âWeâre not doing 30 bets a yearâ: Vijay Pande on betting small after running $4 billion at a16z
It used to be that Vijay Pande was better known in academic circles than investor circles. That changed pretty abruptly a dozen years ago, when Marc Andreessen and Ben Horowitz â whoâd spent their firmâs first five years explicitly avoiding healthcare and life sciences â decided the category was worth betting on after all and handed the keys to Pande. At the time, he was a Stanford chemistry professor who was best known for building Folding@home, the distributed-computing project that turned millions of home PCs into a supercomputer for disease research. Over the next decade-plus, he grew a16zâs bet into a practice managing close to $4 billion. So it was somewhat unexpected when in June of last year, Pande walked away from it all to start something much smaller. In fact, his new firm,VZVC, co-founded with longtime investor Zach Werner, is built around a handful of concentrated bets a year rather than dozens, it has no associates, and it relies heavily on AI for its day-to-day operations. To learn more about Pandeâs hard pivot, we talked with him this week about why heâs making just a handful of concentrated bets rather than spreading himself thin in the current market â and about one of the more interesting conundrums in AI-driven biotech: unlike text, biological data canât be scraped off the internet, so nearly every company ends up building its own walled-off dataset. What does that mean for all the advances AI in medicine has promised, and who actually gets access to them? This conversation has been edited for length and clarity. You can also listen to the fuller conversation (below). Youâve said biology is moving from a âscience of discoveryâ to something you can engineer. What does that mean? For a lot of the way drugs have been developed, there was very much a fortuitous aspect to it. I think whatâs shifted is that AI and machine learning allow computers to wrap their type of understanding around something very, very complicated⊠to try to figure out what targets you want your drugs to hit, for specific diseases, to be able to make those drugs, and now even to help in the clinical trials â which are the most expensive part of the process. I thought clinical trials were getting cheaper because drug developers are using more synthetic data, so not as many people are needed for these trials. Thatâs, I think, very much an aspiration. The cost and time to get to clinical trials has been shrinking, especially with AI, but it could still cost hundreds of millions of dollars to run a trial, which is why drugs are very expensive. The probability of a drug going successfully from the first trial to the end of the third trial is just 20%. If 8 out of 10 fail, and these things cost hundreds of millions of dollars, the amortized cost gets really high. The reason they fail typically is not that the biologist did something wrong; itâs that all the experiments these drugs were designed on were on animal models like mice, and in the end, animal models are just not very predictive of humans. The AI model is not going to be perfect, but itâs going to be way better than any animal model would be, and once it crosses that bar, thatâs where it gets really exciting. [The phase after that is]: Is the drug the right drug forme? You mean personalized medicine. . . The jargon here is so-called precision medicine. If you go to a doctor with something not trivial, they have to guess whatâs going on, because thereâs only so much they can tell. Then they give you a drug â and if that doesnât work, they give you another drug, then another drug. This happens in cancer, it happens in lots of different areas. We would all be much better off if the first drug was the right one. Typically, your blood test values are compared to population averages. But really, they should be compared to: is this [result] weird for you? What weâre starting to do also on the medicine side is [the ability] to just understand what would be right for the individual. Would you say the path to this moment has been slow and steady, or did it spike more recently? I think itâs lots of different things [coming together]. So for instance, precision medicine for the longest time was based on genomics. But the reality is your genome is kind of like the blueprint for your house on day one, but your house is fairly different now compared with the moment it was built. So there are many other things that people can now measure in proteomics and so on that are much more relevant for understanding disease and where your body is now. There has also been [a lot of] automation in robotic measurements that is naturally tied into AI, and those two go hand in hand really well. Over the last decade, thereâs been this steady clip fforin both AI for biology and AI for chemistry. The biology part is like, how can we treat this disease? And then the chemistry part is, how can we come up with a drug to go after that specific protein? There have actually been very significant advances over those 10 years. You mentioned that biology is one of the few places AI canât just scrape data off the internet. What does that mean for how the field