My personal journey from IT to BIO from an investor point of view

Transcribo, más o menos, lo que fue mi ponencia en BioSpain2014 (Congreso internacional celebrado en Santiago de Compostela del 24 al 26 de Septiembre) donde fui invitado por Asebio para participar en una mesa redonda sobre “Financing Convergent Technologies”.

BioSpain 2014. September 26, 2014. 

My IT Career

23 years ago, I finished my studies in Telecommunication Engineers School at Polytechnic University of Madrid. In Spain this degree covers a mix of computer sciences, electronic and theory of information applied to communication problems.

Despite of studying two communication specialties; I’ve worked most of my career in software development. I became an entrepreneur and an employer, I studied an MBA… and right now, I own and run MediaNet Software, a company with more than 200 software engineers across three countries developing software for very large customers in the banking, telecommunication, energy, insurance, internet industry… MediaNet Software, will be soon a 20-year-old organization, and also the heart and beginning of some other spin-offs that sum up to other 100 specialized professionals in the IT field.

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Internet Investor

For the last 10 years, I founded, promoted and supported some other initiatives with a variety of Internet business models such as:Mercadeuda, matching offers and demand of commercial debt between companies; Ready4ventures, a platform to facilitate connections between investors and entrepreneurs; Centralia, a common market place for procurement and admin services for neighborhoods’ communities; Belbex, a B2B Real State networking platform.

Another company I cofounded was BuyVIP, an ecommerce platform with a particular business model, that today is known as “private sales”. This company grew in 5 years (2006 to 2010) from 0 to 100 M€ of revenue per year, operating in 7 countries and with more than 5 millions registered users and buyers. In November 2010, we sold BuyVIP to the world’s ecommerce leader Amazon.com

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Back to the University 20 years after

4 years ago, with a very solid background and experience as engineer, employer, entrepreneur and  investor, I decided to become a student again. I got back to academic mode to try finding new fields of knowledge to develop by joining a 2-year Master degree in Biomedical Engineering at my first University.

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The Master was a mix of several disciplines. Some of then like Molecular Biology, Anatomy, or Physiopathology… were very strange to me as well as fascinating. Others like Medical Informatics, or Artificial Intelligence seemed more familiar to me.

Some of the subjects were held at Biology School, other (like biomechanics) at Industrial Schools, other like “new materials” at Civil Engineering School (known as Caminos, Canales y Puertos in Spain), other at Computer Science School….

Other subjects, such as Medical Imaging, Electromagnetic Fields effects, Biofotonic, Assistive Technologies, Biomechanics… were hold at the Telecommunication School where I studied 20 years before. In fact, some of the teachers were the same professors I had two decades before.

What is even more amazing is that, the same professors, still use almost the same mathematics, before focused on a problem of multiplexing information for communication through a wire, now focusing on a new algorithm design for a Computed Tomography or Magnetic Resonance Medical Imaging Acquisition.

The same machine learning patterns that before were used to control or guide a vehicle across a road, now are used to try to build an artificial pancreas to control the right level of insulin or glucose.

The same software of simulation that before we used to calculate the load or throughput of a electronic system, is now use to simulate virtual cells fighting with a virtual bacteria infection…

Practically the same technology used in the 80s and 90s for semiconductor design, is now the base for biosensors, and the technology designed for ink-printers 30 years before were the starting point for the design of CGH (comparative genomic hibridation) arrays for DNA studies.

The massive sequencing of genes is not possible without new informatics and big data approaches and, in fact, are similar to map-reduce philosophy used some years ago for crawling the web with algorithms like Google Search Engine.

Why we can address now bigger goals with the same technology?

Compare the titles of my Final Project in Telecommunication Studies in 1992: “Using of Neural Networks for guiding robots” with the new Final Master Thesis in 2013: “Using complex network theory for analyzing MEG (magnetoencephalography) signals of hyper sensible patients to the Electromagnetics fields”

The Moore Law we saw in IT for many years, has enabled to use computer science first, for simple problems such as accounting, banking systems, to more complex problem for example with scalability challenged introduced with Internet, and now we are daring with Health and Medical disciplines: from helping us at micro simulation of physics of atoms designing new molecules before testing them with real molecules and chemical reactions, or to understand macro models of how spreads a particular epidemic or how to extract useful information and knowledge for all the medical patient records in, not only in a Hospital Information System, but also in a whole Public Healthy System or even in massive worldwide clinic studies.

