Author | Wu Zhongxue
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In 1985, Noubar Afeyan, a 23-year-old American Ph.D., met an old gentleman at a conference in Washington. Mr. Lao shared the story of starting a business in Silicon Valley with his friends more than 30 years ago. Young people were deeply impressed and strengthened their determination to start a business.
The old gentleman is David Packard, co-founder of HP, and the young Armenian refugee descendant, after many entrepreneurial attempts, founded venture capital firm Flagship Ventures (later renamed FlagshipPinering, hereinafter referred to as "FP") in 2000 to focus on biomedical (Biotech) investments.
Flagship Pioneering means "Pioneer" flagship. It would be all too appropriate to use that name to describe the mission and current status of the FP.
For more than 20 years, FP's influence has surpassed its Biotech peers and ranked among the best venture capitalists in the world. It has pioneered a differentiated investment model – an incubator startup that has initiated and nurtured more than 100 life sciences companies, including the COVID-19 vaccine company Moderna. The exit rate of FP's funds, a key measure of fund performance, is as high as 50%.
Previously, we were in "The Future in the Eyes of the Big Guy Behind the 100 Billion Vaccine Superstars: Will Humanity Enter the Century of "Digital Biology"? The article shares the future of the biotechnology industry in Affyan's eyes. Today we explain the incubation model of FP and the birth process of the star company Moderna.
Incubation mode: Start with a hypothetical problem
Unlike traditional venture capital firms, FPs are mainly based on in-house developed intellectual property, creating and incubating startups, with foreign investment accounting for only a small part. The company's slogan is: We pursue breakthroughs in human health and sustainable development and create a bio-platform company.
In Affyan's own words, FP's mission is to innovate in "unoccupied" territory. What he pursues is not iteration of existing technology, but solutions to problems and scenarios that may arise in the future.
To that end, Affyan has developed a brainstorming model for starting new companies, and the companies incubated by FPs almost all start with a hypothetical question and follow a strict set of rules to do it, in short, starting with a series of incredible ideas, finding ideas that really have an advantage, and then moving on.
Specifically, it is mainly divided into four stages:
1. Explorations
At this stage, various types of seed assumptions are proposed internally in the FP, exploring "what if... What to do? "Problems and allow assumptions to evolve through variation and choice, brainstorming internally. Affyan said these "risk assumptions" are purely imaginary and are not limited by the availability of existing scientific evidence or data to support them.
Of course, FPs also seek a network of experts in industry and academia to help analyze the pros and cons of these assumptions and make corrections to determine if there is something that may be groundbreaking.
For this exploration alone, the FPs do it 80 to 100 times a year. Of course, a large number of risk assumptions will be passed at this stage, and only a small number of them will have the opportunity to move on to the next stage.
2. Scientific verification (ProtoCos)
After early exploration, valuable hypotheses would set up prototype companies or "ProtoCos", the FP would organize a founding team to test scientific concepts, and would also apply for intellectual property rights for the project. Unlike the traditional entrepreneurial innovation model, the FP sets a stop-loss period, ProtoCos usually keeps it for a year, during which it will invest about $1 million, and if it spends $1 million in a year and still can't verify the concept, then the project will stop. The FP launches 8-10 ProtoCos per year.
3. Establishment of a new company (NewCos)
If the idea is validated in the lab, FP will build a wholly owned subsidiary with a new name on it and fund at least $20 million. Each new company will focus on developing a proprietary platform, recruiting boards, CEOs, and building a complete leadership team. Such new companies will form 6 to 8 FPs per year.
4. GrowthCos
As the company itself grows, the FP will bring in external investors and establish a wide range of partnerships to push the company forward and aim to go public. Since 2013, 25 of FP's GrowthCos have completed IPOs.
It is worth mentioning that in such an incubation model, FPs usually still own about 50% of these startups when they IPO.
