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YC Root AccessWhat VCs Look for When Investing in Bio and Healthcare
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Chapter summaries
Panel setup and moderator introduction (Ethan Perlstein)
The host introduces the panel of bio and healthcare investors and the moderator, Ethan Perlstein. Ethan’s background as a YC alum and biotech founder is highlighted to frame the discussion.
- •The session is introduced as a panel featuring investors from Andreessen Horowitz, Khosla Ventures, and Venrock
- •Ethan Perlstein is introduced as moderator, including his companies and focus on rare disease cures
- •The panelists are welcomed on stage to begin the discussion
Camille Samuels (Venrock): personal motivation and investing focus
Camille shares why healthcare is personal to her and describes Venrock’s history in biotech investing. She outlines her primary investing interests, especially around unmet medical needs.
- •Camille explains her personal connection to healthcare through family experiences and her own health
- •Venrock is described as a long-standing venture firm with deep biotech roots
- •She emphasizes investing in unmet medical need, especially orphan diseases
- •Her focus areas include therapeutics, with additional interest in consumer health and medical devices
Vineeta Agarwal (Andreessen Horowitz): Biohealth team and founder alignment
Vineeta introduces her role at Andreessen Horowitz’s Biohealth fund and explains what energizes her about supporting founders. She emphasizes patient impact, dedicated teams, and the firm’s technical-founder DNA.
- •Vineeta introduces herself as an investing partner on the Biohealth fund team
- •She highlights being physician-trained and patient-impact oriented
- •She draws parallels between a16z’s approach and YC’s founder support and structure
- •She emphasizes backing technically driven founders and transformative healthcare outcomes
Alex Morgan (Khosla Ventures): scope of investing and personal background
Alex describes Khosla Ventures’ broad investing footprint and his leadership of health and bio investing. He outlines the range of sectors he covers and his path from physician-scientist to investor.
- •Khosla Ventures’ investing spans multiple sectors, with Alex leading health and bio
- •His health/bio scope includes services, AI radiology, drug discovery platforms, digital health, deployed care, and devices
- •Alex shares his background as a physician scientist and AI researcher
- •He notes his tenure at Khosla Ventures and recognition of portfolio companies in the audience
What investors look for early: unmet need, truth-seeking, and founder adaptability
The panel answers what they look for in early-stage deals, focusing on team quality, market potential, and founder traits. Camille stresses truth-seeking and preference for technical risk over long-term commercial uncertainty.
- •Camille prioritizes unmet medical need and prefers taking technical risk earlier over future commercial “scrums”
- •Camille highlights “truth-seeking” founders who surface weaknesses rather than hide them
- •Alex emphasizes fit-for-purpose teams, large enough markets, and acknowledging weaknesses and hiring needs
- •Alex notes founders should not assume the initial team is sufficient and should plan to consolidate top talent
Navigating uncertainty: the “idea maze” and being collaborative under changing hypotheses
Vineeta explains the “idea maze” concept as a way to evaluate whether investors and founders can reason together through uncertainty. The emphasis is on intellectual honesty, contingency thinking, and collaborative iteration when plans change.
- •Vineeta describes the “idea maze” as an intellectual journey through evolving hypotheses
- •She emphasizes most early expectations won’t play out exactly as planned
- •Investors probe “what if” scenarios: science, customers, experiments, and next steps
- •She values founders’ willingness to collaborate and incorporate pattern-based investor input
Financing risk and the downturn: adjusting plans, preserving progress, and partnership trade-offs
The conversation shifts to the funding climate and how founders should think about surviving a downturn. Camille and Vineeta emphasize making choices, showing progress, and planning fundraising with future rounds in mind.
- •Alex highlights heightened future financing risk for deep tech and the need for realistic expectations
- •Camille urges founders to adapt to the environment, balancing breadth versus depth and sequencing ambitions
- •Camille suggests strategics may become more important and that founders may need to partner programs
- •Vineeta notes seed valuations have not corrected as much as Series A/B and encourages planning backward from the next round
- •Vineeta suggests drafting a Series A deck early to clarify future milestones and investor expectations
Handling investor “no’s”: misses, constraints, and learning from hesitation
The panel discusses missed investments and how founders should interpret rejections. They emphasize that “no” is often not a definitive judgment on quality and can reflect mandate constraints, biases, or incomplete understanding.
