Kim founded Formation 8 and was previously a General Partner at Khosla VenturesRead more...
Jain is responsible for sourcing, executing and analyzing healthcare investments at Cota Capital
Venture capital used to be a cottage industry, with very few investing in tomorrow's products and services. Oh, how times have changed!
While there are more startups than ever, there's also more money chasing them. In this series, we look at the new (or relatively new) VCs in the early stages: seed and Series A.
But just who are these funds and venture capitalists that run them? What kinds of investments do they like making, and how do they see themselves in the VC landscape?
We're highlighting key members of the community to find out.
Dr. Shubhra Jain is a Senior Associate at Cota Capital.
Dr. Jain leads healthcare investments at Cota Capital. Cota Capital is a $500M fund based in San Francisco, CA. Prior to Cota, Dr. Jain led Product Management for acute care suite of products at Parkland Center for Clinical Innovations. She led product development and launch of SaaS risk surveillance and prediction solutions for clinical outcomes and published peer-reviewed research on the subject. Dr. Jain has served as a consultant and advisor to several health tech startups and Fortune 500 companies.
Dr. Jain is a Primary Care Physician, has her Masters in Engineering from Stanford with a major in Biodesign and her MBA from the Wharton School of Business.
VatorNews: What is your investment philosophy or methodology?
Shubhra Jain: Cota Capital is an investment fund with $500M AUM based in San Francisco. We invest in both public securities and private companies - on the private side, we’re stage agnostic and look at everything from Series A to pre-IPO. We have over 65 companies in our portfolio now. I lead the healthcare practice for us and have 15 investments on the healthcare side.
The other thing that is unique and very founder friendly is that we are structured as an evergreen fund. This allows us to do follow-on investments through the life of the company without any fund conflicts. It also allows us to hold for time frames that are most value additive to the business without any external pressure to close the fund. This is especially valuable in healthcare, where hold times tend to be longer than software.
VN: What do you look for in healthcare investments and what’s the opportunity you see in the space?
SJ: We are looking for proprietary technologies that have some defensibility around them. Fundamental technological innovation that enables us, as a healthcare system, to do something we couldn’t do before, or do it so much more affordably and conveniently that it opens up a significant untapped market.
We are looking to invest in the infrastructure layer, which serves as a platform for the next generation of applications to come. I look across sectors at both hardware and software innovations that meet this criteria.
VN: What's the big macro trend you're betting on?
SJ: I am excited about personalized medicine - delivering the right care, at the right time, customized to every individual patient because we’re all different in our genetic composition, in the way we lead our lives, and the way a therapy impacts different people.
The other macro trend I am excited about is value-based care - we are seeing increasing pressure on our healthcare dollars to deliver more and more value per dollar spent. I look for technologies enabling us to direct and allocate our healthcare resources in terms of valuable physician time, personnel or expensive treatment modalities to patients who need them the most, making care both cost efficient and effective.
VN: What are some of the technologies that you see that you’re excited to invest in that have advanced both of those spaces?
SJ: I’m interested in enabling technologies for cell therapy and gene therapy. FDA anticipates approving 10-20 gene therapies every year for the next few years. Novartis just released Zolgensma - a $2.1 million pill that offers a one time cure for spinal muscular atrophy. At $2.1 million price tag as the most expensive therapy in the world - how much of the population can really afford or access this innovation?
The launch of Bluebird Bio drug for thalassemia - Zynteglo has been delayed due to manufacturing supply chain issues - that is more patients living with this deadly disease not having access to the cure. Supply chain is also a huge constraint in scaling cell therapies - where you take cells from a patient, you make modifications to those cells, and then you put them back into the patient’s body. This process doesn’t necessarily happen at the point of care, so you need to ship those cells somewhere, they need to be modified and shipped back while maintaining the chain of custody and ideal environmental conditions in a short turnaround time.
I am excited to invest in innovations that will make these therapies affordable and accessible at scale. You can see more on what I am looking for here.
VN: What is the size of your current fund and how much do you invest in your companies?
SJ: Our fund is currently at $500 million in assets under management. Because of the stage agnostic approach, we have a wide range in terms of check size. We have done everything from $1 million to $20 million, depending on the stage we are coming in. Typically we are investing $3 million to $7 million in Series A deals and reserving up to $25 million over the lifetime of the company.
VN: When you invest in early stages, what kind of traction does a startup need for you to invest? Do you have any specific numbers?
SJ: Seed and Series A can look very different in terms of traction.
At the seed stage, we’re primarily investing based on the potential of what this can become. We look for a mission driven team with a differentiated advantage and a large market, If this goes right, what could it look like in five or 10 years?
At Series A, we want to see a working product - a proprietary technology that is defensible and differentiated. That validation can come in many different forms: a scientific publication, clinical trial study, interviews with physicians who have used the technology, or customers voting with their dollars. We want to see a product that works, that the target customer wants to use and is willing to pay for.
VN: What other signals do you look for on the team and market?
SJ: We look for founders who are passionate about a problem and have some unique advantage, such as an academic or professional background, deep insight or personal experience grappling with a problem. Amongst co-founders, we look for signals like: have they succeeded or failed together before? Have they been in high pressure environments together before? Do they have a clear delineation of roles and responsibilities between themselves? Are they able to communicate well between themselves?
