be polar opposite, meaningthat you don't want to change because you wanna
stay the course.
How do you navigate that dilemma?
There's probably two different scenarios youcan think about them in.
One is in the context of a company.
So one of the ways that I've tried to solvethis in the past is to actually have a team who
(05:58):
is specific focus is to look at these newinsights and figure out what they might mean.
I would often call it a strategy team.
So we get an insight that causes an moment.
You can't often moment just go and say, allright, we're gonna go do this without doing the
work.
Then you also don't want to take the wholecompany and have them take their foot off the
(06:19):
gas pedal and start doing some other work.
So what I found that's really useful is havinga dedicated group of people who can be deeply
analytical, deeply thoughtful, understand thelogic train that gets you there to go and do
that work.
But then what you have to do at the back end ofthat is you've got to draw the conclusion, and
then you have to make sure whatever conclusionit is, is communicated really clearly, I.
(06:43):
E.
Stay the course, or no, we're making thischange.
But what I always find is that the vastmajority of people, and this often can show up
in a board CEO dynamic or a CEO management teamdynamic, people want to stay the course, they
want to keep doing what they were doing.
Sometimes it's because they had comfort in it.
Sometimes because they just naturally want toresist change.
(07:07):
Sometimes it's because they don't fullyunderstand what the new opportunity is.
And of course, that's part of the CEO job, isto bring people along the journey and
understand what that direction is.
But it is really important to be able to getthere, convince yourself first, and then bring
teams around you.
Sometimes you just want to go from 20,000,000to 22,500,000.0 to 25 to 27.5, and that just
(07:30):
feels good for everybody.
Even if you've missed a billion dollaropportunity or a $10,000,000,000 opportunity,
just having that incremental progress, there'ssomething very viscerally satisfying about
that.
It feels safe, it feels safe.
And people will tell you, you always win bycompounding.
But let's get into the honesty of it.
If you compound at a low rate, it's not as goodas compounding at a high rate.
(07:54):
Is it much more difficult to change thedirection of a company when you actually have a
little success?
Is that really the most difficult part?
It's incredibly difficult to get companies tochange when they're fully going.
And that's why I always think about the earlyphases of a company is so incredibly important,
right?
When you, in the early days, there's not manypeople.
So you have tremendous control over culture,tremendous influence on culture, tremendous
(08:20):
ability to make sure you're hiring the rightpeople, people who live to those values, to the
goals, to the virtues you're trying to instillin the company, but also people who have a
shared vision.
And the people I think who joined companies invery early days are just driven by this passion
to do something special.
And they're the sorts of people that they'llbring to you that funny thing when they see it.
(08:43):
And they want to engage with you in thatconversation.
And they're looking for how we can do somethingthat's great.
What happens when a company gets bigger iswell, your systems get diffused, your hiring
gets diffused.
And so sometimes the ability to hire peoplethat are aligned with culture or aligned with
standards or aligned with values tends to drifta little bit.
(09:05):
Because I have a goal, I have my near term goalthat I'm trying to achieve and I need X, Y and
Z number of people to be able to achieve it.
So I know at corporate we think about this, butin my little world, I think about my end to
your goal.
It just creates this drift.
When you get companies that are at that size,inducing change, of course, is a much more
complicated phenomenon that involves changemanagement, bringing people along the ride.
(09:29):
And what you find is if you don't do it right,these little silos will go off and keep doing
the old thing, and not follow along the journeyin the way that you're intending the company to
go.
And I actually want to give my brother atremendous amount of credit on this.
When he built TripleLift, even as that companygot to several 100 people, they were really
(09:53):
strong at maintaining the quality of hiring, atmaintaining the culture, and keeping an
environment that kept the the community focusedon the goal.
And to the point that when they were acquiredby Vista, I think they had one of the highest
scores in Vista's history for how the team wasperforming.
There's a psychological principle callednegative contagion, which is the scientific
(10:19):
explanation of one bad apple spoiling theentire batch.
One conventional thinking person that is aconformist could actually create a gravity
around him or her to bring the entire companyinto this kind of small thinking.
And that's why I think it's so important.
Preproduct market fit is really where you'recreating the the DNA of the company to keep
(10:43):
that with truly first principles thinkers, withtruly non egotistical people that can change
course if needed.
100%.
I think when you can find people like that, whoshare the goals of being able to do something
specific that has big impact, you're building agreat team.
