Thesis: Special Opportunities in Biotech Markets
A thesis on investing in a market of poor incentives
A special thanks to the Analogue Group, Jolie Gan, Ismail Mardin, John Sherwin, Jacob Goodwin, Vishal Sethi, Viraj Chhajed, Mack Healy, and Eli Casdin for their thoughts and feedback as part of the drafting process.
I graduated in 2021 and set out to build a biotech company. Truly a period of good times: the alt protein scene was booming (shoutout to Beyond), investment dollars were stacking up (thanks COVID), and being a young founder was all the hype (still is).
I wrote this piece almost as a form of therapy to reflect when shutting down my biotech company. In hindsight, our team made poor decisions led by venture incentives that took us down a poor path. We built everything to optimize for the next round and not longer-term durability. The ZIRP era was good until the music stopped.
This thesis is a review of the biotech business, how it functions, the inefficiencies it creates, and how to take advantage of them.
—Andrew Hui
You can find the thesis in the PDF attached or within this post itself. Do let me know what your thoughts are in the comments, I am looking forward.
1. Biotech companies are high-sharpe ratio businesses
2. High-sharpe ratio businesses rely on venture capital
3. Most technologies and companies cannot be venture scaled
4. Reliance on venture capital undervalues biotech IP
5. Bad structural incentives further undervalues IP
6. From the late Charlie Munger…
7. Don’t make venture assumptions because you think you have to…
8. Venture incentives ignore good economic outcomes and set up structural weakness
9. Proper structures and incentives unlock value
10. Where to invest in biotech?
Before you go…
If you’ve got any thoughts, questions, or feedback, please drop me a line - I would love to chat! You can find me on X at @backshui or email (andrewhui65 [at] gmail).
Every week, I will publish a new thesis digging into an underrated theme that I find interesting. A teaser for the next piece in the pipeline…
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