Two-Legged Mammals & Triple Exits

Jockeys, two-legged mammals, serial entrepreneurs, proven operators. It’s the one ingredient that makes all the difference in any startup. My Lux Capital partner Larry Bock has exceptional pattern recognition in spotting the great ones. Consider Larry Fritz, with whom Lux’s Bock has co-founded three companies. Fritz had Athena Neurosciences acquired by Elan Corporation for $630 million, Idun Pharmaceuticals sold to Pfizer and Conforma Therapeutics taken out by Biogen-Idec for about $250 million. Here’s my exclusive interview published for subscribers earlier this month:

Dr. Larry Fritz has founded and developed several successful biotechnology companies. His most recent company, Covella Pharmaceuticals, is focused on new mechanistic approaches to inflammatory diseases.

Prior to Covella, Fritz founded Conforma Therapeutics and served as its president and CEO from inception in 1999 through its acquisition by Biogen Idec in 2006. Dr. Fritz was also a founder and director of Cabrellis Pharmaceuticals, a specialty pharma cancer company spun-out from Conforma in conjunction with Biogen Idec's acquisition; Cabrellis was subsequently acquired by Pharmion.

Prior to Conforma, Fritz co-founded both Athena Neurosciences, now wholly-owned by Elan Corp., and Idun Pharmaceuticals, subsequently acquired by Pfizer. As vice president of research at Athena, his work led to the clinical development of products for multiple sclerosis, Alzheimer's disease and neuromuscular disorders. In addition to his entrepreneurial start-up activities, Fritz also has experience as the CEO of a public biotechnology company.

Following the sale of Conforma in 2006, he served as president and CEO of Anadys Pharmaceuticals, a Nasdaq-listed company working on viral diseases and oncology. Fritz also serves as a venture partner with Westfield Capital Management. He holds an A.B. degree in Biochemical Sciences from Harvard, an M.S. degree in Physiology from University College London and a Ph.D. in Biophysics from Rockefeller University.

Josh Wolfe: Walk the readers through your background and how you got involved in the life sciences.

Larry Fritz: I'm a scientist by training. I did my undergrad in biochemistry at Harvard and a Ph.D. in biophysics at Rockefeller University. At Rockefeller, I was in a rather small biophysics lab doing neurobiology research, measuring the electrical properties of cells in neurons and muscle. I was interested in aspects of brain function, but I wanted to move in a more biochemical direction instead of just being, as I like to say, "at the back end of an electrode." That is, if you really want to understand brain function, you need to study the system interactions at the molecular level. That was my introduction to molecular biology, and I came out to California in the early 1980s to start looking at problems in neurobiology using emerging molecular tools and techniques.

So you were a really bright young Ph.D. neurophysiologist--a title likely to immediately confuse most people! How did you get involved with start-up companies?

I always thought I would go into academics, but at some gut level I got really excited about the biotechnology industry that was emerging at the time. Only a handful of companies like Genentech and Amgen even existed at that point. I decided, rather than take an academic position, I would see if somebody would hire me in the biotech industry, even though I wasn't the typical "type."

Despite the fact that my educational background was a bit unusual, a Bay-area company called California Biotechnology decided to hire me. For a time, I think I was the only card-carrying neurobiologist in the entire biotech industry! While there, I worked on problems in the cardiovascular system and started a small neurobiology group within the company. Around that time, the first molecular hooks into Alzheimer's disease had just been discovered within the academic world, and I formed a collaboration with some academics to explore the prospects.

Through that collaboration, I was introduced to a seed-funding group called Avalon Ventures. We maintained an ongoing discussion, which ultimately led to the founding of my first company, Athena Neurosciences. That is where I first met Larry Bock, and we put Athena together. [Full disclosure: Larry is a partner at my firm, Lux Capital.] I ran R&D for about seven years, we took the company public, and it was a great success story both financially and medically. I'm proud to say that some of the work we did back then has stood the test of time. For instance, we developed a drug called Tysabri, which is the single most effective drug for multiple sclerosis, and we invented that drug from absolute concept.

View my complete interview with Larry Fritz at Forbes.com.

Steve Jurvetson: An Exclusive with DFJ's Managing Director at the speed of thought

In yet another exclusive interview, this week I sit with Steve Jurvetson of DFJ.

There aren't many investors as sharp, quick or multidisciplinary as Steve Jurvetson, managing director of Draper Fisher Jurvetson. His firm is a leading venture capital firm with affiliate offices around the world and one of the most active energy and clean-tech investors. Steve was the founding VC investor in Hotmail, Interwoven and Kana. He also led the firm's investments in Tradex and Cyras (acquired for $8 billion), and in pioneering companies in synthetic biology and molecular electronics. Previously, he was an research and development engineer at Hewlett-Packard, where seven of his communications chip designs were fabricated. His prior technical experience also includes programming, materials science research and computer design at HP, the Center for Materials Research and Mostek.

At Stanford, he finished his bachelor of science, electrical engineering, degree in 2.5 years and graduated No. 1 in his class. He also received master of science, electrical engineering, and master of business, administration, degrees from Stanford, and serves as co-chair of the NanoBusiness Alliance and president of the Western Association of Venture Capitalists.