And then you get that alignment where peopleare driven by the end result as opposed to the
(11:09):
means of being able to get there.
And the more people you can find like that in acompany, the latter, not the bad apples, the
better.
You you started $7,000,000,000 companies frombeginning to scale.
Used to be this conventional wisdom that thepeople that started the company shouldn't be
the ones that scale.
Do you find that to be true in that the truefirst principles thinkers can actually scale,
(11:31):
or is it more that the middle management peoplecan't be early employees?
When you think about what some of thesecompanies do that are able to hyperscale and
continue to scale and continue to grow andcontinue to innovate, you tend to see that
founders are playing a really important role asyou go along the journey.
Because, of course, the founder will help toset up the company in the beginning.
(11:51):
A founder will play, will make an importantdecision in setting strategy, trying to define
that product market fit.
What I've seen often is when you then hire aCEO to replace a founder, one of the first
things that that new CEO wants to do, they tendto undo a lot of things that that prior CEO or
the founder may have done, and that createschallenges.
(12:14):
Now, in some cases, the company may have doneits innovation, and now it just needs to rinse
and repeat.
And in that case, probably a founder who'sgoing to constantly innovate is not going to be
the best way to do that rinsing and repeating,again, because it's a different mindset.
But the reason that hyperscaling companieshyperscale is they're constantly getting that
(12:36):
data, they're constantly getting theinformation.
They're constantly asking the question, how canwe do better?
And I think what they do really well, is they,these sorts of founders will say, what am I
really good at?
Which is often innovation, visioning, ideation,creation, bringing people along, etcetera.
(12:56):
And what are they less good at?
Which is, for example, operations in somecases, and they'll surround themselves with
outstanding operators.
So you can get the best of both worlds.
And I think that's a really important dualitythat when you can recognize what one is good at
and what one is less good at, you can make anoutstanding company come out of it, at all
phases.
(13:18):
Double clicking on this $0 company, thecompanies that start out early and turn into
billion dollar companies, how necessary is aculture of working seventy, eighty, ninety hour
to becoming a billion dollar company?
What found is you can actually get a reallygood read on where a company is going, by how
(13:42):
long people want to stay working at the companyon say a day to day basis without being pushed.
So I think these mandated cultures of, we'regonna work twenty seven hours a day and never
go home and sleep, when it's mandated, I don'tthink it works well because people burn out.
But when the team that you have has the passionthat they just want to keep working on it, they
(14:05):
want to make it, they want to solve it, theywant to get it there, you know that something
good is going to come out of it.
And you can actually feel that energy if youwalk into a company where people are acting in
that way with that kind of passion, it's in theair.
And I think people are more excited to go workthere.
They're more excited to work late hours withoutbeing told that they have to.
(14:28):
And the output you get is, it's not just eighthours plus eight hours, it's much, much higher,
because again, it's all about that drive.
Is that primarily a passion for the mission,passion for personal financial gain, a passion
for problem solving, what underpins that desireto stay late at night?
A lot of it, especially when you're dealingwith health companies, has a big part to do
(14:53):
with the mission.
But I mean, the other two obviously are a bigcomponent of it as well.
I don't think it's one or the other.
But why would a computer scientist go to ahealth company as opposed to a tech company in
the Bay Area?
It's probably because they're driven by themission.
What would people say from the outside thathave known you really well?
(15:13):
What would they point to your one or twosuperpowers that has allowed you to start
$7,000,000,000 companies?
I don't know what people say behind my back.
But my favorite line that I've heard someonesay publicly is was actually said by Bob Langer
who called me fearless.
And what his framework on that was, is that youcan pick the problem, but you got to run
(15:36):
headlong into it.
You got to be able to say, it doesn't matterhow complicated this is.
It doesn't matter that a lot of people saidthat it's hard.
It doesn't matter that it might seemunsolvable.
It's just you go and you push and you try tofind that solution.
And I think that you could call it strongperseverance, could call it maybe an
(15:57):
unwillingness to let go.
My wife would call it stubbornness.
I think that plays a really big role into it.
I think that phrase that I've used many timesis, you know, if you're running to a brick
wall, the question is, are you gonna hit thebrakes and leave a skid mark or are you just
gonna go right through?
And I always like to think about the latter asthe right option.
(16:19):
When you're driving into this brick wall, howimportant is it to have a inner circle of other
great thinkers that could tell you, you know,you're smart to be driving at this brick wall,
you have the right vehicle, just go and do itversus kind of doing it as a solo mission.
