Investing Billions - E360: The Hardest Lessons I Learned from Building 4 Unicorns

Episode Date: May 1, 2026

What if the biggest breakthroughs in biotech don’t come from more capital—but from building better systems for innovation? In this episode, I sit down with Errik Anderson, biotech entrepreneur and founder behind multiple billion-dollar companies, to discuss how building infrastructure, not just drugs, is reshaping the future of healthcare. Errik explains why most biotech companies fail the same way, how reducing the cost and time of experimentation unlocks more innovation, and why staying private longer enables better long-term decision making. We also explore compounding in biotech, the limits of scaling creativity, and how conviction, mission, and talent ultimately determine which companies change the world.

So you just announced your series E, which came in at a billion dollars, so you now have another unicorn. What number of unicorn is? This would be my fourth, actually. Yeah, yeah. This is of companies where I've been the founder or the co-founder. That's right. And what makes alloy therapeutics different than the other three companies?

It's a true biotech infrastructure company that is taking a very long view of both services, technologies, and the drugs that flow from that. So we're looking at the entire value chain from early stage drug discovery. all the way through to commercialization. And we're putting together the pieces so that we can coordinate that ecosystem of innovation from what happens in our academic labs all the way through to servicing pharma

and late stage clinical. And we started in one particular area and we've expanded more and more to be able to touch the whole supply chain. What distinguishes alloy from some of my other companies is it is a biotech infrastructure company, meaning that we're going to touch a whole bunch of different pieces and just be the faithful servant and supporter

of hopefully all of pharma and all of biotech as we go forward. And I call you often on the podcast, but specifically, I love this concept. You built the business that you wanted to work in for the rest of your career. How's that played out? This was something you told me in 2019, I think. This was like one of your main organizing mechanisms for Aller Therapy.

How is that played out? That's a philosophy we have to kind of build the business that you want to work. And it's a little bit comes from our single family office where we realized, as we've been building companies for 15, 20, 25 years now, that when you invest in companies, you write a check and then you spend your time making sure that your investment goes well. But as an operating business and as a builder, what I've learned is it's far more effective for us to think about where do we spend our time and then our capital and everything flows from that. So at first, it comes from this principle of, well, what are the problems in the world that we think are worth solving? What engages us intellectually?

Where do we feel like we have an edge in being able to do something useful? And so the vision for alloy was the world needs great tech-enabled services specifically. So really cutting-edge technology that constantly is refined and gets better over time. and it needs to be wrappered in a service because the vast majority of folks only discover one drug or two drugs for their whole company. Most venture back companies

only end up with one or two drugs. But you still want to have the absolute best world crushing services and technology at your fingertips. And so at Alloy, we think we're good at what we do. We have at this point 22 drugs in the clinic already at Alloy

over 100 partner drug programs and we feel almost an obligation to do a good job of discovering drugs for other folks. So we're good at it. We enjoy it. And I will say it's really, really hard. So it's almost started laughing when you're like the business that you want to work at. Easier said than done. Easier said than done is a good point. It's like, I'm sure some people have jobs that like every day is just like it's all fun and sunshine and rainbows. Discovering and developing drugs is very, very hard as anyone in biotech or pharma will tell you.

It's deeply rewarding when it works. But at the same time, there's nothing about it. It's easy. Another quote that I have quoted you on several times is on your worst day, if somebody comes in with a suitcase of $200, $300 million in cash, it's hard to say no. Hard to say no for me. Hard to say no for you. This was a decade ago. So let's call it $2,3 billion today. We're talking about the ups and downs and how when somebody comes to you with a deal,

it's hard to say no, although obviously you said nothing up there. How do you continually say yes? How do you create opportunities so you can say yes to the thing that they really want? So if what they really want is access to a technology, and somebody's coming in trying to buy your whole company, we'll stop and listen and say, what is it you really want? Do you really want to own this exclusively

and then have the problem of managing the team and also the problem of managing future innovation? Or is it really you just want to own the one or two or three drugs that we already have that might have used the technology? I think mostly what Farmo wants is drugs that really work. I think the ability to maintain a competitive advantage and think about other drugs that look like that. Sometimes you want to own the platform.

We can accommodate that in a way that our partners will be happy. So you can give certain restrictions around what other things are we allowed to do after the partnership, perhaps. You can give target exclusivity. You could give domain exclusivity. We could give timebound exclusivity. So yeah, someone coming along and saying, hey, here's so much money that you want to walk away. I would, I don't want to walk away because I think we've got a lot of work to be done. That's kind of the test.

That's how you test your thesis. Is this the business that you want to work in the rest of your life? So another way, is there amount of money that could, that you would sell for? And if the answer is no, although obviously there's always these crazy amounts. But if generally it's no, that means that is the business. There are crazy numbers where you're like, oh my gosh, especially for my shareholders, my employees and everyone else. Of course, you would have to say yes to something.

But I would, what I know is on the other side of that number, the acquirer still owns the problem of future innovation. And that acquire is going to be sophisticated enough to know that it's, it's an enormous challenge to wake up every single day and to create the right structures of how to manage people and how to manage future innovation. I think that's one of the challenges of innovation is that you can't just throw more money at the problem and get more innovation. You can't just scale up fundamentally creative processes. It has to be a way that you reward people for their innovation and you make them feel safe and supported. And I mean, we don't even have a bulletproof playbook on it. This is more

of the decentralized model of how we support really creative people and building new technologies and doing new drug discovery. So if someone came with a sufficiently large check, I would listen and I would try to engage in a conversation of, well, how do we give you everything that you want plus what we have? How do you let me and let us actually try to manage future innovation? And maybe there's a consortial model here. Maybe you have a vision for how massive amounts of capital can accelerate what we're doing.

Great. I would love to have that conversation. But what I believe is on the other side of that, there's going to be more opportunities to create even more value and more medicine if we collaborate with others. So we shouldn't just go to. I tried to stump you with a binary choice. me a framework. We've known each other since 2010, convinced me to go to talk to business school.