- •Camille recounts passing on AveXis partly due to perceived CEO fit and price; it later had a major acquisition outcome
- •She reflects on the emotional weight of missing a patient-impactful opportunity
- •Vineeta argues most “no’s” must be wrong empirically and founders should focus on the reasons and what’s actionable
- •Vineeta shares missing Surbhi’s financings due to fund scope (not doing med device) and encourages staying connected despite a “no”
- •Vineeta describes taking longer to understand certain technologies and acknowledges investor biases in categories with prior failures
More misses and decision dynamics: partnerships, bias, and conviction
Alex shares examples of passing due to ecosystem/talent concerns and uncertainty about expertise. The discussion highlights how internal partnership dynamics and perceived execution risk influence outcomes.
- •Alex describes passing on Recursion due to skepticism about talent concentration and location-related bias
- •He reflects that remote work shifts some assumptions about where companies can be built
- •Alex recounts interest in Asher but passing due to uncertainty and lack of perceived expertise
- •The examples illustrate how perceived risk, bias, and conviction levels affect investment decisions
Behind the scenes: diligence ranges from quick seed decisions to deep IP and large deals
The panel explains what happens inside venture firms when they get excited about a company, emphasizing that processes vary widely by stage and company type. They describe who does the work, what diligence can include, and how partner meetings function.
- •Alex describes a wide spectrum: fast seed decisions versus months-long work for large transactions
- •He notes diligence varies by company type, including deep IP work for deep tech
- •Alex mentions hiring specialized IP capability to support bio/healthcare IP diligence
- •Vineeta emphasizes that despite large partnerships, typically one or two people sponsor and advocate the deal internally
- •Camille explains Venrock’s longer relationship-based diligence (often months) and notes each firm’s culture differs
Biotech vs tech-bio vs founder-led: rejecting the dichotomy and focusing on constraints and positioning
The panel explores labels like biotech, tech-bio, and founder-led bio, with panelists largely rejecting rigid categories. They note all companies face regulatory constraints and that labeling becomes more consequential later for public-market positioning.
- •Vineeta argues multiple concepts are being conflated and rejects a strict biotech/tech-bio dichotomy
- •She emphasizes founders matter across all company types and that using modern tools is becoming unavoidable
- •Camille notes historical overemphasis on “experienced” CEOs and says support and evaluation often look similar across categories
- •Alex suggests categorization matters more later with bankers and analysts for sector comps and branding
- •Camille adds that founders must learn to describe the company simply in a way that helps investors categorize it
Milestones by stage: risk discharge, value-creating steps, and clarity on failure points
The panel returns to practical fundraising milestones, emphasizing that round labels vary and what matters is risk reduction. They discuss therapeutic and non-therapeutic milestone examples, plus the importance of defining clear value-creating steps.
- •Camille describes typical therapeutic milestones: de-risking key risk, animal data, sometimes development candidate, and indication prioritization
- •She notes in healthcare IT and genomics, the key milestone may be different (e.g., a payer customer)
- •Vineeta frames every round as discharging risk, with risk inversely tied to price
- •She gives an example progression: standing up a company and hiring, validating a core component, then advancing to delivery and in vivo data
- •Alex stresses identifying the value-creating milestone and the benefit of clear failure points to avoid limbo
What makes a real “platform”: product pathways, optionality, and cost-of-next-program logic
The panel closes by discussing what defines a platform company in biotech, acknowledging ambiguity and a spectrum. They emphasize explaining how a platform yields successive products and why the second program should be cheaper or faster than the first.
- •Vineeta emphasizes explaining how the platform leads to the first product and the next products (line of sight beyond one asset)
- •She encourages clarity on the “special sauce,” such as target identification, uncovering biology, or modality mechanisms
- •Camille notes she invests in both platform and product companies and avoids “religious fervor” in decision-making
- •Vineeta explains why investors like platforms in principle: standing up the next program should cost less than the first
- •Alex describes a spectrum of “platform-ness,” warning against shallow pipelines where only the top is strong and the rest is weak
- •Alex highlights optionality as especially valuable in uncertain markets
