There has been a big debate over the last few years over whether the Series A crunch is real or not. What everyone can agree on, though, is that there are definitely more seed and early stage funds now than ever before, and more people willing to give money to young companies looking to make it big.
Risa leads the GE Ventures, New Business Creation team that develops and invests in new opportunities in healthcare, energy, and software. The team has launched Evidation Health, Vitruvian Networks, Current Powered by GE, and has several in new businesses in development.
Risa joined the GE Ventures team from Kleiner Perkins Caufield & Byers where she was a partner for 10 years. Prior to KPCB, Risa was a Principal at J.P. Morgan Partners. Throughout her VC Career, Risa has invested in and held board director or observer roles in over a dozen healthcare companies including CardioDx, Corthera (acquired by Novartis), Epizyme, Foundation Medicine, Ilex Oncology (acquired by Genzyme), Nodality, Orexigen, Pacific Biosciences, Triangle Pharmaceuticals (acquired by Gilead), Trius (acquired by Cubist), and Veracyte. While at KPCB Risa incubated several companies and was the founding CEO of two.
Before joining the venture capital industry, Risa worked as a derivative specialist on the Chicago Board of Trade, where she traded futures and options on government securities. Risa is a member of the steering committee for the Coalition for 21st Century Medicine and on the advisory board of the Personalized Medicine Conference. She was also named as one of the 100 Most Influential Women in Business by the San Francisco Business Times. Risa holds a degree in genetics and development with distinction from the University of Illinois, a Ph.D. in immunology from the University of Chicago, and was a member of the second class of Kauffman Fellows. Risa is an avid athlete; she is currently playing basketball and a regular at bootcamp.
VatorNews: Tell me a bit about your background. Where did you go to school? What led you to the venture capital world?
Risa Stack: I was running a trading desk at the Board of Trade at night while I worked on my Ph.D. at the University of Chicago during the day. I worked on the trading floor where you hand signal and yell and scream, and was really intrigued with the interest rates market and how markets move. That, in combination with working on my Ph.D., was a really intellectual exercise. I was looking for a job that combined science and business.
I saw an opportunity for the Kauffman Fellowship, which is where they took people from different backgrounds and got them into VC. And this was 1995-1996, so VC wasn’t as popular or well-known as it is today. I applied for the fellowship, met with firms, and ended up going to work for what was then Chase Capital Partners. So I learned a lot about private equity but realized that ultimately I wanted to do earlier-stage venture, and that’s how I ended up at Kleiner Perkins.
What really led me to the idea of being a venture capitalist was when I was in graduate school, working on the Board of Trade in the 90s, I had read a book called The Billion Dollar Molecule, which is about the founding of Vertex, the biotech company. And in that book they talk about venture capitalists. That seemed like the greatest job in the world because you get to help people create things..
VN: What is your investment philosophy or methodology?
RS: Because we’re part of a bigger company with so many different businesses—transportation (railroads, engines), oil and gas (equipment for that industry), healthcare (imaging and software)—the way that my team works is that we try to identify an area or problem that needs to be solved, working in conjunction with the managing teams of the different businesses.
So we started a business called Vitruvian in the life sciences space. That was done through conversation with the CEO of Life Sciences at GE, who saw that a lot of his customers in the immunotherapy space we’re saying someone really needs to figure out a way to scale immunotherapy to tens of thousands of patients. Can GE do this? So the CEO of the Life Sciences business called us up, we talked a lot about it, we spent a year investigating the space, and created a business strategic to GE.
We really try to work with the different businesses to identify areas that are strategic to them and new markets to get into.
VN: What are your categories of interest?
RS: To great extent they map to GE’s existing businesses because our goal is to create things that are strategic to GE. For example, we built Vitruvian in the immunotherapy space because GE is very interested and has a big business in that area. Now we’re working on a project on the oil and gas space, which maps to that industry.
VN: What do you look for in companies that you create or fund?
RS: We look for a problem that needs to be solved, like the scaling of the immunotherapy business. If we take market risk, we don’t want to take technical risk. If we take technology risk, we don’t want to take market risk. I think that’s common for VCs. You take one aspect of risk but not both because that makes it a lot harder. That’s our philosophy broadly. One thing we try to do early on is bring in some great entrepreneurs to help us build the business, who will ultimately go on in some cases to become management for the businesses..