That's where we first met. And we've had a lot of these, I guess, not really late nights, but early morning kind of philosophical discussions. And we started in the mid-2010s, probably 2014, 2015, talking about this concept of the perpetually private company. Palantir at that point had knock on public. I think it was like 10 years in or something. SpaceX was still probably seven, eight years in. How have your thoughts evolved around this perpetual private company? Does it make sense? Are there private companies that should stay private forever? There are some companies that probably should stay private, that there's an advantage to being perennially private. It's still a similar philosophy, which is you should go public when the value of being public is greater than the value of

being private. And for a lot of companies, going public is the liquidity event for their investors, or it is a necessary access to capital. Sort of being public, you're tapping into other things. Alloy can go public at some point, but I would evaluate it through that lens. At what point does it make for us, makes sense for us to be public? Is it more valuable to be public than private? As a private company, we enjoy being private because we are super flexible. We don't carry the overhead of being public.

There's a lot of decisions that you can make as a private company that you can as a public company and just being more nimble. But at some point, there's an advantage to us having a conversation with a million, two million, three million people. It's like, I'm jealous of the public companies that are biotech companies that when they start talking about their philosophies on what is, what their capabilities are, whether they're going to be around in five or 10 years, that as a public company, you have a really good sense for that.

I think that all over the world is a global bioeconomy, it's a lot easier for our international partners to look at a public company and really get a sense for who you are, what you do. As a private company, there's always this question of like, oh, like, let's get to know each other and really try to figure out how big you are. Like on the financing, we have, we haven't raised money since 2022 because our team has executed like maniacs to be a successful private company. We just closed this recent round of financing at a good valuation as a reflection of the value that we had continued to be creating. And now we're thinking out to the future of, oh my gosh, if we 10x this again or even 10xed it twice from here,

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The rest follow. Learn more at alpha-sense.com slash how I invest. And maybe it makes sense to go public. I have to be honest, my bias has been against the public markets. Obviously, LPs don't necessarily want to hear that about DPI, But in general, I think most companies, most great companies should stay private as long as humanly possible. And I think we're starting to see an evolution of different vehicles and different solutions to liquidity while staying private. There's continuation vehicles that are coming from the buyout space by last measure $110 billion in continuation vehicles,

which is basically a secondary into a new pool of capital. That's allowing companies to stay private longer. The secondary market is starting to institutionalize. it went from kind of this black hole to this gray market to now you have like Charles Schwab and Goldman Sachs getting into this industry and really like providing more access. And now also you have these companies Open AI Anthropic, which is a portfolio company, raising these insane amounts of money privately, comparable to the SpaceX IPO. I think it's probably going to be roughly about $30 to $50 billion.

I also have a company of mine, but I don't have any insight there. But if the private market starts to catch up to a public market, why should a company go public? Well, if you can continue to get access to capital as a private company at good valuations where everyone continues to see their investment go up reflected on the fundamentals of the business. So not just like total hype, but you actually can kind of see a path to future cash flow. I'm a little bit provincial in my thinking. I do still think in terms of discounted cash flows and like building real businesses,

real revenue, real profit eventually. That place where you can get access to capital and you stay private, I mean, for most companies, that's going to be, that's a great place to do it. post-GFC, right in 2010-ish, when we were all looking around and debating whether companies would stay private or go public. There was a lot of liquidity crisis there of LPs who were unable to fund their capital calls into the privates. And remember back then, we're like, oh, my gosh, we think this is the end of privates. It's like private equity is going to get smaller, maybe venture capital. But actually the opposite happened.

The market became more sophisticated in its ability to underwrite. And I think as companies stayed private longer, we saw all the alpha flow into those companies. So why was that? being private allows you to have a conversation with investors in a deeply involved way where they can understand your business and stick with you across a time horizon that's more than a quarter or a year. And I imagine for a lot of public investors where their capital is flowing in and out all the time, maybe it's in a mutual fund and kind of an extreme case, but even in hedge funds,

right, that are very highly specialized in the biotech space, you always have this threat of redemptions in the capital coming out. as a private company, especially a private company that's profitable, say, as a company like Alwood that's continued to scale as an EBDA positive company, that allows us to have a conversation with our investors about how we put capital in and we compound over time. And being locked into a trajectory that says we're committed to a path that's going to play out in 5, 10, 15, and 20 years and being able to demonstrate that you have accretion in your business model, you have an accretive business model and you have your stock price is going up over time

because you're helping people get in and out of your stock even in the private markets. Well, then why wouldn't you stick with that engine that compounds over time? I'm sure a lot of family offices have this problem, but so do large pools of capital. One of the challenges you have is when you have an exit, you've got to do something with that capital.

It's like, don't give me, like there's so many investors I talk to, especially on the family office side where they're like, no, no, I don't want you to sell your company. Like, could you just keep compounding it? And I wonder where... I think that's uniquely to your cap table, but it's maybe a little bit unique to my cap,

but I talk to a lot of other folks have a similar issue. I mean, we'll just look at it. Well, a thought experiment is like this, and this is how I think about my companies that go public. Okay, so I sell it. Then what do I do? I pay 32% tax and then put in that SP 500. You need to have a good answer to that second question. Warren Buffett said the number one consideration investment is this opportunity cost. What is opportunity costs? And sometimes opportunity costs could be getting into the next three-seat company. I have to go 100x. Sure. In theory, in least. But you have to think about what am I doing with that capital? People just want this reinforcement. Oh, I crystallize this 10x, which

I think it's kind of a simple way. Warren is a perfect example. So why aren't there more companies that look like Berkshire over time where he has, I mean, he's sitting on a ton of cash right now, like waiting to deploy. We'll see what happens, right? But he has on the behalf of his shareholders, he has solved the compounding problem to some extent. Structurally. Structurally, exactly.

So why don't we see more companies like that sort of large conglomerate companies with permanent capital? I wonder about that all the time. At Alloy. That's Bill Ackman's dream. That's what he's trying to do. It completely is, right? And it's, and it's, I think we all understand how amazing and how awesome that would be. And you'd love to just give someone $100 and just keep compounding forever.