develops? Itâs a place where you donât have any of this data that people can just all train the same thing, and your data canât be distilled from one model to another. Itâs a really interesting play from just the pure AI sense. Doesnât that echo a familiar problem in medicine, though â doctors operating in [territorial, often competitive] silos? Youâre onto something really big here. Letâs say [someone] has some type of cancer, and itâs both an issue in oncology and endocrinology â those two doctors really donât sync together very well. What is really intriguing about AI is that it can, in principle, be a specialist in everything, and it can start to see things that really any single human being couldnât. It would be equivalent to having a team of the very best doctors all clamoring together in that moment. But is there enough data sharing for that vision to actually be realized? I understand why founders and investors want to protect their [respective findings], but . . . I think one of the bigger trends is that weâre starting to see a shift toward building these atlases of biological information â which, from a technology standpoint, are typically foundation models. And as they become more common, I think weâll see the same thing thatâs happened with open-source LLMs, which do very well against the corporate ones: open-source foundation models in biology having a very broad impact. Youâre involved with Genesis Therapeutics, which came out of your lab at Stanford, and Insitro, the drug-discovery company launched by Daphne Koller, a former colleague at Stanford. You say youâre also incubating a company with a founder youâve known for 20 years. What are you looking for in founders, and in what areas? There are two areas that Iâve been spending most of my time on. One is AI for healthcare delivery, which I did a ton at a16z as well, and then AI for clinical trials. One of the things thatâs most important to me [about founders] is that we can really trust each other â founders that have high integrity, that do what they say theyâre gonna do⊠Iâm expecting this relationship to be 5, 10 years plus into, ideally, their next company. I want to work with people who are thinking long term like that. Ideally, these are people who are not just trying to win and beat other people, but really thinking about the question: how do we win together? What have you gotten right and wrong in your investing career so far? When I started talking about AI and machine learning and technology and medicine and bio 10 plus years ago, there was a lot of resistance and a lot of people saying, âOh, thatâs never going to happen. Thatâs never going to be useful,â and so on. That resistance is largely gone and seeing this arc is very fulfilling. I think it took me some time to really appreciate that as seductive as the coolest technologies are, it really always comes back to go-to-market. I tell my founders, especially the ones who are coming from the science or the product side, for them to take all their brilliance and creativity and really apply it to the go-to-market side, that the go-to-market part is at least as hard or harder than the technology side. Help us understand how youâre designing this new firm differently, compared with what you were running at a16z. Right now, weâre doing something really quite different⊠VZ is named after me, Vijay, and my co-founder, Zach Werner â heâs the Z. Weâre intentionally really quite small⊠on the investment side, itâs really just the two of us. We were actually intending on hiring associates, but it turned out, with the agents that weâve built up, not to be something that we need to do. How concentrated is âconcentratedâ? Weâre [not] driving 30 bets per year⊠weâre talking about probably five, not a lot of investments â very concentrated. Adding a company at a typical fund is like adding a Facebook friend â thatâs something you do pretty quickly. For Zach and I, itâs more like . . . wanting to have another child. This is a big deal for us. With that structure, who are you competing against for deals? The funny thing about this model is that typically weâre not trying to compete for a hot round â people make room for us. Itâs a very different thing than trying to get the hot Series A or Series B. Largely, people want us as investors because of what Zach and I can do, and how hands-on we can be. When I look at people who are inspirations, I look at someone like Antonio Gracias at Valor â heâs well-known now because of the SpaceX deal, but heâs been doing what heâs been doing for 20 years. What Thrive has done, with a more concentrated portfolio, is also a real inspiration. Obviously, a16z is sort of in my DNA as well, but I think those other ones are new additions to how we think about things. Whatâs overhyped right now in AI and biotech? The reality is that AI can find insights that we canât get from just humans alone. The thing that always gets tricky is when thereâs this call that AI is going to cure all everything. The reason for hesitance there is not because of any doubt about AI â itâs about doubt of the data. LLMs work because thereâs so much data to learn from. When the data is just simply not there, then AI canât magically solve that problem.
