In the Harvard Business School Class of 2000, over 60% of the graduating physicians chose to become venture capitalists, either private or corporate. And even now as the public capital markets continue to slide, this popularity does not seem to be waning, prompting some observers to ask why.
Certainly, one component of the appeal of venture investing is that it affords an opportunity to develop new technologies that will radically impact healthcare. Isaac Ciechanover, NA, states, “I want to change the way health care is performed, and I think the best way to do this is to find companies that will revolutionize medicine. I want my children to laugh one day at how I once treated patients.”
While agreeing with this perspective, Greg Weinhoff, recent Harvard Medical School graduate, MBA Class of 2000, and now Senior Associate at Whitney and Co., adds that health care makes good investment sense on its own economic merits. “Health care investments typically have longer holding periods and it’s pretty difficult to get 100x returns like we were seeing at one point in technology investing; that being said, excellent performance in health care sustained over years is very possible, if you know what you are doing.”
Weinhoff points to the advent of genomics as a conspicuous example. With the announcement of the completion of the Human Genome Project, the sequencing of three billion bases of DNA yielded a set of genes numbering approximately 30,000 and the corresponding proteins could number far more. Given that over 340 billion dollars of pharmaceutical sales has focused on a set of less than five hundred proteins, the basis for new therapeutics has exploded.
In addition, novel related investment opportunities have emerged. Pharmacogenomics uses genetic variation to predict and optimize therapeutics, promising patients tailored therapy. The scale of the data storage and analysis requirements that the genomics and post-genomics era presents is unprecedented and bioinformatics aims to solve these problems with novel computer science solutions. Major technology companies with strategic genomics and bioinformatics initiatives include Agilent, Compaq, IBM, Intel, Microsoft, Motorola, Oracle, and Sun.
Samir Kaul, NE, a former geneticist who managed the landmark effort to sequence the Aribidopsis genome, argues that enthusiasm for the investment opportunities genomics offers must be tempered by acknowledgement of the underlying science, a competence he thinks physicians often have. “The technical sophistication of professional investors in the genomics space is rising, and frankly, it’s well-deserved. Being able to differentiate what’s fake and not fake in genomics requires a real willingness to stay current with the technology, and you don’t get that from watching Nova once in a while. On the other hand, you have to understand the business models, you can’t get too enamored with slick science.”
Weinhoff views his training in both business and medicine as mutually important in his current role as venture capitalist. “My experience at HBS gave me access to a VC network that has proven absolutely invaluable, but my training as a physician allowed me to understand the language, the literature, the technology, and at the end of the day ask the right questions, which has been probably the most important skill I could have at this point in my career.”