And you just check in and like, how's my investment? And it's just, it's doing great. We do see alloy as a compounding engine. I mean, when I think about alloy, not just from a dollars and cents standpoint, although that should play out as well. But there are some things in cutting edge technologies where you compound your insights as much as your capital. And it's not just a synergy of one plus one equals two or one plus one equals four. it's really there are insights that only come from the intersection of the parts of the puzzle coming together.

And biology is a complicated multidimensional problem. Warren Buffett, if you look back, right, how did he get in the last 40 years, he's returned about 100 times his money if my data correct. Okay, that's about a 14% compounded rate, which 14% doesn't seem like a lot for like a really high tech company or risky company. but if you told me you could give, like, you have an opportunity where I could put in $100 and you will give me 100 times my money in 40 years, I would do it in a heartbeat. Yeah, if I believe you could.

And tax is a big aspect of that. There's that whole retirement paradigm where if you put in $1,000 now in like 40 years it'll be, it continues compound. It breaks down in many different ways. One is people take it out, people don't hold. It's not a tax deferred way. But it does, the math does work.

It's just there's so many nuances to that and how to execute it. One of the things we talk about at Alway is we reinvest 100% of our revenue back into innovation and access to innovation. And the reason why I can say that with such certainty is I know there will always be one more opportunity where we can leverage our technologies, our services to create a new drug. You know, may we live long enough that we've cured all disease that I'll be made a liar by the like that statement. We continue to reinvest it.

It kind of comes like there is always something more we can deploy. And it's innovation and access to innovation as it relates to making medicine. But there's there's always going to be a supply. chain problem even on the back end of a new drug that we've discovered, trying to reduce the cost, trying to increase the access around the world. I get excited about those problems. And so that's a, that's a statement we can make as a business that we are so fully committed to taking the knowledge that we have, the capital that we have, the resources that we have, and then trying to figure out what is the best way that we can use those resources to make an even better drug and even better

technology that will lead to a better drug or even access to those drugs. So at the end of the day, maybe we're just like a big logistics company, just moving around drugs. My bias against public companies is the short-termism and also the implicit lack of control from founders. And obviously, Google and Facebook has these super voting shares. Have you looked into that and looked in the how do you make public companies function more like private companies? Absolutely.

And I think the controlling class of stock is a really important one. It's more common in tech. Does it work in practice? I think it works in practice. I think it comes down to the quality of the leader and what do they believe. So it works both ways. If somebody has control, it's two-edged-star. Exactly.

You could drive that car right off a cliff because you've got the wrong driver there. And I think also the market punishes that, at least historically, last time I looked at this, Meadow was trading lower because Mark Zuckerberg had that premium. Maybe that's changed since then. But the market does not like control in the hands of the founders. It's impossible to completely run that experiment, right?

But does Mark take a near-term hit? Like the market today gives him a haircut, but he's going to win over the long. run. And for the right founder with control stock who also surrounds him or herself with good people advising them and is mindful of what's happened in the world, you can you can make a lot of mistakes as a very, very profitable company that you have control of over. And but if you integrate it as a learning model, I believe you'll win over the long run. If we look at some of the colossal mistakes perhaps historically around acquisitions, like AOL Time Warner immediately comes to my mind. Right. It's like was that a good acquisition? at the end of the day. Like, is everybody happy with the level of dilution that was taken through that merger? Not really. Public markets don't necessarily get these things right as well. And the short-termism that you talk about is a real challenge for public companies, obviously. The pressure that you feel as the management team looking at your stock price every day

and really your employees and how you manage their psychology, it's how you get outside of that trap. How do you stay focused around real value creation? It's a big challenge. In the biotech and the biopharmist space, I think most people are not familiar with the, control provisions in the stock class that Regeneron has. And so there's a just an incredible success story that the founders of the company had a special class of stock that gave them more control over that outcome than not. And so they were able to prevent an acquisition through that special control that they had. And that gave them the room to do the right things to invest in science over long time horizons.

I mean, there were many different scientific bets that they placed that had to play out in a little bit longer time horizon. and eventually we're very correct in a lot of different technologies and have great drugs and a great pipeline. So they were able to make it through that transition to being a very big, very successful pharma company without getting acquired in part because they did have that. It's another way. The public markets obviously are extremely efficient,

but they're extremely efficient in the short term. And they keep founders in management from doing the things that you need to do for the long term. They're just short-sighted. World is changing really, really quickly. We think about oudaloups a lot. Does it ever come up with your folks that have observed orient, decide, and act. So John Boyd wrote the playbook around dog fighting for the,

for the U.S. Air Force. And it's this principle of you have to observe what's happening in the world. You have to orient yourself to it. You decide and then you act. And as a fighter pilot, if you can do that, if your Oudalup is shorter than your adversary, your adversary is totally cooked, right? Because you can change an update. I saw that back when I was at Lehman Brothers Venture capital during telecom deregulation in the first internet bubble. We saw this pattern where we could, It almost seemed like we could start a whole telecom company or telecom equipment company and start to get it financed faster than the incumbent telco could schedule their third meeting. Just like the oot loops there were like kind of amazing.

The pace of your decision making and your ability to make decisions and to be very rapid to adjust to market conditions is incredibly important. And sometimes as a public company, you can't do that because it functions a bit like a bureaucracy. It's like you have to bring constituents along. you are not the viceroy always in charge of with absolute power of your decision making. And you have to bring folks along. You have to bring the markets along and your stock price can get punished if they don't understand what you're doing in the near term. Or perhaps they understand what you're doing in the near term.

They just don't believe that it's worth the payout that might happen in year five or 10 and sort of thinking about an indefinite future. I think a lot about the temporal arbitrage of how do we make investments today? How do we tell stories today? How do we have conviction today about what the future will look like? in an uncertain future. And the more indeterminate what's going to happen in the future, biotech, AI, sort of even regulatory policy,

the threat of competition from foreign adversaries in our industry. These are all unknowns. And if you sit back and try to predict the future, because you believe that the future will come with or without your intervention, I think you do get punished as a public company. You have a bureaucracy and effectively you're managing it. But how do you exert your will on the future so that you build the future that you want to live in?

