Interview with Dr. Jenny Rooke: Investor in Caribou Biosciences

In our seventh episode of AngelList Radio, we interviewed Dr. Jenny Rooke and learned how to invest in life sciences startups.

Dr. Rooke is a founder of 5 Prime Ventures and has invested in companies like Caribou Biosciences, Zymergen, and Zephyrus Biosciences (acquired by Bio-Techne).

Here are a few of my favorite lessons from this interview:

  • In life sciences, you need more successful investments to get good returns. 
    Most successful life sciences companies are acquired for $200-$500M, and you don’t get many of the multi-billion-dollar exits that you find in traditional tech investing. Since the wins are smaller, investors need more of their investments to succeed.
  • You need to be able to evaluate the technical risks, or follow someone who can. 
    Most life sciences startups are inventing something new. You should be able to evaluate the underlying science if you want to make good investment decisions. Lots of Dr. Rooke’s syndicate backers are excited about synthetic biology, but lack either the skill or the time to research a startup’s technical claims.
  • With domain expertise, you can get great returns investing in unpopular markets. 
    Zymergen builds biotech for industrial applications and was turned down by several VCs that were focused more on health-care applications (where there were many historical examples of successful biotech startups). At 46:26, you can hear the story of Dr. Rooke’s investment in Zymergen’s seed round. The company used that money to help prove their market opportunity and went on to raise a $44M Series A just 18 months later.
  • In many markets, an investor’s network is a big part of their competitive advantage. In less popular markets, domain expertise becomes more important.
  • Apprenticeship is the best way to learn venture. 
    In her early venture roles at Fidelity Biosciences and the Gates Foundation, Dr. Rooke was able to quickly get the opportunity to source deals, do technical and business diligence, and negotiate terms with startups (5:10).
  • Dr. Rooke found that experiential learning was the best way to improve as an investor. Working for VCs helped her avoid costly mistakes while she was gaining experience (14:18).

Learn more about Dr. Rooke’s investments on AngelList and follow her on Twitter.

Here’s a full transcript of the interview:

Tyler Willis: [00:10] Hi, everybody. I’m Tyler Willis. I am an entrepreneur and an angel investor. This year, I am the host for season one of AngelList radio. In our first season, we’re interviewing different investors, trying to learn how they invest and what’s made them successful.

[00:22] Today, I’m joined by Dr. Jenny Rooke. Dr. Rooke is a life sciences VC with a focus in life science technology platforms and synthetic biology. I’m pretty interested in talking with her about some of the synthetic biology stuff, given that that’s so hot and such an interesting market right now.

[00:36] She’s the founder and managing director of 5 Prime Ventures. We’ll talk a little bit about what that is. Prior to founding 5 Prime, Dr. Rooke worked at the Bill and Melinda Gates Foundation. She worked in investments at Fidelity Biosciences, and she worked on biosensor technology for defense markets. She’s got a PhD in genetics and a bachelor’s degree in physics with a focus in computer science.

[00:57] Obviously, that’s given her an incredible background in life sciences and allowed her to focus her investment thesis very, very deeply.

[01:03] We’ll talk a little bit about how that differs from, perhaps, some of the more popular what’s called spray-and-pray type investing, at least derogatorily. We’ll talk with her a little bit about how she’s able to so narrowly focus her investments and still see what looks to be outstanding success. We’re lucky to have you here. Thanks for giving us the time.

Dr. Jenny Rooke: [01:22] Glad to be here.

Tyler: [01:23] Before we get started, maybe you just start with how did you come to this point. How did you get into investing and into, specifically, life sciences investing?

Dr. Rooke: [01:33] I was working in a genomics technology start-up company in the Boston area in the 2000s. I was the first business hire to a very technical, deeply scientific multidisciplinary team. I helped build that business. It was a fantastic entrepreneurial experience. Loved it, and was really just looking for my next early stage start-up to help build in the same way.

[01:56] I believe it was actually a recruiter who said to me, “Have you thought about venture?” The answer at the time was really no, even though I had some familiarity with venture because I had helped raise our venture rounds for the company, but hadn’t asked myself, “Do I want to be in that role? What do these people actually do who show up once a quarter, sit in the boardroom, and ask hopefully intelligent questions?”

[02:18] I began speaking with our Series E lead in Fidelity Biosciences and said, “I’m not looking to interview. I really want to get out of Boston, I’d like to get to the West Coast, but what is it that you actually do every day?”

[02:32] In speaking with them, exploring the space, and reading about venture, I got very excited about the idea of moving from the serial process of building companies one at a time as an entrepreneur to shifting to more of a meta parallel process where I was working with many, many entrepreneurs in parallel as a partner to help them get the financing they need but also to hopefully succeed in building their businesses.

[03:00] It was a transition for me from the inside business building perspective to outside across businesses and how to take that role.

Tyler: [03:11] When you talked to Fidelity, what were the things that you heard that you thought, “Oh, that sounds really interesting?” Or even what were the things that gave you pause about maybe going into venture?

Dr. Rooke: [03:20] I was very excited about the idea of seeing a broader set of businesses, business opportunities, business problems, technologies, teams. I had learned so much from this one experience of building a company, and I really wanted to accelerate that. I was attracted to the idea almost in a kind of classic, business school, case-based approach to learning.

[03:43] I will literally see thousands of companies over a couple of years, and I think I’ll be able to draw out patterns, and truths, and knowledge about building businesses that would take me many lifetimes to learn if I were doing it in the trenches doing it one at a time.

[03:59] That opportunity for learning, both for my own sake, whether I wanted to maybe go back to building businesses, but also in being able to offer that knowledge and wisdom to other entrepreneurs who are going through what I had just gone through. [laughs] That was appealing.

[04:15] I also read a book at the time called “Done Deals,” which I definitely recommend to people who are interested in perspectives from some of the pioneers in venture. At the time the line between angel investing and venture investing didn’t exist because these were individuals creating venture investing.

[04:36] Had a lot of stories about individuals who, perhaps, had come from entrepreneurial space and began investing capital and working with other entrepreneurs. It was incredibly inspiring for me to think about that role as supporting other entrepreneurs and helping people succeed in this complementary role to the entrepreneur. I have since found that that perspective was, perhaps, a little idealistic. [laughs]

[05:07] We can talk about the disillusionment of the difference between venture as partner-to-entrepreneur and venture as finance job. It’s somewhere in the middle, but I definitely recommend it as a way to get rapidly a bunch of the stories from people who got into investing and essentially crafted this industry that we work in.

Tyler: [05:28] You took the job at Fidelity. What was your first job in venture like? You had never done investing. Were you focused on research? Were you focused on analyzing companies, doing investment deals, or supporting portfolio companies?

Dr. Rooke: [05:38] It was a pretty comprehensive experience. I think this is often the case with venture. Most venture firms are reasonably small, have two, three, or four partners and maybe two, three, or four associates and principals. There’s an element to which everyone does everything. They source deals. The look deeply at diligence, both the technical and business sides.

