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China is funding the future of American biotech

Published October 20, 2018

Silicon Valley is in the midst of a health craze, and it is being driven by “Eastern” medicine.

It’s been a record year for US medical investing, but investors in Beijing and Shanghai are now increasingly leading the largest deals for US life science and biotech companies. In fact, Chinese venture firms have invested more this year into life science and biotech in the US than they have back home, providing financing for over 300 US-based companies, per Pitchbook. That’s the story at Viela Bio, a Maryland-based company exploring treatments for inflammation and autoimmune diseases, which raised a $250 million Series A led by three Chinese firms.

Chinese capital’s newfound appetite also flows into the mainland. Business is booming for Chinese medical startups, who are also seeing the strongest year of venture investment ever, with over one hundred companies receiving $4 billion in investment.

As Chinese investors continue to shift their strategies towards life science and biotech, China is emphatically positioning itself to be a leader in medical investing with a growing influence on the world’s future major health institutions.

Chinese VCs seek healthy returns

We like to talk about things we can interact with or be entertained by. And so as nine-figure checks flow in and out of China with stunning regularity, we fixate on the internet giants, the gaming leaders or the latest media platform backed by Tencent or Alibaba.

However, if we follow the money, it’s clear that the top venture firms in China have actually been turning their focus towards the country’s deficient health system.

A clear leader in China’s strategy shift has been Sequoia Capital China, one of the country’s most heralded venture firms tied to multiple billion-dollar IPOs just this year.

Historically, Sequoia didn’t have much interest in the medical sector. Health was one of the firm’s smallest investment categories, and it participated in only three health-related deals from 2015-16, making up just 4% of its total investing activity.

Recently, however, life sciences have piqued Sequoia’s fascination, confirms a spokesperson with the firm. Sequoia dove into six health-related deals in 2017 and has already participated in 14 in 2018 so far. The firm now sits among the most active health investors in China and the medical sector has become its second biggest investment area, with life science and biotech companies accounting for nearly 30% of its investing activity in recent years.

Health-related investment data for 2015-18 compiled from Pitchbook, Crunchbase, and SEC Edgar

There’s no shortage of areas in need of transformation within Chinese medical care, and a wide range of strategies are being employed by China’s VCs. While some investors hope to address influenza, others are focused on innovative treatments for hypertension, diabetes and other chronic diseases.

For instance, according to the Chinese Journal of Cancer, in 2015, 36% of world’s lung cancer diagnoses came from China, yet the country’s cancer survival rate was 17% below the global average. Sequoia has set its sights on tackling China’s high rate of cancer and its low survival rate, with roughly 70% of its deals in the past two years focusing on cancer detection and treatment.

That is driven in part by investments like the firm’s $90 million Series A investment into Shanghai-based JW Therapeutics, a company developing innovative immunotherapy cancer treatments. The company is a quintessential example of how Chinese VCs are building the country’s next set of health startups using their international footprints and learnings from across the globe.

Founded as a joint-venture offshoot between US-based Juno Therapeutics and China’s WuXi AppTec, JW benefits from Juno’s experience as a top developer of cancer immunotherapy drugs, as well as WuXi’s expertise as one of the world’s leading contract research organizations, focusing on all aspects of the drug R&D and development cycle.

Specifically, JW is focused on the next-generation of cell-based immunotherapy cancer treatments using chimeric antigen receptor T-cell (CAR-T) technologies. (Yeah…I know…) For the WebMD warriors and the rest of us with a medical background that stopped at tenth-grade chemistry, CAR-T essentially looks to attack cancer cells by utilizing the body’s own immune system.

Past waves of biotech startups often focused on other immunologic treatments that used genetically-modified antibodies created in animals. The antibodies would effectively act as “police,” identifying and attaching to “bad guy” targets in order to turn off or quiet down malignant cells. CAR-T looks instead to modify the body’s native immune cells to attack and kill the bad guys directly.

Chinese VCs are investing in a wide range of innovative life science and biotech startups. (Photo by Eugeneonline via Getty Images)

The international and interdisciplinary pedigree of China’s new medical leaders not only applies to the organizations themselves but also to those running the show.

At the helm of JW sits James Li. In a past life, the co-founder and CEO held stints as an executive heading up operations in China for the world’s biggest biopharmaceutical companies including Amgen and Merck. Li was also once a partner at the Silicon Valley brand-name investor, Kleiner Perkins.

JW embodies the benefits that can come from importing insights and expertise, a practice that will come to define the companies leading the medical future as the country’s smartest capital increasingly finds its way overseas.