And you create the system or the technology or the drugs that you want to see exist. And you go out and you change the industry to make sure the future that arrives is one that's efficient. And as a learning model that allows us to make better drugs. And I mean, it's almost easier to do that as a private company where you have complete control. I've been curious about this. You started your first company, Atomab. You co-founded it while you were at Dartmouth and you weren't even a biotech background. You taught yourself and you learn through your master's program and created this phenomenal business.

and you've just kept on creating businesses and creating the future that you wanted to see throughout your career. Do you believe in the great man in history or tell me about your updated model? I believe in the great man or woman of history for sure how much credit you ascribe to the agency of the individual or not. It's fair, but at the heart of what we do at Alloy, I mean, this is the most important thing I ask the folks who work at Alloy

is that you got to believe that what we do matters. They're like, if you don't believe that what you do every single day, the care that you take at the bench or the thought you put into the analysis you do or the conversations we have with our partners or paying attention to the problems of the pharma companies we work with or the academics we work with,

if you don't believe that what you do matters, this is not the place for you. And again, we're just not going to debate it. Like it's just, there's no quarter here to sitting back and deciding like, oh my gosh, maybe it doesn't matter. And if I don't do this job, somebody else to do this job.

Is there a way to weed through that during recruiting? I think we try. I mean, we do. A lot of it's just like looking someone in the eyes and trying to figure out of other questions We can ask. We use various different sort of like personality or communication models. But part of our philosophy of recruiting is we try to tell people who we are.

Anti-selling. Anti-selling a little bit. Like I love that he's like who we are is like anti-selling. Like, yeah, I mean, it can be. Well, it could. It's the wrong person. It is anti-sense. Absolutely.

Look, it's hard to work at Aloy. My name's Eric. You know, like this job's going to be terrible. Like, by the way, like we're going to ask more of you than anyone else has ever asked of you and try to hold you accountable. But hey, dirty secret, you're going to have to hold yourself accountable. because we're all too busy, you know, working on all of our things and trying to stitch it together.

The, I do believe in the great man theory, uh, the great woman theory of history. Because, uh, people need to wake up in the morning and they need to believe that what they do matters. And if you don't believe that, I don't, I don't think you push the future into the place where you want to live or anyone else does. Now, how much of it is a single individual? You know, there's a lot of things in the world where you take out a single person and I don't

know that that ever happens. One of, one of the things we do talk about of, So the history of companies, you and I've talked about this before, I'm sure. This idea that in the history of all mankind, human kind, every company has failed for the same reason. And it has failed because it ran out of money. Right. That's the failure mode is always the same. But the success mode is highly idiosyncratic.

It is of a moment in time with just the right people, with just the right macro environment, cost of capital, what the competition is doing? You know, is there a war going on overseas right now and how it affects your gas prices and everything else? These are all the idiosyncratic things that sort of add up to the moment in time of a company that can be successful today. That requires the person and the people also being there and showing up to the office today to do the work that needs to be done today. And if you don't take advantage of that opportunity or you don't build that thing, the moment will pass by. And that doesn't necessarily that the moment will pass by and someone else will build the thing that you are building. I mean, do we think someone else would have built SpaceX in our lifetime if not for Elon? I don't think so.

I don't think so. Very low chance. I think so. And by the way, like, get someone on the podcast or get someone to try to make that case. And I want that, I want to build a company with that person. The person who thinks they can do that and like truly believes it in their bones, great, let's go do it. You go do something and I'm here to support you. I would love to get behind that. Let's go do something great. Holding greatness in your mind of like what, like, something that's like scary in the future that you want to see the future look like and then having the will to get behind that. go out and try to motivate not on yourself but others to build it is hard. It's just really hard. And where we sit in this crossroads of biology, there's a lot of things that are super exciting in the biotech industry right now. But I don't believe if left to our own devices, all of those things will emerge. I think it does require great scientists, entrepreneurs who wake up every day a little bit

psychotic about doing the thing that needs to be done today. And if anything, it's even harder in this industry because we all have pretty good knowledge of where the competition lies. Like if you're working on a particular drug target, maybe you published it in your academic lab and then maybe we saw $30 or $40 million of venture capital, go behind that and we're aware of the target and what you're doing. And then all we know is that you went out of business. It's reasonable that like maybe you collected some data that said that that was a bad drug

target or that there was something about your medical hypothesis, your scientific hypothesis didn't work out. We don't have perfect information. We just view it from the outside. That might set that biology back by five or 10 or 20 years, right? There's so many incredibly complicated problems that are at our fingertips today as an industry that you're constantly deciding which bet to place. If I only had $10 million, what's the drug target?

Like what is the scientific problem that I want to go solve? And so I worry a lot about when we work on a drug program that if we screw it up, there might not be a second shot at it. And so we need to take me as the partner for our folks, the customers we work with. I want us to take really great care because there might not be a second or a third opportunity to go hit that in the next five, ten years. Eventually, we'll probably figure it out, but eventually might happen a long time. It muddies the water for the entire.

Can muddy the water? I mean, look what happened with gene therapy or cell therapy. You're just kind of gene therapy in particular in these early days. Like, we had some problems with the technology and how we handled it and as an industry. And it did set us back a bit by maybe as much as a decade or so in where we're at. Dell PCs with Intel Inside are built for the moments that matter. For the moments you plan and the ones you don't. built for the busy days that turn into all-night study sessions,

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built for the busy days that turn into all-night study sessions. The moment you're working from a cafe and realize every outlet's taken. The times you're deep in your flow and the absolute last thing you need is an auto-update throwing off your momentum. That's why Dell builds tech that adapts to the way you actually work, built with long-lasting battery so you're not scrambling for the closest outlet and built an intelligence that makes updates around your schedule, not in the middle of it. They don't build tech for tech's sake.

