💰 Shelby's Venture Adventure

Hear about post-Theranos VC, more than you bargained for about algae, and where to find the latest hubs and players in Cambridge.

Learn more about Shelby at https://shelbynewsad.medium.com/

Full transcript: https://thealevelbiologist.co.uk/shelbys-venture-adventure/

The A Level Biologist Podcasts is brought to you by The A Level Biologist - Your Hub @ https://thealevelbiologist.co.uk

Transcript

Intro 0:01
Welcome to the A Level biologist podcast, bringing you the most exciting area in the world right now, covering education and business in life science. Your host is Arian Mirzarafie Ahi, who’s on a mission to do for the body what the Internet has done for the mind. He’s a PhD dropout and the creator of The A Level Biologist, Your Hub, please give it up for Arian and enjoy.

Arian Hi guys, how’s it going? Did you know almost half of newly hatched storks abandon their nest to look for a foster parent who might feed them better? Didn’t see that coming did ya?

Welcome to this podcast with special guest Shelby Newsad, a PhD candidate in plant science at University of Cambridge, and analyst at Hummingbird Ventures. I’m excited that, finally, now in the second season of our podcasts, I get to speak with a professional in the funding arm of life science. It is often the missing link between students, research and business. Shelby, welcome to the podcast.

Shelby 1:19
Thanks for having me Arian.

Arian 1:21
I’m sure everyone is eager to learn more about your work, which we will delve into, tell us where you’re from and what your education has been like before arriving in Cambridge.

Shelby 1:34
I have a bit of a different trajectory than most people who are at Cambridge. I’m from a small town in Ohio, of 1000 people it’s called prefer the Ohio and I graduated from Fort Bragg High School there and went on to do a degree in biochemistry with minor in engineering at Ohio State University. After that, I really wanted to get more research experience and do it in a different setting than at a university so I went to the National Institutes of Health in Washington, DC and worked for a year there as post baccalaureate student in Ella Serpy’s lab. in ICHC department.

I was working on glutamate receptor cell service trafficking and didn’t discover as much as I liked, but realised the importance of translating good research when discovery does happen, so that took me to doing a bio science enterprise degree at Cambridge. It was a really multidisciplinary degree with modules in pharmaceutical drug discovery, consulting, business development, agricultural technologies, and venture capital.

I kind of amalgamated those two themes that I really liked, which was ag tech modules and venture capital modules into what I’ve been doing during my PhD; a PhD in plant sciences. I work on algae and as a side hustle, I’ve also been heavily involved in the venture capital community here in Cambridge.

Arian 3:43
Well, that’s fantastic. Thank you, Shelby, there is so much to unpack there because all of those areas are extremely interesting. I really liked the interdisciplinary aspect that you briefly mentioned there, because that is one of the key things that we do talk about and you mentioned the venture capital, which, again, is one of the main things that I’ve wanted to bring onto the podcast for some time and one of the things that people always ask about and they wonder about.

I wonder if your studies on the venture capital side of that interdisciplinary course, taught you something that surprised you about venture capital and how that works in that field. My degree didn’t have anything on that and that was one of the downsides to it. So what what did that teach you?

Shelby 4:41
It’s a really good question. The Biosience Enterprise course just taught the basic mechanics of venture capital,for example, the funding model; venture capitalists are essentially middlemen between very, very rich people or institutions or pension funds, and startups. So venture capital is just a very high risk, high reward asset class. It’s become popularised in recent years, because of tech unicorns essentially such as Uber, Deliveroo, etc.

Arian 5:28
Do you think that is sustainable, or do you think it’s just a phase?

Shelby 5:34
I can’t speak so much to the tech side, I think the biotech growth can be sustainable and has been for the past 70 years because of continued government underwriting of basic research. I think that really has allowed the industry to grow by financing discoveries that are then patented and companies are nucleated around them and if the underwriting from governments continues, then I think the biotech ecosystem, and the venture capital funding around it will also continue.

Arian 6:28
That’s great to hear. Do we have any examples of the government underwriting of that research? I have some people sometimes approaching me on LinkedIn offering research and development tax credits, is that it? Or is there something else?

Shelby 6:44
I think that’s part of it. I guess what I’m thinking of specifically is the US Department of Defence DARPA based model, which invented the internet for military purposes, 20 years ago, was working on MRNA vaccines, and just has been a real bellwether for new discoveries. Apart from that, I think, UKRI funding. In the US, we have the National Institutes of Health and the National Science Foundation that invest billions every year in discovery research and so these are the main modes of discovery that I see.

Arian 7:35
I’m so curious about the work that you do at Hummingbird Ventures. We’ll find out more in just a second.

What is Hummingbird Ventures and your role as an analyst?