I remember when I was starting a company calledLS9, a very, very well known professor said to
(16:45):
me, oh, that idea is obvious, someone shouldalready be doing it.
And one of the things that that made me realizeis, if I can put it this way, great ideas are
obvious once you hear them.
So what do I mean by that?
Well, you didn't know that it was a great ideaand you hadn't thought of it beforehand, but
(17:05):
once you hear it, it's like, Oh my God, that issuch a good idea.
And I realized that that signal of someonesaying, Oh yeah, that's amazing, but I'm sure
it's been done before, even though they can'tfind it, was a really good signal to finding
really interesting problems to be working on.
Double click on this idea that a good ideasounds obvious.
(17:28):
Actually found my favorite ideas are thesereally big markets that only five people in the
world know about.
Like, there might be some obscure cybersecurityCTOs in oil and gas that see this one problem
over and over, and it might be massive.
It might be billions of dollars, but only fivepeople are aware of it.
You're almost saying the exact opposite, whichis something that people feel should exist.
(17:52):
Why do those opportunities exist?
Isn't the market pretty efficient when it comesto venture creation?
I don't know that the market is actually thatefficient when it comes to venture creation,
because the size of the problem is so large.
And there's just a natural framing where peopletend to move from an area they know to an area
(18:13):
they know to an area they know, it tends to beadjacent.
So can you form great companies by taking astep function innovation in an area?
Absolutely.
But at the same time, you can also look at aproblem in a completely new way and see
something that just isn't being done.
So I'll take the LS9 example.
(18:34):
This is a company that we launched back in02/2006, and this was back when that first
clean energy boom was taking place, it wasstarting to shape up in Silicon Valley and
whatnot.
There was a lot of investing that was going onto make ethanol, cellulosic ethanol, and other
(18:56):
such things.
And when you look at the core of that, right,cellulosic ethanol was driven because there was
a replacement of something called MTBE ingasoline.
And the question was, okay, with this growingmarket, can we find an interesting and
effective and low cost way to be able toproduce it?
Corn was an interesting way to do it.
Sugar was an interesting way to do it.
(19:17):
We saw the trend line, and the question thatcame up was, is there something better we could
make?
And this is one of those things that we asked.
And when we did the work, right, I rememberworking through probably about 140 different
molecules that you could theoretically make.
And the one that we ended up deciding to makewas diesel, not biodiesel, but diesel.
(19:39):
And when I say it like that, it's like, well,yeah, of course you should make diesel.
But at the time, people were making a differentmolecule called biodiesel because it was
easier, right?
And it was a relatively simple step.
People were making other molecules because theywere straightforward, but people weren't making
diesel, even though again, when you say it'slike, oh, yeah, that is the molecule that we
(20:00):
use.
It's a massive market.
And if only you could make it, you would say,yeah, let's go make a company that does that.
And that was literally the way that LS9 wasborn.
So it might not be an obvious idea for somebodyto come up with, but once you've gone through
the idea maze and you've gone through all thesolutions and you come up with the idea, at
that point it becomes more self evident versusit's not Exactly,
(20:25):
exactly.
It's not something that's in the commonparlance that everyone's saying, oh, here's an
idea, But it's when you hear a great idea, youwreck it, you can see that it's a great idea
when you say it, it just wasn't obvious that itwas a great idea until you heard it.
You've returned billions of dollars, and not ona billion dollar, on a much smaller number to
investors.
(20:46):
You have one of the best, I think, I've everseen biotech.
How did you transfer your skills from being agreat entrepreneur to being a great investor?
I'd say the first thing is I tend to think ofinvesting as having relatively simple
principles.
And these are kind of first principles.
So I know this is gonna sound super mundane,but a return is effectively your exit price
(21:10):
divided by your entry price.
So often in the venture industry, what happensis the anchoring is around percent ownership.
And so what will happen is you put a little bitof money in the seed, more money at a higher
price in the A, even more money at the B andeven more money at the C.
And that's what people do.
(21:31):
Often it's justified that, Oh, there's acapacity issue, can't put that much money in
early on.
Fine, I get the story.
But Doug Haines spelled it out really, reallyclearly to me once.
So Doug used to, I think, run the New Yorkoffice for McKinsey and then jumped that over
to Point 70 two, where he was the president.
(21:54):
And he had the advantage of not being a hedgefund guy when he went there.
So he went around and he asked everyone, whatdo you do?