On the opportunity side, we are looking for a massive market opportunity. Is there a big enough cohort of humans who care about this same problem and whose lives will significantly, and materially, look better if this was solved? The downstream effect of that is if you’re making people’s lives significantly better, hopefully you’re able to capture some of that value in terms of their willingness to pay for your solution.
VN: How do you think about valuations?
SJ: It’s obviously a hotly debated topic and I think everyone agrees that valuations have skyrocketed in the last decade or so.
Our strategy of investing in both public securities and private companies is a huge advantage - it keeps us grounded and disciplined when thinking about valuations. We try to develop an independent viewpoint on key metrics and benchmarks: Is there an existing acquirer market? If so, what kinds of acquisitions have they made before? What have they paid for similar acquisitions? What kinds of milestones did these companies hit before they got acquired at these specific valuations? What are public comps trading at? What will the public market support for this kind of a business, with this kind of a business model, and this level of traction?
VN: Venture is a two-way street, where investors also have to pitch themselves. How do you differentiate your fund to entrepreneurs?
SJ: In a few different ways.
As a firm, both in terms of the DNA and the culture, and how we have structured the firm, we have tried to put our founder/operator hats on and make it founder friendly. One of the examples I gave you was the evergreen structure. In terms of how we serve on boards and help our portfolio companies, we are as hands on or hands off, as the company needs. We are very communicative and transparent in our diligence process and try our best to be respectful of the founder’s time.
On the healthcare side, I am largely thesis-driven. Every quarter, I will pick an area of interest and dive deeper into that particular space - synthetic biology, digital therapeutics, mental health, cell/gene therapy. In this process, I talk to the incumbents, startups, investors, potential acquirers - different stakeholders in that market. This gives me a good roster of experts I can lean on when I come across an active opportunity. Having done this exercise, I am also able to have an informed conversation with founders, earn credibility, communicate genuine interest and share connections and insights to help them post investment.
My diverse personal background also helps to differentiate and add value. I trained as a physician, did the engineering program at Stanford, was an operator building and shipping product for a digital health initiative and have an understanding of finance and business. This enables me to actively contribute to discussions across many functions of the business. How would a physician adopt this product or what would they be worried about? What would a product road map look like? Which features should be prioritized? What kinds of financing decisions should the company be making on raising debt vs equity?
VN: What are some of the investments you’ve made that you're super excited about? Why did you want to invest in those companies?
SJ: My most recent investment was in a company called Zymergen. They are a growth stage company using machine learning and gene editing to manufacture desired proteins and materials with advanced, desirable properties like sweeter wine or less toxic sunscreen. This is a massive opportunity - to create drugs, chemicals, construction materials, food, basically anything you can think of. We were highly impressed by the team, their density of knowledge and cross disciplinary expertise around the table. They have been very strategic in allocating resources and targeting different markets and applications, balancing time to market, regulatory hurdles, competitive dynamics and creating long term value as they think about prioritization across the business.
Another investment I am excited about is Mission Bio, which is doing single cell analysis for nucleic acid sequencing. A lot of sequencing technologies can tell you that you have mutation A in one cell, and mutation B in the second cell, but they can’t really tell if there are some cells in your body which have both of these mutations. That’s what single cell technology enables you to do. This is a huge area of developing research and is growing really fast. It will enable new applications in immune profiling of cancers, targeting the right treatment for the right cancer patient, and monitoring tumor recurrence. We were excited about the potential to create impact, believe in the strength of core technological innovation and are already seeing a positive response from the market.
VN: You were a physician, you were at a startup, and now you’re a VC. What are some lessons that you’ve learned over your career and how have they helped you as a VC?
SJ: In my current role, I constantly leverage all the different elements of my background. My clinical background helps me develop a viewpoint on investment opportunities, establishes credibility with founders and enables me to ask key questions and identify risks during diligence processes. My training in engineering and product design at Stanford has helped me develop problem solving frameworks and hone on key metrics, help with issues around product design, prioritization across the product roadmap, and supply chain. The operational experience of building and shipping a product is tremendously helpful in earning credibility with founders and contributing to operational decisions in the boardroom.
VN: What are some of the surprises for you since becoming a venture capitalist based on what you thought it was going to be versus what it actually entails?
SJ: I don’t think I understood how much context switching this job involves. Every meeting is different, from a diligence call to a pitch meeting to a board meeting. This keeps things interesting and is a valuable skill as an early stage investor.
Most people think of a VC’s job as identifying businesses and investing in them. A large part of the job is actually working with portfolio companies - serving on boards and helping them when they’re struggling with operational issues. It wasn’t apparent to me, and I don’t think it’s commonly understood, how important a portion of your job as an investor that is.
VN: What excites you the most about your position as VC?
SJ: I’m fundamentally driven by passion and impact. I enjoy working with founders who are willing to walk through walls to change the world around them in a meaningful way, and make people’s lives better and healthier.
As a VC I get to have a privileged vantage point of seeing several companies go through ups and downs. Especially at a stage agnostic platform like Cota Capital, I work with founders searching for product market fit, developing a pricing strategy or scaling their sales strategy. This presents an accelerated learning opportunity for me to understand what it takes to build and run good businesses.
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