Guest: Misti Ushio, FManaging Director, Harris & Harris Group
Patrick: Can you give a little bit of your own background as a sound bite for our readers?
Misti Ushio: Sure. I’m a Managing Director with Harris and Harris Group. I lead the life science portfolio and the strategy for the company. Prior to this I worked at Merck for eleven years doing research, mostly on vaccines and other biologics.
I then took a job at Columbia University’s tech transfer office, where I got an opportunity to learn about intellectual property, starting businesses, the interface between academia and innovation, and how you translate that into a commercial setting.
I had only been at Columbia for about a year when I met Harris and Harris group, where I’ve been since 2007. And last year, as part of an investment, I also took on the CEO role of a portfolio company called TARA Biosystems.
Patrick: Harris and Harris pride themselves on their interdisciplinary approach when it comes to seeking innovation; combining biotech with chemistry, psychics, IT, electronics etc… what is it about this interdisciplinary approach that you think works so well?
Misti Ushio: I think it’s the new frontier. There’s a ton going on in biology – it’s getting so far advanced that the level of analysis is starting to match what is going on in the tech side. I think an interdisciplinary approach has been at the forefront of academia for the past ten to twenty years really, but now things are being produced that are ready to be commercialised.
What TARA does is create micro-heart tissues in a dish. Using these, we can study safety and efficacy of new medicines. This technology is more advanced and more predictable than other technologies because it utilises electrical stimulation and advanced materials to make the tissue more like an adult human heart. It requires that collaborative approach. Without those features it would just be like cells in a dish, which is not representative. It takes understanding of these other pieces to enable this technology to be relevant, predictable and useful for pharma.
There’s been a lot of work at these interfaces: it’s not a new concept. But real life applications are now starting to come out of all this. Our group has a history of investing in many of these disciplines in their own verticals, so we took a step back and said look ‘we should work more closely together’. We’re taking this team approach to the next level. For example, my colleague, who is a physicist, my other colleague, who is a chemist, and myself – a biochemical engineer – we’re combining our expertise together and seeing where those interfaces are.
Patrick: So on one face of it, biology is getting so advanced that it needs these new interfaces, but on the other side there’s this team element, where people work together well at the interfaces of different disciplines.
Misti Ushio: Right. At the end of the day, I don’t know how to build a circuit. And I don’t personally know anything about semi-conductors. At the same time I have the biology side and science side and healthcare side. It really takes two of us to really dig in.
Traditionally, people just stuck to what their vertical was. But it’s hard to get to a point where you can make an investment if you only know half the picture. If you can get a team who know what the whole picture looks like, then you have a better chance of success.
Interdisciplinary teams are also more willing to take on a level of technology risk. If you only know what’s going on in half the picture, it would be a little more risky, because you wouldn’t have the information on the other side. Having people who can work in different disciplines allows you to do better diligence.
Patrick: I wanted to ask about the New York life science scene in general and your views on what direction it’s going; what potential it has. First off, let’s talk about Accelerator Corp, which Harris and Harris is involved in. How do you think Accelerator is going to help New York’s biotech economy and its status as a life science hub?
Misti Ushio: Accelerator has a couple of elements positioning it to be a leader in New York. It has a syndicate of investors made up of both financial investors and corporations. Lilly, Pfizer and J&J are there at the table with us, alongside Arch Ventures, Alexandria Ventures and the Partnership Fund for New York.
Here you have a pool of money and a very diverse and experienced network. I find that with the pharma investors at the table, the amount of information and resources is unparalleled.
Accelerator is also designed is to have efficiencies at the senior level. Most early companies need their own senior management teams, and each one of those senior management teams is a different level of experience. But what Accelerator does, to gain efficiencies with the amount of capital we have, is employ a common management team to manage all the different portfolio companies. This way you only need to support one core group at the top, instead of four or five.
I also think that Accelerator have developed a really, really good network with the universities around New York. Over time, that community is going to get tighter and tighter.
It’s been hard in New York for the past five years or so, because whilst there’s not just been an interest in creating a biotech hub but a real effort with money behind it as well, it still takes a while for all of those pieces to come together. There’s a pool of great entrepreneurship, but they’re isolated islands right now. Now however, more and more, it’s accelerating at a pace we haven’t seen in a long time: those islands are getting bigger and are starting to move together, creating a bigger land mass; like pools of mercury coming together to make a bigger blob. Accelerator helps play a role in that because they’re talking to everyone, making investments and actively trying to build on that community.
Patrick: In your opinion, what steps does New York as a city need to take in order or it to start rivalling areas such as Boston and San Francisco?
Misti Ushio: I think there are four elements that every ecosystem needs. And I think that for New York, they’re finally here now. The city’s certainly not on par with Boston or The Bay on a timing stand point, but I think it has the potential to be. Let me take you through the elements…
1. Having top science, top innovation and top research. That’s clearly here in New York. It’s always been here. It’s super dense in terms of output and money that comes in for research. The question is how do you build on that?