They build it for you. find technology built for the way you work at Dell.com slash Dell PCs. Built for you today. Said another way, the entrepreneur that, let's say an entrepreneur decided to go after that in two years, every investor is going to be asking him this question, asking him or her, every potential high, intelligent employee is going to ask him the same question. So you have all these frictions above and beyond starting a company, which itself is hard.

Sure. So it's like, what target are you going to go after? Unless you're very passionate about this one target, you're going to go after. or something that has less friction. Right. And boy, we live in a crazy industry with biotech or biopharma because the time horizons of answering that question are years, if not decades.

The amount of capital required historically has been 10 if not hundreds of millions of dollars. And so these are not small experiments. And they're not ones that are, you've got a great feedback loop. Like your Oudalup kind of stinks for drug development, drug discovery. There's no lean startup. There's no lean startup, although that is the alloy dream.

That is our model, which is how do we help everyone operate a bit more lean? And truly to be committed to that, to reduce the cost of every single step of the process. We started in drug discovery. We started in antibodies. We've expanded into other types of biologics. And ever increasingly, we're doing more in preclinical and clinical development.

But it's all towards an eye of how do we reduce the cost, shorten the timelines, and increase the probability success of every single inflection point with a goal towards making all of the revenue of answering a question. So the cost of answering a question smaller every time we do it. And providing that service to the world, what you get in. in exchange for doing that is more innovation. I think that's what's not obvious to folks is if you have a million dollar experiment versus a $10 million dollar experiment as a field, we're just going to get more experiments the less expensive

they are. If you think of the bottleneck as the professionals doing the experiment. The professionals, but also the capital. I mean, biotech is only so much risk taking capital. Exactly. Look, I mean, it's a specialist-driven industry. Like, it just friends don't let friends invest in biotech. We talk about friends and families.

We've done investments together. And like every time you do like that early stage like friends and family round, there's, there should be no such things of friends and family round. But when we put money into our venture studio, we only invited colleagues and collaborators because it has to be people who are like, it's a way of diligence and your investors. Oh, it's more of like.

So that they know what they're getting into. You know, if your mom asks you because she's nice and she likes what you do to like put money into your biotech fund, you're like, mom, I really appreciate the support. But I don't know this is the place where you're better just to grant her shares and It's, I mean, this is, and I said that jokingly, sort of. There's only so much money in the venture studio. No, I don't think I even let my mom. It's only so much pressure you could take as a human being.

Totally. Losing mom's money. It's not ideal. We need to diversify as a family here. But no, it's because it's a deeply specialist driven. And you look at specialists just on the hedge fund side and the crossover side and the venture capital side. Like this is an area where the reason why it's driven by specialists is in part because of the

complexity of the science and also the time horizons. There's these compounding complex. complexity. Whereas if we're building a software company, at least we have the advantage of it being something that we might use ourselves. Like you can you can experience a software product and get a bit of an intuitive sense of whether it's useful. And if we've got a new CRM that competes with HubSpot, like I use HubSpot. Like I can sort of experiencing that as an investor. Someone can come to me and be like, hey, this is going to be better. Well, how would it would be better? It's going to have all the features. Then it's going to be one tenth the cost. Okay, great. Like if that was the pitch and biotech like that would be pretty easy. Like I've got your drugs. that today is $100,000 and it's going to work and it'll only cost $10,000. Now the problem is that pitch if you give it to me today as a biotech investor, well, that drug won't be approved for at least a decade because of the process of how we run clinical trials today. And you kind of don't know what competition will look like in a decade. Like a lot of things can change in 10 years.

Maybe that first drug has gone generic and then the generic competition cuts the price by 90% also. There's just, there's a lot of things can happen. So is there a rational case for investing in biotech today? Absolutely. I think, and maybe it comes down to time horizons. So how do you get in early? How do you invest in, how do you get into deals that no one else can get into? One of our philosophies in our family office is you want to own someone that no one else has. Is that super obvious? Like a patent is something that you can own something that no one else has. You defend your IP. A brand. The New York Yankees, no one else gets to own the Yankees. It's like an NFT. It's like an NFT. Yeah, sure. It's this. That's the best argument. that I've heard about sports teams because I went deep into this. I interviewed Cass from Christopher Zook. There's parts of me that are conservatives, investors.

There's parts of me that are very gungos and entrepreneur. But when I see an asset bid up like a sports team by 10x over the last short decades, I'm like, is this not a greater fool's theory? And the best argument that I've heard about that is that there's 30 NFTs in a specific league and it's a index of billionaires and deca billionaires. If there's going to be more deck of billionaires in the future,

there's going to be more demand for these 30 NFTs and they're going to bid up the price. There's also obviously an economic argument and cash flow media rights, all those, but this NFT and scarcity is an interesting argument. We also have a sports team and a sports league. You want to talk about it? I'm happy to talk about it.

I'm happy to track back and see the analogies in biotech, perhaps. But if you look at the big four in the United States and like the most expensive teams on it, I'm not sure that's like an NPV positive. Like just there on the more, like the value, almost the equity value. Not from a DCF perspective. It has to be an equity value play, right?

And so why does the equity value of an NFT rise? Like in that like sort of the rarity? It's like I don't know. Like all the monies that were already painted, they're worth more today than they were 50 years ago. Like why is that? They're the same. Like the product is the same the way that you experience.

They're collecting. There's a reason why it's worth more because it's unique. I think the trade in sports today. I mean, obviously we think a lot about AI and ML. We think a lot about software. We think a lot about this in the field of drug discovery and development. And incredibly exciting things that are happening in our labs and around the world. But I think about it a lot for our sports team as well. And so you

look at what is the value of live entertainment? And in a world where we are awash with even better AI generated entertainment, I predict that we will value something that's real and tangible more, that we as humans, the experience like that, that stirring that you have in your heart, when you read something that a human wrote where you experience a play or you look at a painting that you know is made by someone who's real is that there's a whole internal story in your own mind and your own heart that connects you with that in a way that if you know that it's made by AI

it can still be equally beautiful. You can experience it in a way to like maybe it's wonderful, but the fact that there's no human there, you're just going to feel differently about it. And our experience, we experience life through a temporal lens. Like we consume our reality through time. Like this experience we're having today.