Shelby 7:52
So Hummingbird Ventures is a 200 million London based fund that historically has invested in tech so it had some really interesting portfolio companies; Deliveroo, for example, was a portfolio company of Hummingbird, Peak Games, Kraken the cryptocurrency platform and this past November, it raised a new fund and included a biology arm because the partners of Hummingbird Ventures were seeing biotech founders that wanted to scale like tech founders, and they saw that the technology that biology now has, is able to facilitate that.

So as an analyst, I’m most frequently involved in due diligence of companies that come through the door so I look at the competitive landscape, scientific feasibility; sometimes I look at patents, competitive patents. I think an interesting part of a role of a very early stage venture capital fund is that you’re sometimes able to help out with portfolio companies.

So, in a couple of portfolio companies, I’ve been able to help with various hiring processes, or looking at different types of science for them. So that has been a great experience and with Hummingbird, as an analyst, I also run a fellowship programme with Cambridge students, where the students were doing deep dives of different areas from smart skincare to ageing technology and with facilitating that project as well.

Arian 10:04
That’s amazing. Thank you for sharing, Shelby. A lot of people, I think, are wondering about what those things involve because we’re quite familiar with those terms and concepts but I think there’s probably a lot of students, a lot of science students, who dream of some of those things, but they’re not quite sure how to get there and what it actually involves, because a lot of these buzzwords are quite appealing but a lot of people share how their experiences are different to what they expected. Was everything that you’ve learned so far as you expected, or were there any things that caught you off guard or by surprise?

Shelby 10:53
I think I had pretty good training. I had worked before at StartCodon which is the Cambridge based accelerator, worked as a fellow for their fellowship programme and we were involved in really similar things, actually; scientific due diligence, I feel is what I really feel comfortable with, and probably a lot of scientists entering the business view, feel comfortable with. I think, in venture capital, though, it’s not just science, it’s about the team and sometimes, even if the science isn’t the newest, if the team is really good at executing, and really fast to meeting their milestones, sometimes they actually have the advantage that VCs may go for. So I guess, in summary, what was new for me was the complexity of science, mixed with the psychology and the business due diligence, that historically, tech VCs used to assess more scientific based companies.

Arian 12:21
That’s fascinating. I heard some people say things like, “Investors invest in the person, not the project”. Do you find that to be the case?

Shelby 12:32
Yes but it depends on the fund. I think different funds have different philosophies on what matters more to them. With Hummingbird’s case, I think there is a very large emphasis on the founder and, in a way, that’s a way for most VCs to de risk the investment because if we spend a few days due diligencing a company that these founders have been working on for maybe 20 years sometimes, there’s no way that our amount of knowledge of the field could even compare to theirs but what we are able to assess, and work founders can show is that exceptional level of understanding, exceptional communication skills, really compelling storytelling, real motivation, I guess, to succeed.

Arian 13:50
I like you saying compelling storytelling and I have to go back to the Elizabeth Holmes Theranos debacle. What was your take on that?

Shelby 14:05
Elizabeth Holmes is actually the reason why I went into biotech. So for me, I have very, very mixed feelings about it, because in so many ways, she was an inspiration to so many women at that time, that they could also have a voice and have impact in a really male dominated field. But the aftermath has been really disappointing, the way she’s handled it; I think the last time I checked, she was working on quite a similar company so it seems like maybe things haven’t been learned

Arian 14:50
So is she trying to do this again now?

Shelby 14:53
Yeah, from what I understood and….

Arian 15:00
So she’s not in jail at least?

Shelby 15:03
She’s not; but at the end of the day she put people’s lives at risk, misdiagnosed people and lied to the Cleveland Clinic, Walgreens and the individual investors that she had. Actually, to my knowledge, no institutional investors put money behind her, it was unscientific high net worth individuals that put money behind their loss. So in some way, that is comforting that institutional investors can weed out really phoney companies because we do like to see papers, we do like to see patents and Theranos didn’t have that because the Edison machine didn’t work.

Arian 16:00
I didn’t realise there were misdiagnoses as a result of that.

Shelby 16:04
Yeah, people were diagnosed with breast cancer that didn’t have it or I think people were told there was a relapse when there wasn’t, and vice versa because they were wheeling it out into Walgreens’ shops, so people could have everything tested; it was really one of those cases where if it seems too good to be to be true, it probably is.

Arian 16:39
That was quite a story. I remember the newspapers covering little snippets of that story over a really long timeline and there was always new details coming out and new revelations coming out. I was actually in New York City years ago, when I was in the shop with newspapers and magazines, when she had her picture on the cover of, I can’t remember which magazine it was, but she was on the cover of a magazine.

Shelby 17:05
“Fortune”, maybe??