[06:00] As they get more experienced and have the capabilities, they enter into the negotiation around terms and actually closing the deal. You can argue whether that comprehensiveness is efficient, but it’s how it really works.

[06:14] It was a great experience for me learning the end-to-end process of thinking about a space, developing a thesis, looking at companies, doing the deep diligence, and then driving a relatively small proportion of them to actual deals.

Tyler: [06:27] You were at Fidelity for a couple of years and decided to leave after about two years. What drove that decision, and where did you go from there?

Dr. Rooke: [06:34] I had been there two years and, at the two-year mark, was, I think, finally getting a clue as to how the whole thing worked. [laughs]

[06:41] Then an opportunity arose to go spend time at the Gates Foundation in a way that I thought would make me, frankly, a better investor over time, partly because the way that the foundation was asking its questions about where to deploy capital had some pretty different both constraints and opportunities versus conventional venture.

[07:02] Venture, of course, is focused on making money, and that typically means focusing on US markets often. It tends to be pretty local, often the companies that are right around your firm. By contrast, the Gates Foundation had these crazy 30, 40, 50 year goals — eradicate malaria — and had a scope that was much more global in both the resources and the problem sets they were trying to solve.

[07:29] I was very intrigued what that would do for me as an investor. If I changed those parameters, how would that make me think about diligence, about technical risk, about managerial risk, about capital requirements. It was a way to change some of the key elements of the game of capital formation and observe what that does to one’s strategy. I was very intrigued by that.

Tyler: [07:52] How long were you at the Gates Foundation for?

Dr. Rooke: [07:53] About three and a half years.

Tyler: [07:55] From the Gates Foundation you went directly from there into founding 5 Prime?

Dr. Rooke: [07:59] I did. After about three and a half years there I felt like I had accomplished what I had come to do, had gotten some great work done in the foundation’s programs, helped set up their investing practice, actually, but knew that my first love and real environment in which I both flourish and get excited is back in the start-up world.

[08:20] We can talk about reasons that’s the case, but I wanted to come back to that world of small teams, small companies tackling incredible problems with amazing technology in a for-profit container. I think there’s a lot of advantages to that model, and there’s no better place to do it than here in the Bay Area. So I packed my bags and moved to San Francisco.

Tyler: [08:41] I want to take you back a little bit. I want to actually go through each of those experiences separately, because I think there’s probably some real interesting learnings in all of them. Then we can talk a lot about 5 Prime.

[08:50] I want to go back a little bit to the Fidelity experience, because a lot of the people listening I expect to be interested in learning to invest. Maybe they’re interested in venture jobs. They’re trying to figure out if they should be an angel investor or try to go work at a venture capital firm.

[09:04] Let’s talk about your transition into venture, because unlike some of the other guests on the show, you went into venture first and learned the business what I would consider the traditional way and then have now utilized that knowledge into founding your own firm and being very active on AngelList and that type of thing. In your time at Fidelity you were an associate there. Is that correct?

Dr. Rooke: [09:28] Correct.

Tyler: [09:27] For folks who are less clear about how venture firms generally work, what are the paths? What are the types of roles at venture funds? Associates versus principals versus partners, how do those things work inside of a traditional venture fund?

Dr. Rooke: [09:41] There can be many answers to that question. In fact, there are probably at least as many answers as there are firms. They tend to be very personal and tend to have their own culture. They’ve been called mom and pop shops.

[09:54] There’s not one answer, but generally speaking there tend to be a small number of partners who have the fiduciary duty for the fund, who have generally been actively involved in raising the fund, and who expect to be leaders in the firm over the cycle of many funds, probably. They are really on the line for the investment decisions.

[10:20] In order to make them more efficient, support them in their work, there tend to be others who are, in some ways, in an apprentice role to the partners. That can be called associate, senior associate, principal, venture partner.

[10:33] There are many different flexible titles, but generally it means someone who is coming along in their development as an investor, learning the tools of the trade, developing their own portfolio, developing their own investment thesis, and gaining the experience that’s required to, hopefully, be successful at this. [laughs]

Tyler: [10:52] There’s a theme that bounces around the Valley every couple of years that’s kind of derogatory towards associates. You’ll hear people tell founders, “Don’t spend time with associates. It’s a waste of time, blah, blah, blah,” and similarly, people who are thinking about going into venture, “Well, are you going to be an associate, or are you going to be a partner?”

[11:11] What was your experience like as an associate? What were the good and the bad? If someone was thinking of taking a job there, what would your advice to them be?

Dr. Rooke: [11:19] I think the associate role is a great opportunity to learn this esoteric, fascinating, exciting role of investor while being protected from your own mistakes, [laughs] in the first few years, when there’s just so much to learn, and frankly, infinitely many ways to waste money. It would be a very expensive thing to do on your own dime, paying for your own school.

[11:47] The associate role, for the right person who’s at the right point in their career, especially if it’s in an outstanding firm where you respect the partners and their approach to entrepreneurs, and their approach to investing, I think it’s a fantastic model.

[12:03] I certainly am very grateful for that experience, have enormous respect for the way in which the partnership at Fidelity Biosciences do their investing. I feel very privileged to have learned the craft from a team who is so very good at it, frankly, and brings such integrity to it, which is very important to my value system.

[12:23] I would say for the right opportunity, it’s a fantastic chance to rapidly come up to speed on the investing game and the investing process, build great networks, get a track record, etc., without necessarily having to pay the ticket for risky angel investments.

Tyler: [12:46] How do really good associates make the best of their time there? It’s a two-year, is kind of a normal period of time that associates take, I think, generally, at firms, so say somebody’s there for two years. How do they make the most of that experience?

Dr. Rooke: [13:01] Hard work. [laughter] I think it’s similar to making the most of being an associate at one of the big consulting firms, which I was, as well. The same advice applies, which is be somewhat open-minded about what you think you’re going to focus on, because you’re probably going to learn something that maybe wasn’t even on your radar when you started.

[13:22] Be very willing to jump in, help out, roll up your sleeves. It’s such a highly leveraged learning opportunity. The more time you can put into it, the more thought you can put into it, the more that’s going to pay off.

[13:33] Find mentors. That’s always the case, right?

Tyler: [13:38] You said a couple of things in the last four or five minutes. You called it an apprenticeship, first. You talked about finding mentors. This is, I think, the classic way of learning the investing game, is to find a mentor, and be an apprentice, either work your way up through a firm, or work very closely with a partner, or something along those lines.

[14:01] How did you feel like you came down the learning curve on venture investing? I assume this kind of mentorship model or apprenticeship model was very impactful for you. What was your own personal experience with that?

Dr. Rooke: [14:13] It was a very effective model for me, and this is coming from someone who, I’m a world-class classroom textbook learner. Generally, if I need to learn a new skill, if you’ll give me the instruction manual, maybe a YouTube video, I will self-teach, and I’ll be there.

[14:32] It was very surprising to me how hard it was to get a clue about venture, because it is so complex, it is so nuanced. There’s so many moving parts. Each scenario’s different. A little dismaying. I kept wanting someone to give me the textbook. “Where’s the class?”