2. The people. Who’s going to be running and supporting the companies? Who are going to be the employees? Between New York and New Jersey, where you have a lot of pharmaceutical talent and experience, it’s just a little untested yet. It’s a big question mark in people’s mind: where’s the talent going to come from? Is it here? My gut feeling is that it is here already; we just need to find it. We need to give people opportunities to come out, participate and be entrepreneurial. I think the personality of New York city, historically, hasn’t necessarily been entrepreneurial, at least in the life science side. But more and more people are interested in starting companies. It’s a big learning curve for founders as to what that all means, and whose responsibility it is to provide that education is still a question mark.
3. The infrastructure. These aren’t virtual companies. You need a lab. You need real space, because you’re making stuff! It’s been a problem, but over the last two years or so that’s been getting a lot better. TARA Biosystems has a lab and a desk at Harlem Biospace, which is something that really helps a company get going, and then you get to a point you need to move on to something bigger, and then you have BioBAT over in Brooklyn and Alexandria Centre.
A couple of years ago, you had no idea how a company would take it from beginning to end. But now you can really see the path; where you can start a company and where you can go. It’s not cheap, but then Boston and San Francisco aren’t cheap either. People get hung up about the cost, but the main question is ‘does the space exist?’ And I think the answer is yes, and my prediction is that more and more space will become available over the next couple of years.
4. The capital. Who is willing to take the risk in building and investing in these companies? There’s a lot of money in New York city, but it tends to not be early stage money. Harris and Harris do invest at early stage; we invest all over the place, and we’ve been making a concerted effort to make investments in New York. That’s why we do the Accelerator, as a way of being able to invest in a couple of different companies through that road. Then you see us doing TARA Biosystems, which is something we’ve built from the ground up. Hopefully we’ll be doing more and more here in New York.
I think you may also have heard about the New York City Economic Development Corp’s effort to help spur early stage investing?
Patrick: Yes I’ve heard a lot about that, the one with Lilly and Roche and Arch and Flagship?
Misti Ushio: Yes, so Celgene, GE Healthcare and Lilly are the corporate partners with the city, and then Arch and Flagship are the venture partners. And now there’s just lots more activity. You see these groups talking to more and more of the professors, really trying to get their hands around what is here. – those elements I just talked about. They’re all trying to figure all that out.
So it’s good: I think you’ll start to see that money get deployed. You’ll start to see critical mass. The goal is to get entrepreneurs confident, not thinking ‘oh my god where do I go’, but seeing what their friends are doing. It’s more and more a part of the conversation I the city. It’s not quite there yet, but once all this gets moving, it will be more and more commonplace.
There’s a lot of effort within the university and medical institutions themselves to help with funding. If we had had this conversation six or twelve month ago, I would have said there wasn’t much capital or venture, and that people weren’t coming to New York. But now I’d say we’re here. There are more and more funds coming in to town all the time, which is great. I myself sit on the Coulter Foundations committee for Columbia University and we give out grants for translational work: projects that are hard to fund with NIH money and NSF money because they’re becoming more applied.
New York’s universities and medical centres have created their own pools of money to help move things forward for translational research: Robertson Fund, Rockefeller, NYU has I think 3 different pools of money – they’ve stepped up and said ‘look we need to help move these projects forward. And until people start coming to New York and all this starts to coalesce we can either sit and let it go dormant or we can make an effort.’
Patrick: Going back to Harlem Biospace and BioBAT, I think in many ways the seeds have been planted, it’s just got to wait a bit for the tree to actually grow. You might not see anything yet but it’s all been set up.
Misti Ushio: That’s right.
Patrick: You talked about early stage, high risk ventures, which many aren’t willing to invest in. There’s been a general trend since the financial crisis in 2008 for venture capital to shy away from early stage investments, lowering their general risks for investors, and so there’s been a migration of start-up companies towards corporate venture capital, venture philanthropy or the other options that might exist for getting start-up capital. Working in venture capital yourself, do you feel like that’s the atmosphere right now?
Misti Ushio: I think it’s shifting. Since 2010 there’s been a huge attrition in available venture capital, but in the past year or so have we seen a resurgence and interest in early stage.
Some of the top funds – so Arch, Flagship, Third Rock and Versant – have large funds and are committed to doing early stage. So whilst many smaller firms aren’t focussing on early stage, you still have a couple of big ones that have survived and been able to keep going. And that’s good, they’re coming out strong.
But firms have had to get more creative on how to fund these: how do you think about building companies? Do you focus on business models that are either more capital efficient or can generate revenue earlier in its life cycle than other projects? How do you engage angel investors? How do you engage high net worth individuals who are interested in investing and what types of companies make sense for them to invest in? What are they interested in and are there good interfaces?
I think Corporate venture has been super strong, and that’s been the case now for several years. They really stepped in when a lot of the venture capital firms went away or struggled to raise money: they’ve been very supportive. It’s mostly because they realise that if they don’t move earlier in the investment cycle, then they’re not going to have any pipeline projects or products to buy! Most most pharma and biotechs now have a venture arm and invest quite early. It’s changed the whole dynamic.