Arian 17:06
“Fortune” yeah. I remember thinking, this is quite exciting, isn’t it. So it was quite shocking that something could go so mainstream and become a thing, purely off the back of, as you say, some investor who didn’t necessarily have much knowledge in that field but was powerful enough to just put someone in the limelight, as a new genius or a successful entrepreneur, and then turn out that it was on such quicksand.

Shelby 17:42
Yeah, on no real scientific basis and I think what they were trying to do was kind of novel for the time. So it was, to my knowledge, microfluidic mixed with antibody diagnostics, which, none of that was new but putting it together would have been great and people have tried and I think succeeded in many ways since, but not for diagnosing every type of cancer and looking at every biomarker for every disease; it’s really disappointing.

I do think part of the shaming, though, was because she was a woman that tried and failed and I just worry that some people may be reticent to really back women led companies in the future. I think that’s the thing that I find sad about it. It’s, obviously, her legacy, that she lied to so many people but also the legacy that continues after her, that female founders could be dangerous, which is totally not the case. She was a very extreme example but I just hope that narrative doesn’t continue.

Arian 19:22
Yeah, absolutely.

Intro 19:26
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Arian 20:25
1000s of people wanted to learn more about your initiative outlined in a viral medium article on building a Cambridge biotech ecosystem. What is your vision for it?

Shelby 20:37
I think as you said at the beginning of the podcast Arian, venture capital seems really untouchable to most people, even though they might be very qualified and motivated to do it. So when I started my PhD for my Master’s Course, I knew a couple of funds and ran a couple of talks; I realised there wasn’t an exchange of knowledge and experience in those interactions, there was it seemed like a one way exchange where VCs were telling us about how they do their job, how they do due diligence, maybe for this very case study but the students weren’t able to apply that.

So I think the crux of all of it is really wanting students to understand the field and if they like it, to then have a foothold, to maybe get more permanent positions in venture capital, or if they try it and didn’t like it, they still know what VCs look for and that would make them better Chief Scientific officers, CEOs or just members in the biotech ecosystem. So to me, getting hands on venture capital experience helps everyone in the ecosystem; it helps VCs too, because it’s cheap labour. Initially, we help out with deal flow and due diligence and it helps them in the future as well because they get better entrepreneurs and better founders and the consequence of that, then is potentially more drugs getting to market, more by manufacturing companies.

I think obviously those upshots are very long term consequences that a lot of other things go into but I think more programmes like this are coming up, because people realise that it’s good for everyone to have people educated, involved and informed.

Arian 23:20
Absolutely, yes. You mentioned VCs as being this intermediary between the investors and the people in the businesses that the VCs end up selecting for investment. I was wondering, what do you think about the connection between the investors and the businesses that they invest in without that middle point of the VCs in the middle? Do you think it is important for the sake of transparency, perhaps to have a closer link between those endpoints? Or do you think it is okay to just keep this the middle ground of the VCs with no real knowledge of connection between who the investors actually are?

Shelby 24:22
I think the model works okay for a couple of reasons. I feel like a massive amount has been learned by venture capitalists; venture capital funds’ success actually follows the power rule, where a very small percentage of the VCs make most of the money, it’s not like a standard normal distribution, it’s very much the power scale distribution.

I think the problem with that is that institutional investors have a very small number of VCs that they want to invest in because historically, those are the only VCs that make money; that makes it difficult for new VCs sometimes to be successful and that’s really what you rely on when you’re a new VC. Whatever the amount that was invested in you, so like 100 million, for example, in 10 years, you have to give them back 10 times that number.

So, there is an inherent misalignment in the VC timescale, which is, make the money back in 10 years, for example, and some biotech timescales where it might take more time than that for them to become profitable; that’s the misalignment I see but still, the good thing about it is that VCs do have experience and have ways around this like raising second funds, for example, forming syndicate groups and the other thing is that institutional investors pension funds may not have scientific experience or technology experience and VCs are able to supplement that for them.

Like I said before, just to clarify, VCs are middlemen between pension funds, institutional investors and startups but they do take some of the profits; their business model is to have a 2% fee for salaries, administrative expenses, office space and then 20% carried interest (as it’s called), so 20% of the exit money goes to the VCs and then the 80% is returned to the institutional investors. Does that make sense?

Arian 27:31
Oh, yeah. I’m just in awe at all of this information that I think is so valuable, that people ask about and I don’t think a lot of people are aware of exactly how this fits in and how this works within life sciences, specifically. You are also working on your PhD, which we’ll delve into coming up next.
Your PhD is around algae; for our listeners briefly describe what algae are and the focus of your research.