How does this all work?
Walk me through how decisions are made, whatare the steps that are taken?
And what he pointed out is he said, look, ananalyst will go and figure out, this is a stock
that you should invest in, and here's my pricetarget.
And they'll take it to a portfolio manager andthey'll sell it to them, right?
(22:16):
Nvidia is trading at 100, I think Nvidia willgo up to 120.
So what a portfolio manager would do is thesame buying behavior that I described.
A little bit of money at 100 as the stock goesup, put a little put more money in as the stock
continues to go up, even more and more and moremoney.
But if you ask the question in the context ofNvidia, it's pretty easy to see, right?
If you're at 100 and someone's convinced thatit's going to go to 120, is it a higher
(22:40):
probability that it goes from 100 to 110 andgets you that 10% gain?
Or when you're at 110 and you've gottenconvinced because that trend has started to
take place, is it a higher probability thatit's going to go from 110 to now exceeding
their target, right?
And the answer is, of course, the former.
The reason I point this out is, well, itbasically says, we should be thinking
(23:03):
differently.
It's really about how do we drive multiples,right?
Rather than percent ownership.
And the context on that is, okay, where are thepoints where you can minimize your cost of
entry?
And it shows that there's two points in thejourney of a company.
One is at the beginning, because when youcreate a company, your price of entry is
(23:24):
effectively free.
It's not exactly free, but it's effectivelyfree.
And then there's a point in the middle of acompany because all companies tend to have
these value curves that go up and then they dipand then they go up again.
And those two represent kind of those reallyinteresting points.
And often, depending on the market, that middlepoint can be what we call growth investing.
(23:47):
So a big part of the way I've thought aboutinvesting is getting at those right entry
points, but then partner closely with companiesto try to drive paths to be able to get value
to be created, right?
And value increasing sales, it can be createdby advancing through clinical trials, it could
(24:09):
be through business development partnerships,it could be through IPOs, it could be through
helping to achieve M and A events.
All of those can be opportunities, but you gotto think about the entry point.
And then most importantly, that partnership ofdriving value.
And then the derivative that comes out of that,that's super important, is a really tight
(24:30):
alignment on the plan, right?
It's one thing for an investor to put moneyinto a company, think they're going in this
direction, management's going that way, andthen everyone gets upset at each other.
And so getting that alignment before you putmoney in is a great way to be able to generate
the sorts of outcomes that you're looking for.
Why would there be misalignment?
(24:52):
Is it a risk appetite difference?
Or is it I believe X, you believe Y?
It's the latter often.
And so it may be, you can find companies, forexample, we've seen lots of these, where they
may be selling, for example, B2C, but it turnsout the fundamentals of the B2C business aren't
(25:13):
as strong.
The underlying product might be very strong,and what they really need to do is to evolve
their model to a B2B or B2B2C.
And those kinds of shifts, if you want to sitthere and hope that a CEO is going to make that
kind of shift passively, that's not going tohappen.
But if you align on that decision ahead oftime, and in fact, you're then underwriting the
(25:34):
CEO, taking the step that you jointly agree isgoing to unlock value, that's very powerful.
One way that I look at what you're talkingabout, specifically in biotech, is there are
essentially two universes.
There's the business universe where you'reworking on the biotech, there's different
scientific risk, different discovery, FDAfeedback, and then there's the financial
(25:59):
universe where you have seed, series A, who'sleading, who's all this memetic behavior, and
you want to be able to trade between these twodifferent universes with full information.
So essentially insider trading in the privatemarkets, understanding the science on a basic
level, while the non scientific investors andthe less sophisticated investors are just kind
(26:19):
of using memetic behavior and looking at eachother to gain conviction.
It's a really good way of putting it.
I mean, if you take it in the therapeuticdevelopment world, right?
Part of what's interesting about thetherapeutic development world is there's a lot
of just binary decisions and binary outcomesalong the journey.
And so for example, you would say we're goingto take drug A and treat disease B.
(26:42):
And there is a moment in time where thatselection gets made, and then the clinical
trial or clinical trials get done.
And the alignment that we're gonna do A in B isincredibly important.
Now, you might say that's a pure sciencedecision.
The science is really a big part of it, butit's not the only decision.
(27:02):
I've been told in my career many, many times,there's no such thing as product market fit in
drug development, but that's simply not true.
Because when you look at approved drugs,approved drugs, I think the statistic is only
40% of them ever return the capital that wasactually invested to get the drug approved,
(27:24):
which is a crazy statistic.
