Human 3 companies do not fall into a specific sector, but they are defined by a set of characteristics. Some of these characteristics seem to be rather unique to XEIA, while others are variations on relatively common startup and business themes. Almost none of our portfolio companies are described by all of these attributes, but each portfolio company checks at least a few of the boxes. They are:
Does the company's product have the potential to shift the entire distribution of health outcomes ie, not just heal the sick, but enhance or elevate the wellbeing of the already healthy? Many highly successful drugs fall into this category, the prime example being Ozempic, which can treat morbid obesity, but can also help someone with a 2-pack get a 4-pack (or maybe even a 6-pack!).
But it’s not just drugs that can be “distribution shifting”. Plastic surgery can repair skin scarred from trauma but can also enhance aesthetics. And diagnostic platforms like our portfolio company Superpower can be used both by people looking to understand complex, chronic symptoms that their doctors don’t have answers for and by already healthy people who want to make sure that they’re staying “optimal”.
In most cases these “distribution shifting” companies have larger TAMs because they appeal to the entire spectrum of people. And because their products can be safely used by healthy people, we believe that they nudge the world towards a preventative care paradigm, and away from the “sick care” status quo - hopefully creating a more flourishing and resilient population.
Examples:
If this thing works, will it be a massive improvement over the status-quo or “standard of care” treatment? This is relatively common thinking in the tech startup world (Peter Thiel's "10x" rule), but is much less common in bio. In bio, the majority of companies are pursuing "derisked targets" or trying to create slight derivatives of already established drugs that are nearing the end of their patent life in an effort to capture a slice of an existing market without having to go through the trouble of developing new biology. This approach can make money, but it rarely leads to paradigm shifts in patient outcomes. We prefer to back biotechs that push the boundaries of biology to make step-change improvements in patient quality of life - not cynical incrementalists looking to make a quick buck.
Examples:
Are there examples of humans doing this “in the wild”? The most obvious example here is psychedelic medicine. People have been using psychedelics for thousands of years and there are countless reports of their benefits.
We like HERO companies because strong prior evidence of human use gives us a hint of what clinical trial outcomes might look like and (in theory) reduces risk.
You might notice a contradiction between “HERO” and “Stepchange”: if we already have examples of people doing this, how can it be a step change - wouldn’t it be incremental? It’s a great question. The answer is that in most cases, the HERO product has either never been scientifically validated (FDA approved) or only validated in a highly-inconvenient form factor that limited adoption. For example: psychedelics were never FDA approved because the War On Drugs prevented research. Deep brain stimulation (DBS) is highly validated for Parkinson’s but less than 2% of eligible patients get it because the surgical implant procedure is so invasive and dangerous.
Examples:
This one is so important to us, it is literally the first word of our name (XEIA stands for X-disciplinary Exploration, Investment and Acceleration). We believe that most breakthroughs happen at the intersection of multiple disciplines, so almost every company we back has some element of crossdisciplinarity. The most common being “AI/computation<>Biology”, but also “Traditional Medicine<>Modern Medicine” and “MaterialsScience<>Neuroscience”.
Examples: all of our portcos
This is our fun way of saying “proprietary technology” or “flywheel”. We look for companies that are leveraging exponential technology and individual know-how/trade secrets to generate defensible platforms that enable a compounding competitive advantage over time.
But that’s not very interesting, most VCs say something along those lines.
What sets us apart from the herd a bit is that we also invest in companies that have no built-in or obvious flywheel. We see plenty of problems in the health and bio world that are so big that a single successful asset could help billions of people and generate significant financial upside - no flywheel required.
Examples:
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