Shelby 28:09
Well, Arian, describing what algae are is actually really complicated. Algae are morphologically and physiologically diverse. They range from small diatoms that are smaller than some bacteria to full-on kelp forests that can live in marine or freshwater. Algae can be red, brown, or green but largely speaking, algae are eukaryotes with chloroplasts that are not then plants. So if that’s if that’s not confusing enough, maybe I can go into a little bit how algae are formed, because I know there’s like a general audience and it might be interesting to some people.

Algae formed when a eukaryote engulfed a free living bacterium and this made the chloroplast and this is called an endosymbiotic event and several of these endosymbioses happened with algae and that’s how the different clades were formed between red, brown and green algae. My research specifically is a comparison of a green algal model organism called Chlamydomonas reinhardtii, and a brown algo diatom called Sphaerodactylus tirocinium, really wordy names, but I’m comparing responses of these two different types of algae to vitamin deprivation.

Vitamin requirements in algae are actually really widespread where 50% of algae require an external supply a vitamin B12 for growth and the two organisms that I work with actually don’t require vitamin B12 but you can knock out a gene with CRISPR, genes coding with lining synthase, and that makes them B12 dependent and the presence or absence of that gene in other algo strains also confers like B12 dependent or independent growth.

The fact that 50% of algae require B12, you would think that this would kind of match some type of phylogeny, but it doesn’t at all and we’ve actually shown in the lab I work with, Allison Smith’s lab at Cambridge, and previous members of the lab shown that B12 dependence in chlamydomonas reinhardtii can be evolved and a short transposal element, in this case, was inserted into the gene, making it non-functional.

So we think it’s quite common, potentially in nature for that to happen so I’m looking at what it means metabolically for an algae to become dependent on B12 and when it is dependent, what it means to its metabolism, to starve it of that essential vitamin.

This doesn’t really make ecological sense in a silo so I’m also looking at algal bacterial symbioses because at the end of the day, the algae get B12 and other nutrients from bacteria but we don’t really know the mechanism of how algae and bacteria symbiose, we’ve really characterised it in plants and actually, there’s a really good paper Delou et al. 2015 the PNAS paper that describes how some symbiotic components are conserved in algae from land plants and so those are the candidate genes that I’m looking at.

Just another nuance to my project is that there are different forms of Vitamin B12 and we are starting to understand that these different forms have different abilities, in the way they support growth, and the way they change gene expression so that’s the third part of my project.

Arian 33:22
Wow there is so much to unpack there, so do you think that this knowledge about the use of B12, and the different forms of B12 is going to potentially impact humans in terms of their food and then nutrition? Or genetics?

Shelby 33:41
Yes, I think humans; we require B12, as well and it’s actually one of the things that’s more dangerous for people that go on a vegetarian or vegan lifestyle, is that the source of B12, which most of it comes from red meat, like beef, they don’t have any more. And when you have lower amounts of B12, you get something called pernicious anaemia and there are other reports of dementia like effects when you have vitamin deprivation. It’s not part of my research to investigate the different analogues with humans but some people that we interact with are very interested in that aspect.

Arian 34:42
Fascinating.

Shelby 34:45
I mentioned that vitamin deficiency used not to be such a problem because we used to not wash our food as much. Bacteria live in dirt and make B12 and when we didn’t wash our food, we were able to get B12 from the remnants of dirt. So our sanitisation culture in this way has led to deficiencies in some ways.

Arian 35:35
Wow, I would have never thought that so if we grow our own vegetables, we’d better just just pull them out of the earth and eat them without much washing. Extra extra nutrient boost.

Shelby 35:50
Yeah, I guess now we can take vitamin supplements, which is good; this is not an endorsement to eat the dirt.

Arian 36:03
Just to finish off on: I know there was previously before the recording a brief mention of the Cambridge University Technology and Enterprise Club, who have got a podcast called “CUtalks”.

Shelby 36:25
Yes; a good friend of mine, Shreya Singhal, started CUtalks and continues to be really involved. I’ve helped co-host a couple of episodes related to venture capital; I would really recommend giving CUtalks a listen, they have really diverse entrepreneurs in tech, biotech and VCs.

They’ve just done an amazing job, so I would recommend. I’d also like to give a short plug for the Venture Capital Society at Cambridge as well; we run fellowship programmes with accelerator Start Codon that’s based in Cambridge. We started a fellowship programme with Investiere, which is a Swiss based fund. We’ll continue with fellowship programmes with Hummingbird Ventures and then just this year, we’ve started another fellowship programme with PwC ventures, so people that are interested, be sure to check us out.

Arian 37:37
Oh, wow, that sounds so interesting. Thank you so much, Shelby. Thank you for listening. And remember, if you wish to make an apple pie from scratch, you must first invent the universe. Bye

Shelby Bye!