There's no like we're both spending hours of our day for this, preparing for it and otherwise. and we only have one life to live and the only true currency that we have that is scarce is our time. Venture capital and biotech, where is it at today, where are the opportunities

and where can VC still make money in biotech? Great question. Venture capital and biotech looks like venture capital in general, which is the funds have gotten bigger. And it's logical why that happens. We talk about this a lot, you know, all of us do, which is if you're successful, you've got a $100 million fund, well, then you earn the right to have a $200 million fund.

And if you're successful, you're on the right to have a $500 million fund. There's just this inevitable growth that if you're good at what you do, you have a bigger and bigger funds. In biotech, there's a few exceptions to that. Atlas is a fund that has always had discipline to say that there's like a right size of fund. I deeply respect them for that. Those partners, they believe that this is the right scale to the number of partners they have and the amount of money they can deploy at a benchmark of biotech. They do a great job. They, you know, funds wax and waning.

It's a power law model or even like you look at an exit like Moderna. It's like, did we? It's like a third power law there. Like two power laws. I mean, that was such like a black swan event. But these are these are power law exits in biotech. It takes a very strong person to say this is the right size fund and I'm not going to have an AUM driven model like benchmark. Yeah.

Right. Sorry, you said benchmark and like they said the benchmark and now got like, yes, just like benchmark. Yeah. So, but let's unpack why benchmark looks the way it does. We can, you know this as well as anyone else and I don't want to speak for them. But one of the things that I observe is that they also have a lot of their own capital in it. So it's a little bit like your super successful hedge fund friend that at some point wakes up and is like, I'm going all personally like that. Yeah, exactly.

Like what's better than 20, 25% carry is 100% carry on your own money. Right. And so why would you ever do that? Well, that also bumps into the gravity of the quality of the opportunities that you can source and manage. At some point, there's just a limit to that. You look at like rent tech and the medallion funds, there's like, it can't be a $60 billion fund. There's a size of that.

I don't know if anyone's ever run the math on that, which is let's say you could be a $700 million fund with management fees and carry. And let's say you could get it 2x. Let's say two to two to $2.5x. Is it smarter to do a $300 million fund and put in $50 million or $100 million of your own money? It's a math question, but I don't know if anyone's actually run that.

They put it out. I'm not surprised. You can talk to some books on our Venture Studio team. Otherwise, we, there is an optimal size fund if you believe in what you're doing. Like if you believe in yourself. If you believe you have alpha, then there's actually a financially greedy disposition to fund size. Yeah, like the way you say that, like a financially greedy. So take that in biotech. Long term greedy. Long term greedy, exactly. But it's like where can your conviction and your knowledge, the limits of your knowledge and

your conviction actually return alpha. So one of the challenges you have in biotech or biopharma is we spend so much money in clinical trials, in particular late stage clinical trials. So no one has enough money. on their own to build the right portfolio. But then you also can't watch and manage that portfolio effectively. Where are the exciting places in biotech, we vote with our feet on this a little bit. So it's just like what we do. We go early stage, exactly. So it's also just really rewarding that you can, by being early stage, you're at the,

you're at the point of creation of the technology or creation of the drug itself. And it's very little capital. So your reward on your own activity, on your contribution is actually very, very high. It's disproportionately high. And the later stage you go, we really reward capital as opposed to rewarding innovation. It's sort of just because if you're spending $200 million in a clinical trial where it turns out, especially it's a binary event, and so it's risky, you better have a lot of capital. And so because it requires so much capital. And it crowds out other returns. I mean, these are highly predictable events. If they were highly predictable, you could

go out and raise that money or it would be lower cost of capital. And then more value would probably accrued the operator. But the later stage you get, the more you get into the clinic phase two, phase three, a lot of the values accumulate into the capital instead of to the operator. So the earlier stage you go, it's more supporting great scientists, entrepreneurs. I know you're not concerned about it, but I'm sure your investors are. What does a DPI look like for an early stage biotech? I would separate is most biotech companies are drug companies. So even if you have a platform, you're really trying to use the platform to make a drug that works.

So the fund itself, the fund itself. I mean, if you're returning 3x the fund, three to four X the fund, you're doing great. But in terms of, is that a 14 years until you get your money back? Oh, no, no. Biotic funds still have to operate within kind of the 10-year fund horizon.

These, yes, some of them extend out and whether it's continuation vehicles or they're coming to biotech as well. They are coming to biotech as well. Do you like them? Yeah, I think it makes sense. And it's an interesting alignment. it's well we see so many take the alternative where you go public and there's just a zombie company that is trading below cash and so the public markets because there's no readout there's no readout

but also just I mean for anyone trading below cash there's like is there confidence from the public markets that you're creating value if if you're trading like well below cash there's an argument to be made that you should take that company this is not in all cases but like then some of those cases you can look at it and you just look let's just shut down the company let's return cash to investors and unlock value here That's why I like it for venture and for private equity. It may not be the perfect solution. There's a lot of different issues.

LPs have to re-underite the asset. But it's better than the alternative, which is cutting off the legs from your assets, selling out of steep discount. I think it's way better than the alternative. Capital markets are more efficient. They're more driven by returns. And there's a straight-off between drug discovery,

return of capital, and something has shifted with recent legislation. How do you think about this framework between we want to cure as many people, but we also have to have the right financial returns in the industry. What's your best paradigm? You have to make money. Like it's just the capitalist system is one that helps to organize

all of the world's resources down to a moment of time of like, what are we going to do today? And the decision that one of our employees makes today is, do I come to work today? Okay, great. There's like a lot of tradeoffs that go into that. Maybe they want to stay at home and tend to their sick child, but they have obligations today and they want to continue to be employed tomorrow.

not that we would left somebody off like that, but like that is the calculus that goes for everyone's head. It is going to cost trillions and trillions and trillions of dollars to cure everything. And that money has to come from somewhere. And if there was some magical way to motivate people and to align the economy without having a capitalist system, like a capitalist reward system, I think we should just do that. I'd be on board with that.