[14:52] What I learned is that there’s no substitute for experiential learning in this space, which is the case for, I think, anything that’s a truly complex skill, with much uncertainty and partial information and human dynamics. It’s like learning poker as well. [laughs] You just have to do it, because it’s so complicated, and there are aspects that are very hard to teach in any kind of reductive, textbook way.

Tyler: [15:18] Can you give us an example of, if you remember, any of the early mistakes that you made that either you were shielded from or saved from by a mentor, or maybe even ones that you weren’t?

Dr. Rooke: [15:28] I think it’s a testament to this idea of the power of the apprenticeship, that I can’t actually come up with a terrible mistake that I made in the first year, and it’s not because I didn’t want to. If there were companies I was excited about, I did the deep work, the science was awesome, I couldn’t understand why we weren’t making the investment. I felt like, “I thought this was supposed to be risk capital. Why aren’t we taking risks?” [laughs]

[15:55] Certainly, had I not had the benefits of team, and the team dynamic of discussing opportunities and their pros and cons, and the benefit of collective experience, I definitely would have made some bets that now I would have a long list for you [laughs] of ways that I spent a lot of capital, and why those didn’t work, which just simply were not obvious going into it without, again, that kind of collective experience for what can go wrong, and the collective problem solving, as well, for where to prioritize.

Tyler: [16:31] You said something there that I hear all the time, talking to new angel investors, new people that work in venture, and especially entrepreneurs, which is, “This is supposed to be risk capital.” These folks, these guys, usually they’re like old white guys. “These old white guys are just…They’ve taken all the risk out of everything. There’s no…They’re looking for something that’s almost impossible to attain.”

[16:55] The inference there is that that is they’re somehow doing their job poorly. They’re missing out on potential upside, or they’re not playing the role in the ecosystem that they should play.

[17:07] How do you think about balancing between those two things, about acceptable levels of risk and taking a bet early, and really helping a company that may otherwise not have succeeded, or succeeded as fast or as strongly, but balancing that against the idea of, “There are some risks that are too much to stomach”?

Dr. Rooke: [17:27] The question of risk is such an important and fascinating one, and the answers around striking an appropriate balance between risk and return, and risk management and portfolio management, frankly different for every investor and every flavor of capital, which is why we have a capital formation ecosystem, and not just one box.

[17:47] Part of what I’m super excited about with AngelList is that it makes it possible to customize different kinds of capital, different kinds of investors who can position themselves in the appropriate place on that risk-reward spectrum. That’s why I’m there.

[18:02] I have an appetite for technical risk that some might consider imprudent, but it really excites me. It also plays to my strengths, as you mentioned in the intro. If I have an advantage, it’s around really digging into the science and trying to understand whether it will work, and more intelligently, perhaps, handicapping that than another investor might.

[18:22] That’s important to me, is being able to go early and go risky on a technical perspective. Other investors might not feel comfortable with that kind of risk, but feel great because they understand consumers, and so they’re going to take consumer risk.

[18:36] I couldn’t tell you what a consumer wants, to save my life. It’s terrifying to me, so I don’t take those kinds of risks. I think there are others who are great at it. There are different flavors of risk and different kinds of capital that have different objectives.

[18:50] That was, again, one of the things that attracted me to the Gates Foundation is it was very high-risk capital, because the objectives were so beyond what we can currently do with today’s technologies that it required taking enormous risks, risks that I felt like I couldn’t responsibly take with LP capital as a venture investor.

[19:10] I wanted to scratch that itch. I wanted to make some “so crazy it just might work” science bets, in some really critical areas, and I got to do that. For me, coming back to the startup world and the Seed, Series A range, which is where I live, which is earlier stage than most venture, is the right spot for me in that risk balance.

[19:31] It might mean that I will not make as much money as other investors who have said, “No, there’s still way too much risk there. We’re going to wait until some of the technical risk has been removed.” I totally respect that. That’s probably the right answer, [laughs] but I’m delighted to have found a place in the ecosystem, a niche that is the right balance for me in terms of risk and reward.

Tyler: [19:55] Let’s talk a little bit about your investment thesis, and how you operate. While you say that you kind of do take a lot of risk by going early, unlike, I think, a lot of people who are in Seed-stage investments where they say, “It’s all risky. We don’t know if it works out or not, but there’s a lot of upside, so we can make 10 bad bets and one Uber, and we’re fine.” I mean, you could make a thousand bad bets and one Uber.

[20:20] A lot of folks, I think, are mitigating the early stage risk by doing lots of deals, and you are almost categorically doing the opposite. You’re doing one or two deals a year, I think, is the…maybe three or four, but it still seems kind of small.

Dr. Rooke: [20:36] Right.

Tyler: [20:36] You seem to be focusing very deeply on building a relationship with a small number of portfolio companies, and really nurturing them up. Tell me a bit more about your thesis. Why, even if it’s such a risky stage, why are you going so deep in these individual companies rather than building more of a portfolio?

Dr. Rooke: [20:55] In some ways, it’s the venture model of investing, in life sciences, which is different from the venture model in tech, applied to early stage. The belief there is that it’s the same kinds of risk and the same kinds of portfolio management that’s required for venture, just on a smaller, earlier scale. It is also my ambition to continue scaling my practice, a larger and later stage, so it’s the same toolkit for me.

[21:27] In tech, I’m not an expert, but my understanding in tech is it’s quite reasonable to say, “Well, we just don’t know what’s going to work.” Part of it is that magic of, “What is the market going to say? What is the consumer going to want? What about the competition?”

[21:44] The equation is different in life sciences or heavy technology investing, where the initial risk around whether the solution or technology is going to work is the big risk, and that’s not a coin flip. That’s not a mystery, a mysteries of the universe-type mystery, but there’s a belief as a scientist, as an engineer, one can look at the data, and make some intelligent guesses about the likelihood of those things working.

[22:16] That doesn’t get better by making many of them. You don’t do it by saying, “Well, it might or might not work. Let’s invest in a bunch, and then see what works,” because the fact is that in heavy technical investing, most of it’s not going to work. You could easily build a portfolio of a hundred shots on goal in life sciences, and zero will actually physically work out.

[22:42] If you don’t bring some level of technical diligence and investigation to the science, “Does the science work? Is it likely to work? Is it likely to solve the problem that we want it to?”, it would be very easy to, frankly, waste all your money, and in life sciences and these heavy technologies, we tend not to have Ubers. We don’t have many billion dollar exits, unless you’re talking about therapeutics. That’s kind of the rare case, but I don’t specialize there.

[23:15] The portfolio thinking is more that there will be, rather than 1 out of 10 will work, and it’d better be an Uber, probably 5 to 7 out of 10 will work to some extent, if we’re smart about making those choices. They might not be billion dollar exits, but they’re going to be in the $200 million to $500 million exits, so you need to stack up more wins, and that means being more diligent in the early stages.

Tyler: [23:46] In life sciences, it sounds like, there’s a much closer analogy to a late-stage tech investing, where you’re targeting, perhaps, lower multiples of a particular outcome, but a much higher percentage of survival and success.