GV and Founders Fund look to keep the Valley competitive

Despite heavy investment by China’s leading VCs, Silicon Valley is doubling down in the US health sector. (AFP PHOTO / POOL / JASON LEE)

Innovation in medicine transcends borders. Sickness and death are unfortunately universal, and groundbreaking discoveries in one country can save lives in the rest.

The boom in China’s life science industry has left valuations lofty and cross-border investment and import regulations in China have improved.

As such, Chinese venture firms are now increasingly searching for innovation abroad, looking to capitalize on expanding opportunities in the more mature US medical industry that can offer innovative technologies and advanced processes that can be brought back to the East.

In April, Qiming Venture Partners, another Chinese venture titan, closed a $120 million fund focused on early-stage US healthcare. Qiming has been ramping up its participation in the medical space, investing in 24 companies over the 2017-18 period.

New firms diving into the space hasn’t frightened the Bay Area’s notable investors, who have doubled down in the US medical space alongside their Chinese counterparts.

Partner directories for America’s most influential firms are increasingly populated with former doctors and medically-versed VCs who can find the best medical startups and have a growing influence on the flow of venture dollars in the US.

At the top of the list is Krishna Yeshwant, the GV (formerly Google Ventures) general partner leading the firm’s aggressive push into the medical industry.

Krishna Yeshwant (GV) at TechCrunch Disrupt NY 2017

A doctor by trade, Yeshwant’s interest runs the gamut of the medical spectrum, leading investments focusing on anything from real-time patient care insights to antibody and therapeutic technologies for cancer and neurodegenerative disorders.

Per data from Pitchbook and Crunchbase, Krishna has been GV’s most active partner over the past two years, participating in deals that total over a billion dollars in aggregate funding.

Backed by the efforts of Yeshwant and select others, the medical industry has become one of the most prominent investment areas for Google’s venture capital arm, driving roughly 30% of its investments in 2017 compared to just under 15% in 2015.

GV’s affinity for medical-investing has found renewed life, but life science is also part of the firm’s DNA. Like many brand-name Valley investors, GV founder Bill Maris has long held a passion for the health startups. After leaving GV in 2016, Maris launched his own fund, Section 32, focused specifically on biotech, healthcare and life sciences.

In the same vein, life science and health investing has been part of the lifeblood for some major US funds including Founders Fund, which has consistently dedicated over 25% of its deployed capital to the space since at least 2015.

The tides may be changing, however, as the recent expansion of oversight for the Committee on Foreign Investment in the United States (CFIUS) may severely impact the flow of Chinese capital into areas of the US health sector.

Under its extended purview, CFIUS will review – and possibly block – any investment or transaction involving a foreign entity related to the production, design or testing of technology that falls under a list of 27 critical industries, including biotech research and development.

The true implications of the expanded rules will depend on how aggressively and how often CFIUS exercises its power. But a lengthy review process and the threat of regulatory blocks may significantly increase the burden on Chinese investors, effectively shutting off the Chinese money spigot.

Regardless of CFIUS, while China’s active presence in the US health markets hasn’t deterred Valley mainstays, with a severely broken health system and an improved investment environment backed by government support, China’s commitment to medical innovation is only getting stronger.

VCs target a disastrous health system

Deficiencies in China’s health sector has historically led to troublesome outcomes. Now the government is jump-starting investment through supportive policy. (Photo by Alexander Tessmer / EyeEm via Getty Images)

They say successful startups identify real problems that need solving. Marred with inefficiencies, poor results, and compounding consumer frustration, China’s health industry has many.

Outside of a wealthy few, citizens are forced to make often lengthy treks to overcrowded and understaffed hospitals in urban centers. Reception areas exist only in concept, as any open space is quickly filled by hordes of the concerned, sick, and fearful settling in for wait times that can last multiple days.

If and when patients are finally seen, they are frequently met by overworked or inexperienced medical staff, rushing to get people in and out in hopes of servicing the endless line behind them.

Historically, when patients were diagnosed, treatment options were limited and ineffective, as import laws and affordability issues made many globally approved drugs unavailable.

As one would assume, poor detection and treatment have led to problematic outcomes. Heart disease, stroke, diabetes and chronic lung disease accounts for 80% of deaths in China, according to a recent report from the World Bank.

Recurring issues of misconduct, deception and dishonesty have amplified the population’s mounting frustration.