Now we could come up with a number of differentreasons.
Maybe the pricing wasn't right, maybe thepatient population wasn't right, maybe the
sales wasn't done right, but all of those arethings that we would say in the rest of the
world, which we would call it wasn't productmarket fit.
And that product market fit starts all the wayback with drug A to treat disease B.
(27:47):
Again, so if you get that wrong, you've messedup that back end, you just don't have the
opportunity to do this kind of live testingthat you might have in other places of being
able to say, try selling to a customer.
You can sell surrogates through BD, but youcan't sell to the actual customer until you get
it approved.
From the outside, it seems that biotech is anindustry where you get your drug approved,
(28:11):
everyone makes a lot of money, 40% of the timethat you get it approved, you don't get your
money back.
What's a way to ascertain product market fit ona drug before spending hundreds of millions of
dollars to get it approved?
It's difficult.
I mean, the industry obviously has not 100%solved this as an issue.
But I think what one looks for, and this is theway I've tended to think about it, is you
(28:35):
really want to find a drug that has a set offeatures that a patient population is gonna
look for, or is gonna benefit from, and I'lldouble click on that in a second.
You want a disease where a drug that meetscertain standards, will benefit from it, and
(28:57):
you wanna be able to do it in a price frameworkwhere, you think the market is going to frankly
care.
But some of the things that are reallyimportant that go into that is you need in that
indication to be able to design and execute aclinical trial that will be able to show a
significant benefit in that patient population,one that payers and patients both care about,
(29:24):
and you need it to be able to be done in a waythat regulators also care about.
And I've seen very often, for example, youwould see someone who might do some studies on
a rat, right?
And they'll show that they treated brain cancerin like three rats and the brain cancer
disappeared.
Disappeared.
Great, very exciting.
(29:45):
And then they'll say, you know what, we'regoing to pivot this whole company to go after
brain cancer.
And while it's a very laudable goal, becausebrain cancer has obviously taken many lives and
it's a very tragic course when you see peoplego through it.
Part of the challenge on it is there's a reasonit's been very difficult to treat.
One is the models aren't very predictive, I.
(30:06):
E.
What you see in an animal is not what goes on.
The diversity of a tumor is not the diversitythat you get or the lack of diversity that you
get in an animal.
And all of these lead to features that make itvery difficult to get your clinical trial to
actually work.
And so you see these companies then making adecision, which where they might have great
(30:28):
technology, it's taking them down a path wherethey're not going to be successful.
And again, so a lot of this, when it comes totherapeutic investing, you need the specialized
knowledge to be able to understand this.
You ask the question of how do I draw surrogateinformation from fact patterns I've already
seen to help me make a best guess?
And then you test that best guess in the waysthat you can.
(30:50):
Thank you for listening.
To join our community and to make sure you donot miss any future episodes, please click the
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This actually reminds me of skill stacking,which is this underappreciated concept of if
you're very good at something, let's say you'revery good you're a very good scientist, and
then you learn venture, that's valuable andcould be very valuable even if you're not the
(31:12):
best venture investor or the best scientist.
But as you start to stack more skills, if youlearn regular product market fit and regular
kind of venture strategy on top of the biotechventure strategy, you start to get these
unusual stacks of skills that allows you to beworld class in what you're doing even if and
this is not you.
(31:32):
But even if you're not the world class at youryour core skill, you could actually stack
skills long enough to be really good.
A good example of that is Elon.
He stacked being an engineer, then being goodat fundraising, then being a good writer, being
good at media.
And nobody would really say he's like the bestwriter in the world or the best on media, but
stacking these skills together has made himextremely formidable.
(31:56):
I think it's a great observation.
And I think that the more you can bring variousforms of expertise together, of course you get
the benefit of pattern recognition thattranscends fields.
And I think that's exactly what's occurringhere.
I mean, to me, part of the difference betweenhealth and not health is that health has all
this jargon that often people will pay $100,000in order to get a plaque that goes on the wall.
(32:18):
And what is it?
It's a vocabulary list.
Okay, that's a little bit more diminishing thanI intend.
But at some level, that's part of what createsthat into a specialty is understanding that
jargon, understanding that nuance, but the samebusiness rules are effectively applying over
time.
There's also a very unusual skill, which isextreme domain expertise and ability to explain
(32:43):
it on a very simple term.
So this, like, PhD understanding with seventhgrade communications.