Dr. Rooke: [24:03] I think that’s accurate.

Tyler: [24:06] When you’re looking at these kind of early-stage companies, how is it that you can spot something that looks like it’s going to be a technical success earlier than a Series A around life sciences VCs or other folks that are competitive in your market?

Dr. Rooke: [24:23] Some of the answer might not come down to capability, but just efficiency. If a person is managing director of a $300 million fund, they need to be putting big chunks of money to work, and they need to be doing it with some amount of efficiency. That means there’s a parade of opportunities coming by, to put that capital to work in an intelligent way.

[24:46] When something comes along where the science is uncertain, and it involves digging deeply into the data and getting some expert opinions on whether it’s going to work or not, it’s just easier to, perhaps, move on to the next opportunity.

[25:04] I think many investors in life sciences have quite rationally made the choice to wait that part out, and wait until some of the technical risk has been retired, where some of the technical risk has been retired, and now it’s time to put bigger chunks of capital to work to drive that into development and into the market.

Tyler: [25:24] Almost a pipeline, you’ve got kind of a co-opetition of it, and so you’re serving as a feeder into them, so it’s naturally symbiotic.

Dr. Rooke: [25:34] Right, and some of my most important customers are the venture firms that I’ve worked with over the last decade, who I know what they would say to this company in the Series A meeting, and what they will need to see, and so my job is to work with these earlier stage companies to make sure they’re ready for that next round of financing.

Tyler: [25:50] This is a theme we’ve heard a bit, about how angels add value, which is helping people understand, “What do I need to do to sell this in the next round?” What is the threshold for life sciences Series A? What are Series A VCs looking for in life sciences?

Dr. Rooke: [26:06] I would say there are some fairly well-established norms about what to look for for a Series A therapeutics company, which is still, by far the majority of life sciences venture-backed companies.

Tyler: [26:19] Therapeutics, for folks not familiar with it?

Dr. Rooke: [26:22] Therapeutics — drugs, drugs that humans would take to cure or treat a disease, which is, if you draw the pie chart of life sciences or healthcare investing, well over 50 percent is in therapeutics, where a company has a molecule, an antibody, a chemistry, that they’re hoping to put through clinical development, put into humans, see if it cures the disease, take it on the market.

[26:46] Those kinds of assets are, we have models and patterns for how risky those are before they go into humans in Phase I trials, Phase II trials, how much they’re going to be worth once they get to the market.

[27:01] It’s possible to actually come up with some pretty robust models for how strong the data package needs to be going into the Series A, what’s the appropriate valuation for an asset at that stage.

[27:13] That said, I am much more interested in life sciences companies that don’t fit the traditional boxes. That’s where I spend my time, the other category. There aren’t strong patterns for what these kinds of companies need to show to an investor to get Series A financing, because there aren’t a string of successes and failures ahead of them that they can point to and say, “This is the pattern. We know this works.”

[27:43] That means you have to appeal to more general principles about what it takes to get Series A financing for life sciences companies, and I would say generally speaking, it helps to have some clarity about what the product will be and what the market is, and some kind of data that supports that the science or the technology is going to work to deliver that solution.

[28:06] The stronger those two things are, the better position you’re in, but it’s a little bit more fluid for these kind of other category companies than for a therapeutics company.

Tyler: [28:15] Got it. For the entrepreneur in your portfolio that’s listening to this, what would they say are the other ways you help them, that working with you is value-add to the company?

Dr. Rooke: [28:26] I would say this advantage I speak of as an investor of being able to go deeply into the science and the technology, and really understand what’s happening there, what the challenges are, what the power of the innovation is. That helps me make better investment decisions.

[28:42] It’s also something that I can apply to the company’s challenges around communicating what they’re doing to other investors, to potential employees, to collaborators and partners, so translating, going from that deep science lens and translating that into investor speak, to pitch decks.

[29:03] I have very strong PowerPoint skills, unfortunately, and I’ve certainly helped companies put their pitch decks together. I think they would say that that set of skills around translating the science into commercial opportunity helps them articulate how they are doing that.

Tyler: [29:22] Let’s talk a little bit more about the education of investors, because again, I think a lot of the people listening are in that stage where they’re starting to learn this. At Fidelity, you were a Kauffman Fellow, right?

Dr. Rooke: [29:34] Correct.

Tyler: [29:35] For people unfamiliar with the program, Kauffman Fellow is…Can you give it a quick explanation?

Dr. Rooke: [29:41] Sure. The Kauffman Fellows program is a two-year professional development program for investors who are early- to mid-career, who are looking to accelerate their professional development, their leadership development, to really emerge as leaders and independent thinkers in the investing space or capital formation space.

[30:03] The program’s about 20 years old. I would say in its early days, reflected the somewhat more homogenous venture capital world. These days, there’s an enormous diversity in each class, which has about 35 to 40 Fellows who are coming from venture capital firms, from corporate venture, from angel investing, from even government agencies who are focused on economic development.

[30:29] It’s an amazing cohort of individuals who are thinking about how to develop their skills in capital formation to have the impact that they want to have in the world.

[30:38] For me, that was an excellent complement to my day-to-day, in-the-trenches learning at Fidelity as an associate, to step away from that once a quarter with a cohort of others who were also going through their development as investors and to learn from each other.

[30:54] I would say that that principle really would apply to anyone who’s looking to get into investing or grow as an investor, is find cohorts of peers and mentors where you can share questions, challenges, learnings, etc. It’s a great way to create almost that apprenticeship environment for yourself, and a way to accelerate your learning and make sure it’s not all on your own dime.

Tyler: [31:21] What’s the best way to train a new investor? Let’s say that you had to do succession planning for 5 Prime. How would you go about taking somebody who was raw and intelligent, and understood the science, but didn’t have any investing experience? How would you go about getting them up to speed over the course of some period of time?

Dr. Rooke: [31:40] That is a really hard question. It is hard enough to learn this job, and I think humbling to think about how to take on that responsibility of training someone else. I would definitely focus on the case study model, so that would be as rapidly as possible, giving the fledgling investor exposure to as many investing cases or scenarios as possible.

[32:08] That would be within the practice of the firm, as well, but I would also encourage them to find opportunities to be exposed to other people’s examples.

[32:18] I think that the availability of tools and information and first-hand experiences that are now on the Web in one way or another, including this podcast, as well as some excellent blogs that are out there, and videos, that would be a way to accelerate that that wasn’t available to someone trying to learn investing even a decade ago. That’s an exciting addition to the arsenal in training.

[32:45] Then, like I said, I would really emphasize trying to find a stage-appropriate cohort of peers for peer-to-peer mentoring. For example, I would certainly encourage that person to check out the Kauffman Fellows program, as well as create local communities where it’s safe to ask questions and share experiences and learn that way.

Tyler: [33:08] If you think of your education in venture, to the point where you were deploying your own capital, or your own allocated capital, it sounds like it was a period of almost five and a half or six years, lots of investment of time and money. Kauffman Fellows, I know, has a high bar.