After past cases of widespread sickness caused by improperly handled vaccinations, China’s vaccine crisis reached a breaking point earlier this year. It was revealed that 250,000 children had been given defective and fallacious rabies vaccinations, a fact that inspectors had discovered months prior and swept under the rug.

Fracturing public trust around medical treatment has serious, potentially destabilizing effects. And with deficiencies permeating nearly all aspects of China’s health and medical infrastructure, there is a gaping set of opportunities for disruptive change.

In response to these issues, China’s government placed more emphasis on the search for medical innovation by rolling out policies that improve the chances of success for health startups, while reducing costs and risk for investors.

Billions of public investment flooded into the life science sector, and easier approval processes for patents, research grants, and generic drugs, suddenly made the prospect of building a life science or biotech company in China less daunting.

For Chinese venture capitalists, on top of financial incentives and a higher-growth local medical sector, loosening of drug import laws opened up opportunities to improve China’s medical system through innovation abroad.

Liquidity has also improved due to swelling global interest in healthcare. Plus, the Hong Kong Stock Exchange recently announced changes to allow the listing of pre-revenue biotech companies.

The changes implemented across China’s major institutions have effectively provided Chinese health investors with a much broader opportunity set, faster growth companies, faster liquidity, and increased certainty, all at lower cost.

However, while the structural and regulatory changes in China’s healthcare system has led to more medical startups with more growth, it hasn’t necessarily driven quality.

US and Western investors haven’t taken the same cross-border approach as their peers in Beijing. From talking with those in the industry, the laxity of the Chinese system, and others, have made many US investors weary of investing in life science companies overseas.

And with the Valley similarly stepping up its focus on startups that sprout from the strong American university system, bubbling valuations have started to raise concern.

But with China dedicating more and more billions across the globe, the country is determined to patch the massive holes in its medical system and establish itself as the next leader in international health innovation.

Carmera, the mapping startup for autonomous vehicles, raises $20 million

Published August 23, 2018

Autonomous vehicles need more than a brain to operate safely in a world filled with obstacles. They need maps. Or more specifically, self-driving vehicles need maps that constantly refresh and can deliver important information — like that sudden lane closure due to construction or a double-parked vehicle — so they can take the safest and most efficient route possible.

This specific need has provided an opening for startups in what once looked like a locked-up mapping market dominated by a few giants.

Carmera, a New York-based mapping and data analytics startup, is one of them. The company, which came out of stealth two years ago, has now raised $20 million in a Series B funding round led by GV, formerly known as Google Ventures. Carmera previously raised $6.5 million.

The company announced the funding raise Thursday along with a few other updates, including a new feature on its autonomous mapping product and a partnership with New York City. The capital will be used to hire more talent and expand.

“We’ll be doing the most aggressive hiring we’ve ever done this next year,” Carmera co-founder and CEO Ro Gupta told TechCrunch, adding that the company will mostly focus on building out its New York and Seattle offices. Carmera, which has about 25 employees, plans to have more than 50 by the end of next year.

“The money also allows us to be more prospective than simply reacting to customer needs,” Gupta added.

In other words, Carmera can move into new markets where it suspects there will be a need in the future, not just wait for a call from their customers. One of those customers is Voyage, the autonomous driving startup that currently operates self-driving cars in retirement communities.

Carmera has an interesting business model, and one that’s likely attractive to investors looking for startups with a present-day revenue stream. The company describes itself as a street intelligence platform for autonomy. Its main product is the Carmera autonomous map, a high-definition map for autonomous vehicle customers like automakers, suppliers and robotaxis.

The twist here is that the company uses data gleaned from its other product — a fleet-monitoring service used by commercial customers with vehicles driven by humans — to keep those AV maps fresh. The fleet product is a telematics and video monitoring service used by professional fleets that want to manage risk with their vehicles and drivers.

These fleets of camera-equipped human-driven vehicles deliver new information to the autonomous map as they go about their daily business in cities. Carmera calls this a “pro-sourcing” swarm.

The startup has now added a real-time events and change-management engine to its autonomous map that Gupta contends is a major leap forward because it not only provides more detailed information to self-driving vehicles, it gives these driverless vehicles a suggested path.

In some mapping products, there’s generally a base map and then a dynamic overlay. The problem, Gupta explains, is that when things change, like a lane closure, the dynamic map only flags it, leaving it up to the vehicle to figure out what to do next.

“That works fine when humans are driving, it just doesn’t go far enough for AVs,” Gupta said. “What they need to know is how do I path plan around it?”