The truth is that if you don't reward innovation and risk taking, you don't get innovation and you don't get risk taking. there is no evidence in the history of humankind that there is a system that gets new innovation and gets creativity without rewarding those things. There's like even painting a painting that is new and is different, you will get ridiculed for that if it looks different. Right. You will just like whatever's coming from your heart and to turn like into turning into a painting, you will suffer the criticisms of the critics. and you will suffer the criticisms of maybe your wife who loves you or your children who are like, Dad. I thought you were good at painting.

And therefore, those are all costs associated with doing something new and different. Now, what are the rewards? The rewards might be that you feel your own personal sense of satisfaction. The rewards can also be from that creative endeavor that someone values it and pays a premium because it's different, right? It's unique. It's your style. So I multiply that by like every single observation of how creativity works, looking backwards as a student of history. If you don't reward creativity and you don't reward creativity and you don't want,

reward risk taking, you don't get more of it. And so the future that I worry about is a command and control economy that is too top down and not bottoms up where we think we've got it all right and we tell people what the rules are and who's going to get rewarded. And we set too many of the, let's say the constraints of the system up that limit people's ability to capture the value that they create. Because I don't worry about that because I'm going to make less money. I can care less. I just need the resources to do what we do. What I worry about is how to every incremental person that's going to show up and give their best self today and be really creative. Because if we're going to cure everything,

if we're going to live in this amazing abundant future where energy is free and medicine is cheap and affordable and accessible to everyone and we all live forever, we need innovation. Right? Like it's innovation that's going to get us out of this trap that we have. It's actually the exception proving the rule, which is in spite of all these financial incentives and all this fame and accolades you could get to doing the hard thing, still so few people do the hard thing.

So if you even take that away, where are we going to be? And why do so few people do the hard things? I totally agree with you. It just so happens that if you went to a great school, like you went to tuck, had a great job. You're like, you get paid a lot of money in like your job that, you know, your last jobs were probably easier than what you do today. You also constantly challenge yourself.

Well, it's not about the binary of like, am I going to do something that makes money or not make money? Am I going to do something that's meaningful or not meaningful? It's like, am I going to do something that's a little bit easier? and still get paid enough. And I think a lot of people approach their lives, and they're not bad people. That's just how life plays out. That they're, it's just,

you kind of just want to be home to see your kid's soccer game tonight. And you, you want to be able to take a few vacations in a year. And like, you just want to chill or get some sleep tonight. And then there's the psychos who just for whatever reason, they're miswired. And you wake up every day feeling this feeling that you better get something done. Paradoxical because it's this deep sense.

agency which becomes self-fulfilling. You believe that you're the person that must solve this problem and then you end up being the person that solves the problem. Totally. Or then you surround yourself with the folks that all do. And so the most magical thing is when you can find yourself in an environment with a team where you all believe that you're going to figure it out. And the more pressure you're under, you find yourself in situations in history where the

constraints really push you to dig deep and to solve problems. And I think there are, it's 350 million people in America, 8.3 billion people on the face the planet. I think most folks have an opportunity for greatness and that they have an ability to perform well above what they're doing today. It's just they don't have to. I've gotten flex or to brag about myself a little bit, I've gotten much better at developing people and kind of getting this greatness out of them. One thing that I've found is oftentimes they resist for a while until they get a big outcome and they're like, wow, I could do great things. What does that big outcome look like? It's depending on the position. They work really hard, even like our

worked really hard on our second Hermose episode. Yeah. And she hated me for that two weeks of just pressing, pressing, pressing. You could do better, you could do better. And now she's like the number one fan. And she like, it's meme this experience to other employees. At agency, I mean, this is what we want for all of our children. I think you just encapsulated like as a parent what I want for my children,

but what I want for everyone, which is you work hard enough at something that you realize that you're better than what you thought you were. And then that gives you that taste of like, oh my gosh, like I am a human of great worth. And it does, it kind of like, that's, that's the best dopamine hit possible that the hard work that you have done leads to something that you find useful and that others maybe find useful. And whatever your domain is, you're coming back to the painting work, maybe it's, maybe it's you work in biotech, maybe your antibodies, maybe you're in our genetic medicines team, that like when you're pushed and you kind of dig down deep and something works, I totally agree with that. You just, I mean, that's a drug kind of onto itself. You just want, you just want more of that. I think for some folks.

To your point, you rewire your brain, which is pain. It's just like when you start working out, pain is pain, then pain becomes pleasure. And then you start to equal, your brain just rewires it to pain as blood. Close state. And this idea that you can get to this like state of flow where you like lose track of time. And there's a woman who wrote a book on this. And I remember in her preamble, it was like, oh, man, I've realized there was this thing called flow. And I've experienced it like a few times in my life.

And I forget her number, but it was like single digit numbers. And I remember reading, and I've read the whole book, And in the beginning, I was like, I'm reading like the introduction. I'm like, like a few times in your life. Like you wake up in the morning, man. It's like, put yourself into that, that state where you're working on a problem that is occupying your full mind and your talents. And it's hard.

Like, it's stressful. Like, it's actually very, very hard. One thing that I lose track of time done, learned us from Dave Fautnot, from HF0, great accelerator. They just like turn these $100 million AI startups in like 12 weeks. It's unbelievable. That's crazy. And he really taught me this concept of context windows.

I think you just naturally do this, which is when you're in flow, you box yourself out. I don't check emails. I don't do. Everything's on silent. And I take it through this to our window, full context on everything. And then I close a tab and then I can move on to other things. But just encapsulating, basically forcing flow onto the activity has been just a game changing form. So you know what that's like.