[33:27] You were two years as an associate, a fair amount of time in the Gates Foundation, with different goals, certainly, but a lot of the same activities and training. How are the ways that, if you were to go back and do it again, you would short-circuit some of those lessons, or improve the speed or the efficiency of becoming a good investor?

Dr. Rooke: [33:47] If there’s one thing I could do differently in my early days of learning investing, it would have been to emphasize the human dimension more. I was very focused on learning, doing the technical due diligence, looking at market sizes, understanding intellectual property, when I was first learning, looking at investing opportunities.

[34:13] What I didn’t do as much was proactively reach out into the investing and entrepreneurial community at that time in the Boston area, to understand what other people’s stories were, to build those peer networks, to look at other investors’ examples of what they were doing, to look for ways to collaborate around deals that we could work on together.

[34:34] The partners that I was working with understood that, and they were good at that. I didn’t understand, at the time, why they so emphasized the importance and the value of syndicating deals. I thought, “We love this deal. Why don’t we take it all?” [laughs]

[34:48] I’ve since learned, there’s so many benefits to working with others, too. Not just getting deals done, but then supporting a company to success. If I could do something different, it would be to, in those early days, work more to find other investors who I thought were doing something interesting that I could learn from in that peer-to-peer way, and build those networks at my level to complement the strong networks that the partners and the firm had as well.

Tyler: [35:17] You said something interesting there, which is a technical detail, that I’m not sure everyone will pick up on, which is supporting the companies to success. What’s the defense for syndicating a deal that you believe is going to be a massive return? You obviously want more of your capital into it. Why would you syndicate that deal? Why would you share it with another investor?

Dr. Rooke: [35:36] The real work happens after the deal is done, and the company is in the trenches trying to develop the technology, get the product to market, make customers happy. That’s the hard part. The investors have a much easier job, frankly, and it’s our job, I believe, to do everything we can to grab an oar and help increase the chances of success there.

[35:58] I think anyone in this business knows that you can’t predict exactly what’s going to be needed down the line. There’s some general categories. You’re going to need more money. You’re going to need to grow the talent pool, probably need more space at some point. You might need to execute some contracts with a partner.

[36:15] There’s categories, and certainly if you can have more people around the table to help you tackle problems as those arise, as a collective, then there’s more resources available to the team to get those things done.

[36:31] Certainly in the kinds of investing that I do, which are excruciatingly multidisciplinary, what I gravitate toward is companies that have some combination of hardware, wetware, and software that make new and incredible data sets that solve a problem. Very few people have deep expertise in all of those. I would argue no one does, and the companies themselves are a microcosm of those different sector expertise.

[37:01] Ideally, the people around the table that are the investors, that are a part of the syndicate, also reflect that diversity of both expertise and networks that can help the company grow.

Tyler: [37:14] Vinod Khosla has kind of famously been derogatory towards VCs, saying that…I think the quote was “70 percent add negative value, and 95 percent are worthless,” or something like that.

[37:27] How do you think about picking? When do you get excited about having another investor involved in a deal, and I’m thinking now in a Series A or Series B context, bringing in an additional co-lead or another large-capital presence. When do you get excited about adding another voice to the room, and what are the things that you get fearful around, where you might counsel an entrepreneur to avoid that person?

Dr. Rooke: [37:50] That’s a critical question, and it’s most important to put that question to the entrepreneur, what do they need to be successful, and what kind of support does the company need?

[38:04] I do think it is my job as an investor to help entrepreneurs think through that question. Part of it is culture. You want some mix of like-minded individuals who have a similar set of goals and values working with you, and are not afraid to rock the boat a little bit if things aren’t going well, so finding that balance is helpful.

[38:24] Like I said, being very clear about the set of domain expertise that is necessary for the company to succeed, and making sure there’s some representation of that, I think, around the table. It doesn’t have to be as in investor on the board. It can be an advisory board, but for the key pieces about technology development and market success, I think it’s very important to have that in the board room and in the investor syndicate.

[38:47] The point about alignment, which comes up when people talk about investing, is, I think, critical to emphasize, and there are many flavors of alignment, but making sure that everyone is coming in as an investor, as a stakeholder, is pulling toward the same goal, and is thinking about it at least similarly, is pretty important.

[39:08] I would say with the rise of angel capital, individual investors, the explosion in the equity crowdfunding model, the enablement of that practice through platforms like AngelList, there are more individuals looking to invest in early-stage companies than ever before, which is exciting.

[39:30] That’s something that entrepreneurs need to be very careful about, because I think there is quite a range of individual or angel investors on dimensions of capability, personality, willingness to work with others, ability to be helpful, need to be helpful for their own ego. [laughs]

[39:53] That can be, I think, a very seductive and potentially destructive time for early-stage companies, because there can be so much, right now, excitement about getting into these exciting companies from investors who may have less sophistication than they think. That imbalance, in particular, I think, can be destructive.

[40:21] I think that’s part of my job as well, is helping entrepreneurs, whether I’m investing in them or not, think about how to balance that set of risks and passion that angel investors can bring to the scenario.

Tyler: [40:37] There’s a common refrain here of the dentist from some flyover state in the middle of the country. I’m from Ohio, so let’s call it Ohio. The dentist from Ohio is somebody you don’t want to have in your Seed-stage round.

[40:50] Is there also an equivalent thing in life sciences or synthetic biology of the successful tech founder that doesn’t really understand the science behind it?

Dr. Rooke: [40:59] I think it’s an apt analogy. I’d just as soon have the dentist or the tech investor if they have an appropriate orientation toward participating in the opportunity. [laughs] If they’re excited to invest, and they are willing to be helpful, but are not looking to interfere, then that’s great for everyone.

[41:22] I think what can be challenging for entrepreneurs in this category of investors is knowing the extent to which that investor wants to be involved and is going to let their passion, perhaps, overtake judgment about what the company actually needs. That can be very hard to assess. It can be very hard to assess in a short conversation, which is often where some of these early investment decisions get made.

[41:52] I would say in those scenarios, there are ways to protect against some of the dangers. One is references. Has the person ever worked with a startup before? Can you talk to that startup? How did they feel about whether that person was helpful or “helpful”? That’s one.

[42:08] Another is syndicate. I am excited about many of the benefits of the Syndicates program on AngelList. One of those that I feel like I offer to entrepreneurs is the ability to bring in that pool of angel capital that is interested in, and is so critical for early-stage funding, without having to have 50 individual conversations and 50 individual backers who feel like they need to be at the CEO’s door every other week. That’s just not scalable.

[42:38] To me, Syndicates has many of the benefits of the LP venture model, in that it allows entrepreneurs to access pools of capital without necessarily having to have all of those one-to-one relationships with dentists or tech entrepreneurs [laughs] who might do more harm than good by being “helpful.”

Tyler: [43:01] You act a bit as a filter there.

Dr. Rooke: [43:03] Right.

Tyler: [43:04] Walk me through your syndicate. Is that made up of folks that are not connected to tech or life sciences that don’t have domain expertise, the dentist from Ohio. Is it made up from successful entrepreneurs in other areas? Is it made up from industry experts? Institutional capital? How do you think about the makeup of your syndicate? Where does your backing come from?