And that Moore Law in IT is nothing compared with the speed we saw the last 10 years of the DNA sequencing race (for example) where we can find out a quadratic exponential law.

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BioEngineers are mixing the electronic with the chemistry and so they are combining both improvements adding the power of Moore Law with other biological exponential laws that finally yield in a double exponential progress.

Is now the right moment for VCs to invest in these new raising bio-ventures?

Nowadays, at the pure Internet sector, where I come from, there is a lot of money in Spain for investing in new projects (about 1 billion euros of Family Offices, VC, and different kinds of Business Angels).

Although there are many Internet ideas of business plans fed by the apparent low entry barriers of internet technologies, by the interest of promoting self employment and also, because the entrepreneur fever encouraged in business schools, etc…  However, there are only a few interesting business project to investi on: not from the viability of the business but from the investor and probability of the return of investment point of view.

In my humble opinion, during these last two years, I’ve been actively seeking more projects in some specific BIO subsectors, where I believe there is a better opportunity for investing.

So, I founded and funded HealthyTech, as a private fund to invest on some earlystage projects related with biomedical tecnologies, bioTIC, bioinformatics, and so. During last 2 years, I’ve invested on 2 projects for a total capital near to half a million euro.

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One of then is MedimSight, offers the power of cloud computing for processing medical imaging diagnoses. I think in next 10 years, having a MRI or CT equipment without the cloud processing offered by a service company like MedimSight, would be equals to having today a computer without an internet connection.

The second one is NIMGenetics, a well consolidated spanish company that’s leading the medical diagnosis with genetic tests. The company has recently closed an increase of capital round of more than 1 million euros in order to address properly its plans for international business development.

Different criteria for evaluating Internet and Bio investment opportunities

Coming from Internet ventures, you have to adapt the metrics and priorities of some parameters for the evaluation of investments.

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For example:

– The timing is different: internet times are faster…in a internet ecommerce project you know if the business model run or not in one only or two years. The same for obtaining the comercial ratios of capturing new customers…

– The entry barriers. Here, you need a knowhow and a team that you have to build up with several years. Meanwhile, at internet ventures, the entry barriers are very low. Practically, everyone come build a business model, powerpoint style, in a long weekend or as a practice exercise finishing your favourite MBA.

– The competitors. Because the low entry requirement for new competitors in the internet, you can discover 3 new competitors with your successful idea and business next week. However, as much as you need to start a business model an this sector, as much as you can take advantage of your specific knowhow compare with the abilities for your new competitor that probably you have been following for some months or years across the scientific congress  or publications of the research group behind the new initiative.

– The IP (Intellectual Property) or Patents are now valuable of have a reduced value at the Internet models where the key factor, the more important driver is critical mass and ability to speedy execute the deployment of strategies for capturing the more market share as possible.

Mixing all this different variables, I believe that the good news for this sectors venture investments is that, if your have a differential knowhow, a team focused on business, a mix of Scientifics and managers that speak the language of money… your investment can reach good multipliers (such as internet biggest projects) but, more important, the probability of multiply your investment by 0 (Zero) is quite small here than in the next fashion social network you can imagine. So, the total return, averaged by all your portfolio, I guess that could be better at Biotech than at the Internet Startups

BioEconomy BigOpportunities?

Studying the last centuries and last years of economic revolutions, we see the best opportunities during periods when, a new technology offers an exponential growth during some decades.

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I believe that, investing in BioTecnology, BioInformatics, BioPharma, BioMedicine, BioEconomy or BioEverything for the coming decades, is like investing in microelectronics in 60s,  in microcomputers in 80s or Internet at the beginning of this century.

I hope so! ;-)

PD: Thanks to my editors :-), @enriquegoizueta and @eliavallejo, for their help preparing this post.

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