VN: What would you say are the top ventures you have been a part of? What stood out about them in particular?
RS: I mentioned Vitruvian, which my team has worked on building. What was really fun about that was we learned so much about the industry.
The other one we’ve been involved in is Evidation Health. Again, we’re trying to help development of the whole digital health space in terms of what is needed to validate new technologies and new therapies for that area. It’s really fun when you can help a new segment evolve from one that’s rather young to going through the process of maturing and validating technologies that will drive the space and help create delivery methods for new technologies.
Another one that my team worked on is Current, which focuses on distributed power. We wrote the business plan and were going to set up a separate standalone business, and then had an idea to put existing GE businesses into that greater strategy.
Those are a couple core ones that we’ve focused on in the last couple years.
VN: These days a seed round is yesterday's Series A, meaning today a company raises a $3M seed and no one blinks. But 10 years ago, $3M was a Series A. So what are the attributes of a seed round vs a Series A round?
RS: Overall, drawing on my background at Kleiner Perkins from mid-2003 to the end of 2012, the industry seemed to really change in the sense that a lot of VCs did seed stage. Right now, there’s that group of “super angels,” and there’s a lot bigger angel network. So I think that a lot of VCs don’t necessarily seed things anymore because entrepreneurs can get millions of dollars from angels.
One of the points is that the seed round has potentially gotten bigger and are done by super angel groups. And the Series A companies are a little more mature than they would have been years ago thanks to the evolution of this new funding source.
VN: Given all the money moving into the private sector, I believe there's more money going into late-stage deals in 2015 than there was during the heyday, back in 2000, do you think we're in a bubble? And is it deflating now?
RS: My former colleague Aileen Lee is widely credited for coining the term “unicorn.” It feels like we have a lot of companies at pretty significant valuations, so I’m not sure the public market can support them. If you’re in the public market, you have a lot of companies that are profitable and have a long history of being profitable. So I find the whole unicorn concept pretty interesting, and I think some people are tracking what happens to them. It feels to me like we’re in a bubble, but I’m hearing some of the unicorns are doing down rounds.
VN: If the bubble is deflating, how does that affect your work?
RS: From our standpoint, we like to start companies. We go in owning a lot, and we focus on building a sustainable business model. So we’ll keep doing what we’re doing because I think a lot of the bubblier companies aren’t really in the core areas where GE has a strong focus. A lot of the bubblier ones, in my view, are more consumer-oriented.
VN: What do you like best about the work you do?
RS: I love learning about so many different, new things. When you’re developing a company, you really have to get deep into that particular industry. I really like to be around people who are super knowledgeable and super excited about the space. You get to work with a lot of great people too. The entrepreneurs are so passionate, and I get so much energy from them.
VN: Is there anything else you think I should know about you or the firm?
RS: What we have is a really unique model because we get to leverage a lot of knowledge our colleagues and GE has about different businesses. So, for example, if we have an idea about starting a business in the oil and gas sector, there are people within GE who have spent their career in that sector. So you can get a lot of knowledge just within the network.
What we’re also able to do is identify potential partners who might want to test solutions with us. What’s really neat is the access we have to different industries and the customers in that industry. At a great VC like Kleiner Perkins, you have a lot of access. But the level of access we have when we’re interested in a new solution for a segment, we can get to three or four real, multibillion dollar customers and test our idea, which is super exciting and hopefully means we can have a higher success rate.
After my conversation with Risa, I connected with GE Ventures to get a download on their investing facts and figures beyond the "New Business Creation" unit. Here's what they shared.
What is the size of your current fund? And where is the firm currently in the investing cycle?
We invest up to $200 million per year across practice areas, including funds targeted to investment as well as technical and commercial collaborations.
What is the investment range? How much do you put into each startup?
We typically invest anywhere from $1 million - $15 million.
What series do you typically invest in? Are they typically Seed or Post Seed or Series A?
We invest in seed to mid-stage companies with Series B or C rounds, and sometimes beyond.
VN: In a typical year, how many startups do you invest in?
Since GE Ventures was first started, we’ve invested in approximately 100 portfolio companies.