That's exactly right.
When you find people who can do that, it'samazing.
So biotech over the last decade hasunderperformed and has not done great as a
venture class for LPs.
What has been the reason for that?
We can look at it on a couple of differentlevels.
(33:07):
When you look back at biotech 2019 to 2021,things went smashingly well.
We'd say the same in most domains, I think weall know the basis for that.
An unusual amount of money was printed in azero interest rate environment.
So where were people going to put money forgrowth?
(33:27):
They were going to put it in tech and biotechnames.
And we saw a massive amount of money move intothe markets.
And of course, a massive amount of valueappreciation in the markets.
So I think that's, if I can put it simply, itincredibly exciting.
I think what happened, of course, course is asthe world changed, the companies weren't as
(33:49):
caught up to their valuation as they wanted tobe.
And so more recently, we've seen a very strong,I think the word is correction that people like
to use, where of course a lot of that value andthen some has been erased.
And so when you look at where the biotech worldis and the health world is, I tend to think of
it as being in two different environments.
(34:09):
One is when you have generalist investors whoare in, and one is where you don't.
So in 2019, 2020, 2021, a lot of generalistinvestors were going into biotech.
In 'twenty two through present, they're simplyput, are not.
But the interesting thing is, I think when oneis focused, whether it's on drugs or whether
(34:31):
it's on health associated technologies, whenyou're really focused on high quality companies
that have that product market fit, have thatmoat, right?
In that case, it might be patents or somethingalong those lines, have a great team.
Even in markets like this, they are doing greatthings and they're creating tremendous amounts
of value.
And so I think it really becomes that questionof making sure you can find those great
(34:54):
companies that can continue to outperform whengenerally is a bad environment.
Is there a supply and demand aspect wherethere's less capital now in biotech VC so that
should increase theoretically, at leastreturns?
Or are there other dynamics driving the marketsand valuations today?
(35:18):
Today versus last year are very interestingquestions.
If we look at the biotech world versus thehealth large world, I'll give you two different
frameworks.
Biotech today is incredibly complicated,because not only do you have to deal with
science and regulatory and commercial and allof those framings, And then you have decisions
(35:38):
around the cost to be able to move from A to B,and whether you can actually generate real
value that comes out of that, which is typicalbiotech.
But now on top of this, we have the questionsaround what things like the impact of
negotiations secondary to the InflationReduction Act are going to mean, what this
potential most favored nation is going to mean,what some of the tariffs are going to mean.
(36:02):
And so if I oversimplify it, it's very hard tocalculate an NPV or a DCF in biotech today.
It's very hard to be able to do that.
In health, when you look at it, right, I thinkwhat's really interesting is you look at the
health world, there are four major drivers thatare leading to a foundational transformation of
(36:25):
20% of our GDP.
And it's happening incredibly quickly.
And these are things like AI, things likedecentralization, A progressive shift from
things done in a hospital to things being doneby a specialist, from a specialist to a
generalist, from a generalist to a consumer,consumers seeking an unusual interest in their
own health, and frankly, change in the way thatpayments are being done across the entirety of
(36:50):
the health system.
Again, all of this is happening incrediblyquickly.
And so part of what's exciting from myperspective is, sure, some of this requires
that specialized knowledge, but I think what'shappening is amazing companies are getting
created.
And these companies when they're created andthey're growing, are unlocking tremendous
amounts of value.
(37:11):
And I think what's been interesting is you cansee these companies in an environment where
couple outstanding outstanding management,outstanding ideas with, frankly, leadership
that's associated on the financial side.
And these companies, I think, still have thesky as the limit in an environment that might
otherwise be
Tell me about Avren Capital.
(37:32):
I launched recently a firm called Avren Capitalthat I'm very excited about.
I launched it with my brother.
It's basically we took the benefit of ourbackgrounds and we looked forward and we said,
look, what is the single biggest GDP growthopportunity and wealth creation opportunity
(37:54):
over the next handful of decades?
As we step back and did that, much like whatAvista would have done back decades ago in
picking enterprise software, we saw it as thatintersection of health and tech.
If you will, watching how tech is transforminghealth and doing it incredibly quickly.
And so we said, what we wanted to do is tofocus very specifically on that transformation
(38:18):
and help to usher in the next generation ofgreat companies.
So we've built a team that's focused on findingand partnering with outstanding companies and
helping them to grow and get into thatexponential phase, which we're incredibly
excited by.