And one of the first places where I saw that that comes from a negative place is when you, when you like procrastinate or you get under a deadline. And I think when I was like a teenager, I'd like procrastinate. Forced flow. It's like it becomes forced flow. I've realized later in life that like, oh my gosh, that tendency. Have you ever procrastinate? Yeah.

I think I'm like predisposed to procrastination at times. Certainly when I was younger. But what I realized is you just, you force yourself into like, oh my gosh, here's the deadline. And ideas come better. It kind of gels in. It's just, I don't know, there's something going on chemicals in your brain that just make you do better work. If you're writing on a deadline, for instance,

I talk to friends who are writers, editors, they have to, like, produce something every day. You just, you kind of develop that muscle a little bit better. The writer's room for The Onion, if you remember, our GC was at the Onion before he goes with us, which we joke. That's how, that's how seriously we take the law at the family offices. Our GC used to be the GC of the Onion.

But Logan would tell stories in the writers, they'd put out so many ideas in a day, and you could only pitch, like everybody pitch an idea, but you could never pitch it a second time. And it was this like forcing function of like coming, like just creative coming up with ideas and then they get lost the next morning more and more and more. And it just it sharpens that,

sharpens that ability to just like do it really, really well with that. Since we last chapter, I changed my religion to quality is downstream of quantity. It's one of the things. One of my central tennis. I was like, since last time we saw you other, like you got married.

I got married and I changed my religion to quantity is upstream of quality or quality is downstream of quantity. I believe it on such a deep level. We all embrace it. I made everybody convert. Quality is downstream of quantity. Yes.

If you want to do more, we now do five episodes a week. Everything on the entire stock has gotten better. From editing to podcast booking to social media, everything. Quantity forces quality. So what do you think is going on there and maybe what's the lesson for a biotech executive?

The way that you distill that is in the negative, which is people could only improve so much each single at bat. Meaning if you gave me here the 12 ways to do a podcast better today, one of two things would happen. One is I would ignore it. My ego would come up or even if I wanted to,

if I'm like, oh, Eric's giving me the best advice. I just couldn't do it. My brain's just not able to process 12 pieces of feedback that once. But if I now do six podcasts this week and you tell me two things, I will process that in the same week. Okay. Versus one podcast a week.

So there's some finite ability. for the brain to process information. I think that's one thing. There's many layers of that. There's the ego. I think the ego and the self could only change so much on an attempt. You can't see how far away you are

from being good. That makes sense. And I'm an agency person because you got here because you're good at a bunch of things. And you can't throw out everything at once and still be decent at what you do. You can't.

And look, watching videos of yourself constantly failing and constantly improving is itself like hard to do. But I force myself on it, but I do it now five times a week. And that's just one example. and it's a bit paradoxical and people don't necessarily embrace it

and it's hard to internalize. Do you rewatch like this whole episode or as an editor editing and just pulling out the good stuff? You watch it yourself? I do the first edit on every episode for other reasons, but partially it forces me to watch it.

I will never put something out to somebody else that I won't myself watch. It also, it makes me empathize with the listener better as well. So there's other, but this idea of quantity being upstream of quality is very important

and I think it's one of those, you know, this Peter Thielism, which is like, what is something that you believe that other really smart people don't believe? Sure. It's kind of my answer to these days. That's, okay, I like that.

Well, what's paired with that somewhat in here you describe it, it is it's not quantity, the sacrifice of quality, right? Some people just don't massive quantity, but you're embedding in your quantity. There's processes to it. There's still taste to it. There's still high standards. But at the same time,

it's the quantity that's pushing the quality. Trying to bring that into the pharmaceutical. So some of the things, It resonates though, which is you, some experiments we design could take years, right? So it's a little bit like, let's come back to SpaceX, right? So NASA can do a phenomenal job overthinking and overengineering and sort of coming up with the perfect way that we might build a rocket. Or you can go out and make a whole bunch of incremental changes and improvements quickly

and realize what works and doesn't work. The biopharmaceutical industry tends to look more like, let's measure 12 times and cut once, long time horizons, lots of money, patients lives, dealing with regulators. There's like all, it comes all from a place of strength and great care to be to like really overthink it. And the outcomes are uncertain. So I think that also kind of just feeds into almost the mentality that maybe we should take great care.

One of our values at alloy is that we plan carefully and act urgently. That's like one value planned carefully, act urgently. But that started as like act urgently, like have a bias towards action sort of like the patient is waiting like we need to do this. And it didn't quite work for us on the balance of how we think about science and how we think about medicine. Because just to have a bias towards action, like, are we empowering people as one of our values? So you use your values when you're not sure exactly what you should do. And so you rely on them.

You're like, oh, my gosh, just move fast. That's actually not usually the thing. It's this implicit by planning carefully. You have to do the pre-work. You have to be sharpening your axe every single day. So then when it comes in the moment to swing that axe, it's like really sharp. You could distill it to going in every day and just doing it. a bunch of attempts of improving your study, improving all these things. It doesn't mean literally

submit 100 FDA studies per month or per year, but it's upstream of that before you even submit, like, do all the, but I would like a system where the FDA would give us feedback on like an A-B test of like, what about this? What about that? That's extreme. They can't do it. Although in some of these, some of the great innovations today happening at the FDA, I think are largely happening behind the scenes of how does the agency power the reviewers with AI tools, sort of, the large language model, perhaps internally, that is all of the private knowledge that the FDA knows,

they can't share with the rest of us. And to bring all of that to the reviewer and say, based on everything we've known, like, how do you think you would respond to this? Like, those tools are sort of being built and used today. And so maybe there is a world where we could ask that LLM some questions. We could A, B, test a little bit based on your infinite knowledge at the FDA and all the private data you have.

If I ran my experiment this way versus this way, like which way do you think will be better? I'm very optimistic that, that we're going to be able to recognize the patterns and the historical data to make better decisions to shorten time frames to be more efficient with the agency, which will save us a lot of money and a lot of time. I think change the calculus of drug discovery and development. Well, Eric, as always, this has been unpredictable and intellectually stimulating. Thanks so much for jumping on. Great. Thanks for having me. It was awesome. Anytime.