Using "foundational ideas" to find and fund the future at MarsBio
How we build the idea-set that underpins our investing strategy
When you’re raising a venture fund, you get asked a lot about your “deal flow” - the deals that you get to diligence. It’s probably the most important asset a private market investor has: unique deal flow as a competitive edge. At MarsBio we spend a lot of time building our methodology for finding the best companies to invest in.
At later investment stages, deal flow is mostly about knowing other investors. Your investor network, and reputation in that network, brings you deals. In seed investing, other investors aren’t as important: it’s less about who you know, and more about what you know.
The foundation of our deal flow comes from clarity on the ideas that we think are most important. We distill this into something like a “request for startups” and are constantly accruing ideas of products and companies we want to see. This is one advantage we have as scientist-entrepreneurs ourselves: we’re able to look at the technology landscape, extrapolate against certain trends, and estimate where (with the right talent) great companies will be built. We won’t necessarily predict all the most impactful ones, and indeed some of our ideas are quite broad (e.g. organoids), but these technical themes underpin and inform the way we look for deals. We spend about 1/3 of our time researching, testing, and developing these foundational ideas.
We build this idea-set in a few key ways:
Reading scientific papers and discussing them with the authors. Most scientists are open and willing to discuss their work with interested outsiders, especially technically literate ones. Most aren’t planning on starting a company based on their academic work, but we’re happy to get to know them years before they may. Of those that do start companies, more often than not, they focus on a related topic that doesn’t involve licensing IP. We love this: there is proof they can do the work, and technical precedent, but no burdensome university involvement.
Working on open source & community development projects. As science becomes more democratized, more viable projects are popping up in the DIYbio, community bio, and open source bio software space. Open source work is robust, innovative, and underpins much of the tech industry - soon it will underpin much of deeptech too. These bio communities are made up of passionate outsiders who are filled with great ideas, and we allocate time and resources to supporting them.
We mentor and advise scientists of all stripes, even without a company on the horizon and even if we haven’t invested in them. This builds our reputation, exposes us to a wide breadth of technology (sometimes beyond the limits of our portfolio), and also strengthens the foundation of ideas we want to fund.
Access to lab space allows us to build links with startups. Finding space is challenging and is often a roadblock for deeptech companies. MarsBio’s early portfolio grew out of the deal flow we saw while working on Lab Launch, a network of shared lab spaces. Being involved in the infrastructure needed to build and scale gives us an early view of companies, and is a key enabler to offer them.
Lastly, communications and info sharing on our foundational ideas act as an attractive force. This is commonplace amongst VC funds, many of which have become more like media organizations than investors. But, publishing our way of looking at the future, and sharing technical insights, serves to attract relevant people to us. And hey, you’re reading this right now :)
Good deal flow isn’t found, it’s cultivated, and it takes a lot of time and legwork. As more scientists-founders find success, and begin investing themselves, we have an opportunity to build more and better “foundational ideas” to expand the breadth of deal flow, and thereby, the breadth of successful deeptech startups.