Dr. Rooke: [43:30] The answer, which is exciting to me, is all of the above. I built my syndicate starting by having a deal I was excited about, and wanting to bring individuals in my network together to invest in that deal. AngelList provided a platform or mechanism by which to achieve that.

[43:49] What’s happened over time…Those are primarily industry experts, domain experts in life sciences that I’ve brought on.

Tyler: [43:57] Had you founded 5 Prime at that point?

Dr. Rooke: [43:59] I hadn’t named it that, but essentially.

Tyler: [44:01] You were doing investing full time. This wasn’t the first deal.

Dr. Rooke: [44:04] I was doing a mixture of investing and early-stage company building at the time.

Tyler: [44:11] You had this deal that you got that you were really excited about, and so you were acting as almost an angel that wanted to syndicate it out to a larger group of industry contacts.

Dr. Rooke: [44:22] Right. I had done deep diligence on the opportunity, believed it to be, frankly, the best I had seen, after looking for years in synthetic biology, and wanted to write them a check, [laughs] and didn’t have a fund behind me at the time.

[44:36] I was still contemplating whether I wanted to raise a fund, whether I wanted to go back and join a firm, go back into the company-building experience. Here, I had done basically venture-type work and had said yes to a deal, and found I didn’t have any dollars to back it up. [laughs]

[44:56] Syndicates, for me, solved a real problem in that sense, in that it was an opportunity to gather capital together around a venture-quality deal without raising a blind pool in a traditional venture fund. Like I said, I brought some individuals on to the platform who I was excited to be investors in the company, and also made the deal available to the AngelList investor community broadly.

[45:26] That began a migration from the broader AngelList investor pool into my syndicate. I would say all of the categories you listed are represented there. There’s some very successful tech, both entrepreneurs and investors, who are excited about what’s happening in life sciences, and well they should be — it’s fantastic — and recognize that they might not have the deal flow or the expertise to get into or vet the best deals.

[45:56] This is a great, I think, bridge between their excitement and exciting opportunities, and I get to help build that.

[46:04] There are others, I’ve noticed, who maybe just aren’t in the geographies where these deals are happening, and this is a way to access those, so maybe it is the dentist from Ohio, for example. Then there are, as you’ve seen on AngelList, the emergence of institutional investors as well, so small funds that are participating. It’s quite a diverse mix.

Tyler: [46:23] Did you charge carry on that first deal?

Dr. Rooke: [46:25] Oh, yeah.

Tyler: [46:26] Walk me through the…What’s the company, and what was the process of getting the first deal on the platform?

Dr. Rooke: [46:34] The company is called Zymergen. They are an industrial biotech company. They optimize the microbes that make chemicals in the chemicals industry using synthetic biology, robots, and big data.

[46:45] I had been looking in the synthetic biology space for years, at the time, and in fact had done some grant-funding in synthetic biology while I was at the Gates Foundation. I was quite excited about the technology that was being developed there, but was not seeing very many experienced entrepreneurial teams.

[47:03] Zymergen struck me as quite different in this regard — an experienced CEO and technical team, really coming from industry, and able to apply these incredible technologies in a very commercially relevant way, and have the experience and the capabilities I thought were crucial for executing strongly in the space.

[47:25] I was thrilled to find them, and originally thought perhaps I could just help them get funded through my VC network. I said, “I’ll introduce you to life sciences investors that I know,” which I did, and there was a collective shrug, because this is an industrial bio company, and so most of life sciences investors in the world are focused on health care. That is where the wins have been. That’s where the patterns are.

[47:54] Many firms simply couldn’t get to a yes on Zymergen, even if they were fully convinced in the opportunity, the strength of the technology, and the team, it was out of scope for them. There simply weren’t funds that were focused in this space, very few.

[48:12] I had this incredible venture opportunity, a team that I was super excited about, a best in-vintage opportunity in a space where I was a domain expert, and Syndicates gave me an opportunity to pool capital around that deal.

[48:30] It was a friend who was working at AngelList, actually, as the Syndicates mechanism was being launched, alerted me to this new tool that was happening on the platform. She said, “I know you’re doing a lot of work with exciting companies. Maybe this is something that you could use.”

[48:47] I looked into it. I came in, met with AngelList’s team, got up to speed on how it worked, and then went and pitched it to the CEO of Zymergen. I’m so glad he was willing to take a risk on this new approach, because it was really the perfect opportunity to start building an independent investing practice around these kinds of companies that are somewhat orphans in the life sciences world, in that they don’t fit into these traditional categories.

Tyler: [49:14] Were you scared in making that investment of the follow-on funding potential, given that it is kind of playing into an orphan industry?

Dr. Rooke: [49:23] I probably should have been, but those are the kinds of risks that I think are worth taking. I feel like those are the kinds of risks that can be worked through, can be solved. Capital formation is not violating any laws of physics. You go out, and you find it, and you get it done.

[49:45] If it hadn’t been Syndicates, perhaps I would have come up with some other way. Same with the follow-on financing. I couldn’t have told you who the Series A lead was going to be, but felt like the company was going to demonstrate such great progress in that Seed round, which they did, that the set of options would be broadened by then, and we would figure it out.

Tyler: [50:05] How did you pitch using Syndicates to the CEO of Zymergen? I think that’s something that, this is still a new platform. It’s still a new technology, a new solution. There’s a new set of norms being written around it, and a lot of times, investors and entrepreneurs don’t know much about it. They haven’t had an experiential relationship with it. How did you walk him through the opportunity of Syndicates, and why did he say yes?

Dr. Rooke: [50:31] I think it helped that I went into learning about Syndicates with the same kind of trepidations and skepticism that he would have had, or should have. I certainly wouldn’t have raised it as a possibility or recommended it if I had any reservations, so when I went and met with the AngelList team, I was doing diligence on this opportunity.

[50:56] I asked the set of questions that a CEO would have about, for example, follow-on funding and information rights, etc. I was able to then, when I met with Josh at Zymergen, explain what I had learned, and why I thought this was a reasonable experiment to try.

[51:15] I thought the downsides were constrained. Worst-case scenario, this perhaps disappears on your cap table in the noise. Best-case scenario, this is a strong pool of individual investors who are excited about what you’re doing, and expand that team that’s available to you to contribute to your success.

Tyler: [51:36] What are some of those things that you guys had the trepidation around? Talk about the follow-on funding risk, or talk about the risk of information rights.

Dr. Rooke: [51:46] I think, like we were discussing before, one of the concerns that an entrepreneur might have about taking angel capital of any kind is managing that set of angels on the cap table, and in discussions, making sure to meet their needs as stakeholders while still appropriately prioritizing relative to all of the needs of building the company.

[52:15] Certainly what a company wouldn’t want to have happen by taking a syndicate investment is to suddenly have, for example, 50 angels who feel like they need to talk to the CEO once a week. Do the math, you can’t get it done. That was part of it, is what is the relationship going to be between these individual investors and the company, and is that going to be manageable and productive for the company?