Carmera’s real-time events and change-management feature

The map will detect a change in milliseconds, classify it within seconds and then validate and redraw the base map within minutes, according to Carmera. The company is giving companies deploying autonomous vehicles API access to this data at every stage.

Carmera also has a “site intelligence product,” a jargon term that means the company provides spatial data and street analytics (like how pedestrians move within a particular intersection) to urban planners.

Carmera announced Thursday it will begin sharing data such as historical pedestrian analytics and real-time construction detection with New York City’s Department of Transportation. Carmera will get access to key city data sets in return. The partnership with NYC DOT follows an earlier-data sharing initiative with the Downtown Brooklyn Partnership.

With Lime teaming up with Uber, can rival Bird afford to go it alone?

Published July 10, 2018

Yesterday, we learned that 18-month-old, Bay Area-based electric scooter rental company Lime is joining forces with the ride-hailing giant Uber, which is both investing in the company as part of a $335 million round and planning to promote Lime in its mobile app. According to Bloomberg, Uber also plans to plaster its logo on Lime’s scooters.

Lime isn’t being acquired outright, in short, but it looks like it will be. At least, Uber struck a similar arrangement with the electric bike company JUMP bikes before spending $200 million to acquire the company in spring.

There are as many questions raised by this kind of tie-up as answered, but the biggest may be what the impact means for Lime’s fiercest rival in the e-scooter wars, 15-month-old L.A.-based Bird, which several sources tell us also discussed a potential partnership with Uber.

Despite recently raising $300 million in fresh capital at a somewhat stunning $2 billion valuation, could its goose be, ahem, cooked?

At first glance, it would appear so. Uber’s travel app is the most downloaded in the U.S. by a wide margin, despite gains made last year by its closest U.S. competitor, Lyft, as Uber battled one scandal after another. It’s easy to imagine that Lime’s integration with Uber will give it the kind of immediate brand reach that most founders can only dream about.

A related issue for Bird is its relationship with Lyft, which . . . isn’t great. Bird’s founder and CEO, Travis VanderZanden, burned that bridge when, not so long after Lyft acqui-hired VanderZanden from a small startup he’d launched and made him its COO, he left to join rival Uber.

Lyft, which sued VanderZanden for allegedly breaking a confidentiality agreement when he joined Uber, later settled with him for undisclosed terms. But given their history, it’s hard to imagine Lyft — which also has a much smaller checkbook than Uber — paying top dollar to acquire his company.

Where that leaves Bird is an open question, but people familiar with both Bird and Lime suggest the e-scooter war is far from over.

For example, though Uber sees its partnership with Lime as “another step towards our vision of becoming a one-stop shop for all your transportation needs,” two sources familiar with Bird’s thinking are quick to underscore its plans to expand internationally quickly and not merely fight a turf war in the U.S. (It already has one office in China.)

That Sequoia Capital led Bird’s most recent round of funding helps on this front, given Sequoia Capital China’s growing dominancein the country and the relationships that go with it. Then again, Sequoia is also an investor in Uber, having acquired a stake in the company earlier this year. And alliances are generally temperamental in this brave new world of transportation. In just the latest unexpected twist, Lime’s newest round included not only Uber but also GV, the venture arm of Alphabet, which only recently resolved a lawsuit with Uber.

Another wrinkle to consider is the exposure that Lime receives from Uber, which could prove double-edged, given the company’s ups and downs. Uber’s new CEO, Dara Khosrowshahi, appears determined to steer the company to a smooth and decidedly undramatic public offering in another year or so. But for a company of Uber’s scale and scope, that’s a challenge, to say the least. (Its newest hire, Scott Schools — a former top attorney at the U.S. Justice Department and now Uber’s chief compliance officer — will undoubtedly be tasked with minimizing the odds of things going astray.)

Lime’s arrangement with Uber could potentially create other opportunities for Bird. First, by agreeing to allow Uber to apply its branding to its scooters, Lime will be diluting its own brand. Even if Uber never acquires the company, riders may well associate Lime with Uber and think, for better or worse, that it’s a subsidiary.

Further, Uber does not appear to have made any promises to Lime in terms of how prominently its app is featured within its own mobile app, which already crams in quite a lot, from offering free ride coupons to featuring local offers to promoting its Uber Eats business.

Consider that in January 2017, Google added to both the Android and iOS versions of its Google Maps service the ability to book an Uber ride. Uber might have thought that a coup, too, at the time. But last summer, Google quietly removed the feature from its iOS app, and it removed the service from Android just last month. If there wasn’t much outrage over the decision, likely it’s because so few users of Google Maps noticed the feature in the first place.