Patrick: Moving on to a completely different question: there’s a lot of talk about immuno-oncology and also some of the recent rapid diagnostic tools, but in your opinion, what are some of the most promising biotechnologies to come out in the last few years?
Misti Ushio: Just stem cells in general are very exciting right now. To expand on our offshoot TARA Biosystems, the concept of building predictive tissue is a huge bioengineering advancement. In the past people have used all kinds of different cells, non-human or what have you, to study whether new medicines are safe, if they’re effective, and to discover new mechanisms of action to attempt to cure disease. The problem is that most of these systems aren’t predictable. You can get some interesting information and useful information but at the end of the day you have to keep moving through the clinic. You have to put it in to humans. And you see things fail all the time: you might get to phase 2 or phase 3, but then you realise it has unforeseen side effects or doesn’t work and it gets pulled.
The question is, how do you avoid that? How do you get to a point where most of what you’re putting through is going to work? It saves money. It saves animal use. It saves clinical trials. It saves everything. So if you can be more predictive on the front end, it helps massively.
With advances in stem cell science and tissue engineering, you’re getting more and more predictable human building tissues. Whether you’re building it with 3D printers or whether you’re building it in the way TARA Biosystems does, with advanced materials and electrical stimulation, they need to be generated in a way that is actually meaningful.
The field is accelerating. It has a broad degree of complexity because heart tissue is different from liver tissue is different from bone tissue, so each one in itself is a special expertise. It’s a very, very diverse group of scientists and engineers that come together just to focus on the one tissue, let alone all of them.
I think the other totally different side of the fence is the resurgence of microbiology, which is really fascinating. Microbiology has been the core of medicine for a long time, with penicillin and all these first antibiotics. It all went away for a little while, but because of the ability of sequencing, we now have the ability to learn more about the microbial populations within the land and within our bodies, and now the whole field of microbiology is wide open again because of sequencing technology. It’s really cool – you can find new antibiotics just by looking at DNA sequences. You can pick up what the hall marks are of the machinery are for the microbes that build antibiotic-like molecules.
Most pharma went out of antibiotics and microbiology, but now you see it coming back, and it’s because they’re totally necessary. We still need antibiotics, and we need better ones. There are a lot of small companies in the states right now looking at how you deal with outbreaks in hospitals, where you have strains that are resistant. You don’t want to go to hospital to get infected!
Patrick: We’re constantly told that pharma are moving away from antibiotics for reasons X, Y and Z and that this is bad because we’re running our an antibiotics arsenal, so it’s very reassuring to hear from someone in the field that they are waking up to that!
My final question is, in your position as Managing Director of a large venture capital firm, what is it that keeps you awake at that night?
Misti Ushio: My biggest worry is that companies don’t work. We get in really early, so we take a lot of technology risk. We take business model risk. We take a lot of risk, and sometimes it just doesn’t play out.
Above all, you want them to work! We invest in really exciting technology with a huge amount of promise. And the impact isn’t just you make another thing. The impact is it’s either going to help people or save lives, so you want to see that work. And you have to remember that these are companies; they have people. It’s not a completely dispassionate endeavour. It’s an interesting balance I think, personality wise, where you need to be dispassionate enough to see where things are going wrong and what’s going right and be able to manoeuvre and position the company to be the best it can.
Patrick: It must be hard, because you want to be able to invest emotionally in your companies as well. These projects that you’ve worked on for so long, you must want to see them succeed, surely? One of the things I’ve heard about VC’s having a really hard time is that they don’t quite want to admit something isn’t working and have to exit.
Misti Ushio: Yeah and that’s the most important. Sometimes it’s controversial: you have a PHD or an MD, but can you be an investor? How do you translate from being a scientist over to the investor side? I actually think in being a scientist and having gone through a PHD and that rigorous scientific upbringing, you’re trained to be super critical of your own work. You grow up with this ability to be critical and see where the holes are in your own work, but at the same time still being super passionate about the research you’re doing.
I think that skill translates really well to investing, and I think what you find is that the good investors can do that, whether they have a PhD or not, whatever background you’re coming from. But anyway that’s my plug for the PhD.
Patrick: That makes complete sense. Misti, we look forward very much to hear you speak at the Biotech and Money New York event on November 17th to expand on some of the ideas and views discussed today. Thank you very much.
Misti will be speaking at the upcoming Biotech and Money New York conference, taking place on 17th November at the TKP New York Conference Center.
She will join the 11.05am panel ‘Spurring early stage venture funding and financing’ that features industry experts, including Frank Rimalovski, Executive Director, NYU Entrepreneurial Institute and Managing Director, NYU Innovation Venture Fund, Shari Coulter Ford, Senior Vice President, Partnership Fund for New York City, Tim Shannon, General Partner, Canaan Partners and Nada Jain, Managing Partner, Golden Seeds Fund2 LP and Managing Director, Golden Seeds.
Download the event brochure for more information.