Creative Disruption - Writing The Code Of Life

Forbes: The late science fiction author Sir Arthur C. Clarke once said, "Any sufficiently advanced technology is indistinguishable from magic." What's some magic you've seen lately?

Jurvetson: Some of the most interesting magic I've seen recently is in the domain of genetic alchemy, where you can change one organism into another by swapping DNA. We are on the cusp of being able to write the code of life as if it were a poem or computer program. That gives us a whole new set of capabilities, in what I would call a second generation of industrial biotech, where we don't just cut and paste from nature but we actually write code from the ground up however we choose.

Five or 10 years ago, folks would have said it's impossible to change one organism into another by swapping out 100% of its DNA, yet this has been demonstrated in the past year by Craig Venter and his team at Synthetic Genomics. This is just a precursor to the next step, which is putting a fully synthetic chromosome into a single-celled organism.

Have you invested in this science? How does it work?
Yes, I sit on the board of Synthetic Genomics, and we have two other investments that are also in this new generation of modifying organisms for building chemicals. They're really focused on designing systems to produce evolved organisms to do useful work. They do this by starting with an organism that naturally makes a small amount of a chemical of interest. Then, they'll analyze its metabolic pathways and cripple the organism along all dimensions exceptfor the one they want to make chemicals.

Therefore, in order to survive and reproduce, the organism is forced to evolve to produce more of the chemical that you desire. Some early work in this space by a company called Genomatica has shown a 20-fold improvement in yield from this directed evolution technique.

What's the business case for developing highly advanced technology to produce what are essentially commodity chemicals?
It is true that some folks are going after commodity chemicals, like fuels, where you're selling into a huge global market with commodity price swings. What they're betting on, though, is price position. Although they won't have international protection for their end product--you can't patent ethanol, for example--they can create protected pathways to make chemicals that are far more cost-effective than any other petroleum-based process.

So whether these new processes are consuming waste feedstocks, or stranded feedstocks that were too expensive to ship around previously, or true free wastes like CO2 from the air--you are unlocking value with this technology.

Another interesting aspect to this directed evolution approach, and what separates it from prior generations of biotech, is that your process can actually get better over time.

In past production systems, organisms would "drift" over time--that is, they mutate away from producing the chemical you want, because it is a profligate waste of their resources and energy. But in directed evolution, you've tightly coupled the reproductive pathway of the organism to the chemical of interest, so as time goes on, even if you're not trying to modify the system in any way, the process itself gets better over time instead of worse!

View my complete interview with Stever Jurvetson at Forbes.com.

Speech, Markets, Lampert & Hayek

This week as I’m traveling please consider the following excerpt on free speech and free markets from Eddie Lampert, of ESL Investments and chairman of Sears Holdings, excerpted from his most recent shareholder letter.

"…I believe that in a capitalist society we are always faced with the tradeoffs between freedom and tyranny. In a free society and free markets, what people say and what people write have been largely protected by the U.S. Constitution (this is not always true in any capitalist society). This is much less true in the economic domain, where constitutional protections of private property and economic rights have been watered down over time to permit significant levels of regulation and government intervention. Just as with free speech and a free press you will have people saying things that others view as harmful, hateful, or obscene, so too in a free economy you will have individuals and businesses doing things that others will disagree with. Some of those things may lead to great business success and others to failure or to disgrace. To expect or allow for excessive regulation of business, including financial businesses, is to stifle growth and creativity, which ultimately produce jobs and wealth that are the foundation for any successful and free society.

The two most important books that any student of current events should be reading in this environment are both by Friedrich Hayek, the esteemed Austrian economist. Based on events he witnessed beginning in the early part of the 20th century, Hayek wrote The Road to Serfdom as a warning to England and the United States against the damaging impact of socialist policies and The Fatal Conceit as a warning against heavy intervention in markets and society at large. Despite the almost universal belief today that more, but better, regulation is needed and that the role of the state needs to be not just temporarily larger, but permanently larger, Hayek’s writings and logic should give everybody pause as to the consequences of these actions.

As a country, we need to rebuild confidence and trust and to understand what happened. Whether by business or by government, the misdiagnosis of situations leads to poor prescriptions for rehabilitation and recovery. When the misdiagnosis is done at the federal government level and involves large parts of a national economy, the consequences can be swift and significant. The unintended consequences are often swifter and even more significant. As the leaders in our nation continue to evaluate and evolve the policies and rules of the game, we would all be wise to heed the cautions raised by Friedrich Hayek. I appreciate that the free market can be a difficult master and that there is an important role for government and regulators, but I hope that as we move forward the rules of the game and the methodology for changing those rules will be more consistent and fair than they have been over the past year. Those who desire to protect civil liberties in times of war appreciate the importance of laws protecting individuals and institutions. In times of economic and financial distress we need to be similarly vigilant in protecting economic and contract rights so that we can continue to have a system that functions properly. Attempts to threaten or eliminate those rights will chase away the capital and investment that our country needs to restore prosperity and to thrive in the future…”