Lime’s arrangement could prove more advantageous than that. Only time will tell. But everything considered, whether or not Bird flies away with this competition will likely owe less to Lime’s new arrangement with Uber than with its own ability to execute. That includes making its own mobile app the kind of go-to destination that Uber’s has become.

Certainly, that’s what Bird’s flock would argue will happen. Yesterday afternoon, Roelof Botha, a partner at Sequoia and a Bird board member, declined to discuss the Lime deal, instead emailing one short observation seemingly designed to say it all: “Travis [VanderZanden] is far more customer obsessed than competitor obsessed. That is a quality we look for in great founders.”

A Bird spokesperson offered an equally sanguine quote, saying that Bird is “happy to see our friends in the ride-sharing industry coalesce on the pressing need to offer a sustainable and affordable alternative to car trips.”

Scooter startup Lime is reportedly raising $250M led by Uber investor GV

Published June 5, 2018

It’s scooters all the way down this morning, with Lime also reportedly raising $250 million in a funding after a new Delaware filing this morning indicated that competitor Bird authorized the sale of up to $200 million in shares.

GV (formerly Google Ventures) is leading this round, according to the report by Axios, as the massive land grab for a stake in the scooter wars continues to heat up — whether that’s funding or actual scooters piling up on the sidewalk. Both companies have faced pushback from some city regulators (probably on the basis of tripping over them and falling on your face), but it still means the venture community is still salivating over potentially the next major mode of metropolitan transportation. Most venture investors in the Valley argue scooters make sense for short trips throughout areas that are just too far to be considered a trek, but too close that it would be a waste of time and money to call a rideshare like Uber or Lyft.

Given that Uber exposed a massive hole for easier transportation in major metropolitan areas — and potentially replacing cars in those areas — getting into the next big transportation revolution is more than tempting enough for firms like GV (which is also an investor in Uber). Lime was previously reported to be seeking up to $500 million in funding and was taking meetings with some major firms in Silicon Valley over the past few weeks. It might not get that, but a $250 million influx might be plenty to try to continue to ramp up its business and get more rides on board. Axios is reporting that Lime has told investors users have taken 4.2 million rides and each scooter gets 8 to 12 rides per day.

Still, while it’s not $500 million, there’s plenty of interest in the on-demand scooter business — challenges of keeping them charged and intact included — that Bird has authorized the sale of up to $200 million in new shares at a $1 billion valuation just months after its previous round. So it might not be surprising if this, too, ends up as kind of a rolling process where Lime eventually gets all the capital it sought.

Marketing data startup Segment raises $64M

Published July 13, 2017

Segment co-founders Segment has raised $64 million in Series C funding, with the Y Combinator Continuity Fund and GV leading the round. The continuity fund is the $700 million fund led by former Twitter COO Ali Rowghani. It selectively writes checks for YC startups as they raise bigger rounds. As part of the deal, Rowghani will be joining Segment’s board of directors. In the funding announcement, he said… Read More

Cockroach Labs announces $27M Series B and enterprise tier for its reliable database

Published May 10, 2017

“A database that replicates itself and is meant to survive” — that was the connection that Cockroach Labs CEO Spencer Kimball made between the startup’s memorable name and its value proposition. Despite entering a crowded market, Cockroach has been able to gain the favor of some of the best known VCs in tech. Today’s $27 million Series B is being led by… Read More

Abundant Robotics rakes in $10 million for apple harvesting robots

Published May 3, 2017

GV (formerly Google Ventures) is leading a $10 million investment in Abundant Robotics, a company building apple-picking robots that could eventually be adapted to harvest other fruits. Joining GV in the round were BayWa AG and Tellus Partners, along with the company’s earlier backers Yamaha Motor Company, KPCB Edge and Comet Labs. Read More

Google partners with VCs to host its own machine learning startup competition

Published March 10, 2017

On the heels of acquiring data science community Kaggle, Google is launching a machine learning competition of its own for startups. Google is targeting early-stage companies taking an innovative approach to machine learning. The competition is being run in partnership with seven venture capital firms. Read More

Farmer’s Business Network cultivates $40 million to help farmers buy seeds at favorable prices

Published March 7, 2017

GV (formerly known as Google Ventures) and DBL Partners co-led a $40 million investment in Farmer’s Business Network, Inc., the company announced on Tuesday. FBN started as something of a professional network for farmers and other agronomists. It allowed people working in agriculture to anonymously share information about what they were paying for seeds, fertilizers and other… Read More