Where we decided to focus is on later stagecompanies.
(38:43):
And part of this is when you look at what'shappened over the last handful of years, we've
seen this massive bifurcation of financing intoearly stage and late stage, leaving the middle,
if you will, of company growth as somethingthat is more devoid of capital than it
otherwise should be.
(39:03):
And now when we've had public markets come down50 to 90% on a certain company basis since
2021, at the same time, with fewer and fewerfunds supporting in that area, we found a
tremendous opportunity to find great companiesthat we can partner with, and help them take
their outstanding visions and make them intorealities as they go forward.
(39:27):
So what we're very excited about doing istaking the company building experience that
Eric and I have, as well as the team around us.
The team as a whole has been involved in about22 unicorns.
And putting that together has given us anopportunity to partner closely with
entrepreneurs, with management teams, to helpus collectively see visions that we think can
(39:49):
help to drive to really, really interestinggrowth points, growth trajectories and outcomes
for these companies.
Give me a type of deal that you would do in acompany that's neither early stage nor late
stage.
We tend to like companies that have not justproduct market fit already established, but
they've taken the product, they've developedthe product, it's on or close to market.
(40:14):
And they have a very clear view of how thisthing is going to be able to have a real
impact.
So for example, we've partnered with companiesin the context, actually of what I was
describing earlier, where they might have had aB2C model, and we saw an opportunity that by
going to more of a B2B2C model, they wouldactually be able to unlock dramatically more
(40:38):
value and do it durably.
And we worked very closely with them duringthat transition.
And they've been, if I can put it bluntly, on atear, and that's been incredibly exciting.
Tell me about your thesis on Alzheimer's.
A lot of people are concerned about familymembers getting Alzheimer's.
Tell me about your thesis there.
Alzheimer's is a particularly scary disease,right?
(41:01):
And I think people are scared of it, not justbecause of what they see it doing to their
family or friends, but what they think of thatit could do to them, right?
Watching people become almost mental shadows ofthemselves, right?
Losing memories, forgetting their loved ones,all of that, it's incredibly scary.
And it's incredibly scary, in deeply personalways.
(41:22):
One of the things that's been happening in thebiotech world, which has been exciting for
frankly, decades, has been the world ofprecision medicine.
So what does precision medicine mean?
Well, often what's done is you can findsomething that allows you to know you're
putting the right drug in the right patient atthe right time.
And that was done, for example, for raredisease, rare genetic disease, and that's
(41:45):
unlocked treatments for things like Gaucher'sdisease, Pompe's disease.
These are, of course, devastating children whoinstead of having a death sentence can actually
live a mostly normal life, which is incrediblyexciting.
That same logic was brought into cancer, andhas been, tremendously impactful impactful
(42:06):
there where untreatable cancers now havetreatments.
People who would have again had a deathsentence have now survived cancer.
It was then moved into inflammation andimmunology, and we've been seeing some
tremendous value created there for patients.
But what's exciting to me is I think we're nowat the beginning of an era where personalized
(42:27):
medicine is possible for Alzheimer's.
So we can take this incredibly complicateddisease and start understanding definable
domains within it, and using that where we canmake sure we're designing very specific
treatments for that specific patientpopulation.
And I think that can open up a completely newera in this disease.
And so it's something we're very excited about.
(42:47):
What would you like our audience to know aboutyou, about Avarin Capital, or anything else
you'd like to share?
We at Avarin are really driven by a future ofhealth and a future of medicine that we're
incredibly excited about.
We think that we're at the precipice of anopportunity to bring a new way that we can
think about our journey through life from ahealth perspective.
(43:11):
And we see that as something that's going to bea really important part of people's lives, but
also an important part of the economy.
And we want to play a major role in that.
We love to partner with people in this journey,and anyone who wants to partner with us, feel
free to reach out.
And how should people keep up with everythingDavid Barry?
You can find me on LinkedIn.
(43:32):
I'm on Twitter.
I'm probably the worst Twitter person or sorry,ex person.
You see how bad I am, on the face of theuniverse.
We also have regular webinars.
We just, had one recently, and we're very happyto share the content that that we've been
producing.
No TikTok skits yet?
Not yet.
Not yet.
Okay.
My my my TikTok ability is worse than my ex.
(43:57):
Well, David, thanks for jumping on, and I lookforward to continuing conversation in person.
Well, thank you for having me.
Really appreciate it.
Thanks for listening to my conversation.
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