[52:43] What I learned was that was something that could be really set by the syndicate leader, set expectations with the syndicate, later, to say, “Hey, this is not, angel investors, an opportunity for you to be peer investors with me.” Some syndicates maybe are run like that, but for me, I am the lead investor, I made an investment decision, you are welcome to fill out this allocation with me, is kind of the approach.

[53:07] That’s an excellent opportunity for some people. It’s not the right opportunity for others, but I think being very clear about what the relationship is is important for the company, for the syndicate leader, and for the individual investors. That was certainly a part of it, is saying, “This is how we’re going to run it, because this is what I think is best for the company.”

Tyler: [53:24] Did you just have to be very explicit about that in communications with backers and with the company or was that known or assumed?

Dr. Rooke: [53:31] I was explicit about it. I have made myself quite available to my backers to ask questions that might concern them about the investment opportunity, but that’s in contrast to I don’t give them any access necessarily to the CEO. That’s up to the CEO, if he never wants to talk to any of those backers, that is totally fine.

Tyler: [53:54] Did you get pro rata in that deal?

Dr. Rooke: [53:56] Oh, yes.

Tyler: [53:57] Walk me through what that is and why that was important and how you got that for your syndicate.

Dr. Rooke: [54:02] Pro rata was important to me as an investor building my practice. This is not meant to be a one-shot investment, but as with venture investing, a long-term relationship with the company and then the company’s opportunity. That was what I was used to in some sense as a venture investor and brought that as a bias.

[54:22] I also thought that was an important thing to be offering to backers. Most importantly, I didn’t want my investment or the syndicate’s investment to be treated any differently from any other investor in the seed syndicate.

[54:39] It was very important to me that it be on equal terms. In some cases, in some of my syndicates, I am the largest or at least at parity with some of the other investors. There’s no reason why the terms should be any different in those cases. That was the stance.

[54:59] Pro rata is a somewhat funny thing for syndicates because the participation in the next financing can vary from round to round. Backers disappear or are added.

[55:12] There’s some amount of making that up as we go along, which is pretty interesting and part of why working with early-stage companies is what makes this work, because they’re being fluid, too, about how they’re building their businesses and how they’re putting a capital together.

Tyler: [55:26] For the folks that are not familiar with the concept, pro rata is the right to maintain your ownership percentage by investing in the next round. We’re actually seeing a trend in early-stage consumer tech or B2B tech, traditional tech investing, where pro rata is being removed.

[55:46] It’s actually now become a bit of a conversation between early-stage investors and entrepreneurs, making it only available for major investors, or making it something that is at the decision of the entrepreneur. That’s a trend that’s happening in more of the core tech industry.

[56:08] Is that same trend happening in life sciences? Was this a broad conversation, or is this really kind of a non-issue, or just presumed that pro rata would be OK?

Dr. Rooke: [56:16] I couldn’t really say what the trends are in life sciences broadly, again, because so much of that is spaces I don’t touch in therapeutics, and other…medical devices, so I don’t really know what’s happening at that Seed stage, capital formation trends there. I would say that it’s a bit of an entrepreneur’s market currently. [laughs] I would note that there is more capital than there are great deals. Don’t tell anyone I said that, but we’re aware of that.

[56:54] It’s not surprising to hear that those trends are happening currently. I wouldn’t be surprised if there’s some amount of reversal of those in the coming years. In any case, I think terms like pro rata, and valuation, and all of these are…it’s important to come back to. They’re fundamentally about trying to get alignment of your stakeholders around the company for long-term success. It’s hard for me to get excited, as an investor, without pro rata.

[57:24] Not because of returns, but because that says you’re not actually interested in having me around the table for long-term success. Well, then this probably isn’t a great match. I think it’s more important about what it represents in coming together as a syndicate to support the company.

Tyler: [57:42] It sounds like, from what you said earlier, that the early days of 5 Prime were very fluid, so you were thinking about building a company, or consulting work, or investing, or going back into venture. What was that first year like, post the Gates Foundation?

Dr. Rooke: [57:58] It’s true. It was fluid. In some sense I’m writing the story in retrospect, and picking the dots that connect into a line. The fact was, I came here to the Bay Area knowing that I wanted to be creating value in the startup, and entrepreneurial world, in life sciences, in early stage, but with some flexibility about how I did that. That gave me the opportunity to get really plugged into the ecosystem here in the Bay Area, and find out what people were doing awesome things, and ask how I can be helpful.

[58:35] In the early days, it really was a portfolio of activities, from investing, to part-time business building, to consulting, to explore the intersection, and what the opportunities were, and what was really driving me at this point in my career, and life.

[58:52] Really investing is what emerged as the thing I got up and got excited about, finding the next Zymergen, who is a stellar example of technology and team and opportunity, and maybe doesn’t fit into conventional financing buckets. I feel like that’s my job right now is to find those companies and hear them and understand them and help them get on their way.

Tyler: [59:17] Had you decided to start a fund before investing in Zymergen or did that happen at the same time or afterwards?

Dr. Rooke: [59:26] I would say I decided to start pulling funds together and start 5 Prime purely as a forcing function of having met Zymergen and getting so excited about that opportunity and needing to create a way to participate. [laughs] Maybe that’s backwards, but I got into investing because that was the tool that let me do the work I wanted to in the world.

Tyler: [59:54] You say maybe it’s backwards, but maybe it’s just that this a new way that hasn’t existed in the past. Do you have an offline fund, or is it just the AngelList syndicate?

Dr. Rooke: [60:05] Currently it’s just the AngelList syndicate. I do still spend time with the Fidelity Biosciences team now called F-Prime, by the way, as a venture partner. They are in their fourth fund.

[60:17] It’s a $350 million fund so there’s two pools of capital and two points on that risk and stage spectrum that we were talking about, and I can operate more fluidly on that spectrum depending on where a company’s at and what they need.

[60:32] The question of whether I will raise an offline fund is one that I’m working through right now, and it really will depend on some of the new mechanisms that are coming out on AngelList and how those can scale as my investing practice scales.

[60:49] Changes in regulatory environment about what’s possible and being creative about capital formation, and then really thinking about the opportunity space and asking, as I said, what is the right tool for me to get the work done in the world that I want to do? Those are the sets of questions I’m working through right now.

Tyler: [61:09] Why an offline fund? What are the benefits compared to a syndicate?

Dr. Rooke: [61:16] Part of it is scale. Like I said I’d really like to be able to write not just the first Seed check, but write a very significant check in the Series A, Series B, and currently that’s a scale of capital that isn’t really represented in the AngelList syndicate network, although that’s maybe changing with the Upshot fund so we’ll see about that.

[61:41] Scale, speed of decision-making, that’s also getting better on AngelList. The ability to pull together a syndicate quickly now and be responsive to a company’s needs is very important. Part of it is longevity. I would like to really demonstrate commitment to this space and this practice.

[62:02] This is what I expect to be doing for the foreseeable future and the decade-plus future, and I think that venture firms and funds really classically signal that sort of commitment so that’s appealing. Fees. Fees would be nice. [laughs]

[62:21] But it’s true, the ability to have…I joke about fees but there are investments I would make in an ecosystem around my fund if I had some more cash flow that I think would be both more beneficial to portfolio companies and would help me be a better investor as well and think more about what’s coming proactively in terms of trends and technologies.

[62:49] Those are, I think, some of the reasons people raise funds. None of this is revolutionary thinking, but there’s some benefits to scale. Partners are great, right? Like I talked to you about the real benefits of working in the partner environment in Fidelity in those early days.

[63:04] It would be fantastic to have some of those same really rigorous data-based discussions about making great investments and supporting companies that…Currently I don’t really have that with my backers. I would need a firm and a partner in that setting.

[63:24] I think there’s some real benefits to the two to three partner firm and fund model in the same way that there’s something really strong and magical about the two to three person co-founding team versus the solo founder. I think there’s some benefits to be gained there.

Tyler: [63:46] This is, now I should preface by saying, an opinion that I have and not something that is representative of true fact or AngelList opinion.

[63:59] One of the questions I have is whether the partner model is unbundling a bit, and whether we’re moving more to a federation model, where individual partners make their own convicted bets, and maybe they have a loose federation, or a loose partnership, but you’re moving away from this need of, “Hey, let’s all pool $500 million together and then invest it with a 15 person committee.”

[64:28] Do you feel like that kind of natural unbundling stops at a two- or three-partner point, or do you think there are going to be more single renegade investors, off doing their own thing? Or am I wrong? Is the larger partnership model not really decaying?

Dr. Rooke: [64:49] Here’s what I will say. I don’t know whether this is a true fact or just my opinion, but I believe that the average partnership for a venture firm, the average size, is on the smaller end. I believe it is in the three to five partners.

[65:06] The exceptions are the mega funds. I think there’s been a lot of thoughtful things written about why that is challenging. Most of the decision making that I’ve seen in the, let’s call it, two-to-five-partner firm setting isn’t consensus. It’s usually some version of champion with veto.

[65:26] I think that there’s a lot of benefit to that. I think you can also argue that maybe that explains some of the lack of risk-taking, because you can get talked out of your convictions in that setting.

[65:37] It also probably preserves the opportunity for those partnerships to keep doing their job because they’re not making dumb, dumb decisions, based on passion. My belief is that the practice actually reflects already what you’re describing, is typically loose federations of partners who have complementary but not fully overlapping investment practices.

[66:03] What we’re seeing is a broadening of the spectrum and the ability to have one- or two-partner firms, much bigger firms. The assemblies model that’s emerging, I think, is really interesting. I’m curious to see how that will work, which is using some of the tools that are available now, the tech tools, to be able to bring together a larger set of experts in deal flow and in diligence to be able to get to investment decisions. I think that will be very curious.

[66:37] I’m a big believer, in the same way that I am with entrepreneurship, of a small number of really passionate, complementary thought leaders coming together to build something distinctive. I think that really applies to venture, as well.

Tyler: [66:53] I feel like we could talk for another hour, and I actually probably could do an hour on the Gates Experience. I’m really curious to learn more about that, so maybe we’ll get a chance to do a V2 focused on that. I think some of the moonshot stuff and deep, long-term timeframe is really interesting.

[67:11] I want to thank you. You’ve been super kind with your time. I appreciate that. I’ll let you get out of here.

[67:18] One quick question before we go. For someone who’s listening to this, who’s on the fence about investing, maybe just in general, or maybe specifically about life sciences, what would be your best arguments for and against diving in and starting to invest their own money?

Dr. Rooke: [67:34] Tucker Max has a blog post called “Why I Stopped Angel Investing, and Why You Should Never Start,” I think. I would encourage anyone who’s thinking about getting into investing to read that.

[67:45] He’s, from a place of deep experience, described why it is so difficult to imagine getting into angel investing and being financially successful at it. He talks about all the challenges of deal flow, diligence, maintaining pro rata, and things like that, so I think that’s a great place to go.

[68:06] Part of it is one has to ask, “Why get into angel investing?”, and there are different motivations. If the goal is to make money, I’d have to agree with Tucker. [laughs] There are more reasons not to do it than to do it, and if you are going to do it, really thinking about where you have advantages and how you can apply those advantages in a way that is differentiated versus everyone else who’s getting into it, otherwise, there’s just no way to win.

[68:38] There’s other reasons to get into angel investing that are perhaps not necessarily double- or triple-bottom line, where returns would be nice, obviously, but maybe the main reason is because you are interested in a field that is new to you, or you are excited about working with particular entrepreneurs, or staying in the company-building game, or you’re looking for your next thing.

[69:04] One way to do that is to meet with companies, and see what they’re doing. At least you have a small check to offer them as part of that experience.

[69:14] In those cases, I would say being very clear about why you’re getting into investing, and what you’re willing to pay for that objective is important. It’s great to only invest money that you’re willing to lose. That’s a great way to stay healthy about it.

[69:31] I guess I would come back to syndicates as a way to meet a lot of those needs while increasing your chances of succeeding, or actually seeing that money again, especially for…It doesn’t have to be me. Obviously this is not self-serving.

[69:46] If you can find syndicate leads who are in a space that you care about, who do have the advantages that it takes to succeed, because they’re either extremely well-connected, or they’re spending all their time at it, like I am, or they have deep domain expertise in an area where that’s critical — they’re making great decisions.

[70:09] Investing alongside them, joining a syndicate, being part of maybe an offline syndicate setting, like the more conventional Band of Angels, or Life Science Angels, those kinds of groups, can be a great way to get in and learn, and see, perhaps, better deals than one would as a solo investor while participating in what is obviously a very exciting space.

Tyler: [70:33] Awesome. For people that want to learn more about you, what’s the best place to find you online?

Dr. Rooke: [70:37] There’s my AngelList Syndicates page, which is, I believe. It’s drrooke. I’m also, of course, on LinkedIn, under Jenny Rooke, and that shows, I think, a bit more of my background. I probably should build a website. That would be one of those things I would do with fees, right? [laughs]

Tyler: [70:58] Yep.

Dr. Rooke: [70:58] That’s a good start, and certainly I’m happy to take messages on AngelList or on LinkedIn from interested investors and entrepreneurs.

Tyler: [71:07] Are there places where you publish your thoughts? Are you active on Twitter, or blog anywhere?

Dr. Rooke: [71:12] I am on Twitter. I do blog, not in any central place, and this is the beauty of Google, right? I have a fairly distinctive name, so if you look up Jenny Rooke, the first few pages generally are things that I’m doing in the investing space.

Tyler: [71:28] Cool. Thanks so much, again, for the time. Hopefully, we’ll get a chance to do a V2.

Dr. Rooke: [71:31] It’s my pleasure. Thanks, Tyler.

Inside the Deal is a new series where we interview the syndicate leads and entrepreneurs behind some of the…

Inside the Deal is a new series where we interview the syndicate leads and entrepreneurs behind some of the…

Originally published at on May 18, 2016.