Over the past two decades, Affyan has helped found about 70 companies through this incubation model, including Denali Therapeutics ($6.3 billion) for neurodegenerative disease treatments, Quanterix, which makes protein measurement tools for disease detection and treatment ($2.1 billion), and Rubius, which uses red blood cells to treat cancer and autoimmune diseases ($1.3 billion).
Perhaps it is this seemingly simple discipline that ensures that its subsequent scientific work has a clear set of goals and directions, and through layers of screening, it also ensures that the money is spent on the cutting edge, which greatly improves its return on investment.
One case: Moderna, the star company of the COVID-19 vaccine
Undoubtedly, the most famous case of FP is Moderna, which became famous for the new crown mRNA vaccine.
Affyan is the co-founder and chairman of the board of directors of Moderna. Earlier, some media asked Affyan whether he had imagined that it would become such an influential company when he started Moderna. Affyan's answer was crisp: of course not.
"What comes to mind is that we're likely to have the next generation of biotechnology, and the body being able to make the drugs it needs on its own, something that has never been dreamed of before."
In fact, The Incubation Process for Moderna also begins with a hypothetical problem. The question is: If we can make a code molecule, when it is introduced into the human body, can it make any drug we want?
Around this hypothesis, Afyan and the team asked a lot of questions and explored them around them. Afyan likens this process to archaeology, except that it is the future that is excavated rather than the past.
In addition to Afyan, here are several legendary scientists behind Moderna, Derrick Rossi, Timothy Springer, Robert Langer and Ken Chien, Derrick Rossi is a stem cell biologist, Timothy Springer is a professor of biochemistry and molecular pharmacology at Harvard Medical School, and Robert Langer is a biologist, Ken Chien is principal professor at the Harvard Stem Cell Institute. It is their keen judgment that allows the potential of mRNA technology to be tapped.
Moderna was officially established in 2010. It is understood that the concept of the name Moderna comes from Derrick Rossi, which means the abbreviation of "Modified RNA".
In 2011, Affyan poached a brilliant helmsman for Moderna, Stephane Bancel, who was working for a well-known Diagnostics company in France. Stephane Bancel claimed to be a paranoid optimist, and it was under his leadership that Moderna designed the COVID-19 vaccine in 42 days and a series of subsequent miracles.
In December 2012, Moderna was officially exposed and received more than $4 million in financing from within the FP. Prior to that, FP had invested more than $11 million in Moderna, which has been operating in an "invisible" state.
In 2018, Moderna raised more than $600 million, setting a record for the largest IPO in the biotechnology industry at that time.
With the new crown mRNA vaccine, Moderna's 2021 revenue reached $18.5 billion, ranking among the top 20 global pharmaceutical companies in terms of total revenue, and together with Pfizer, it was selected as one of the 100 most influential companies in the world by Time Magazine in 2022.
The Revelation of FP
After earning his Ph.D. in biochemical engineering from MIT in 1987, Affyan founded his first company, PerSeptive Biosystems, which unfortunately coincided with the 1987 U.S. stock market crash, when almost all entrepreneurial activity stopped.
Affyan persevered, wanting to see if he could start a company, but luckily he secured about $300,000 in seed funding, and PerSeptive Biosystems went public in 1992 and was acquired by analytical instrument giant Perkin Elmer in 1998.
In the course of ten years of entrepreneurship, Affyan said that he made every mistake in the entrepreneurship textbook, which also gave him the opportunity to understand the "chaotic and turbulent" world of startups early.
For him, the establishment of FP is an experiment in institutional innovation and an exploration of scientific entrepreneurship.
In Affyan's view, FP's unique model combines scientific creativity, technological ingenuity, entrepreneurship, leadership, professional capital management, and a vast network of experts in a single institution. Affyan is the company's main founder, funder and owner, taking responsibility for their long-term success and creating truly impactful companies by providing all the resources of their ecosystem for incubated projects.
"If we can do this systematically and time again, it would be a floutation of conventional wisdom." Conventional wisdom holds that companies like Moderna have a low chance of repeating themselves, but we can build an engine that can produce companies that could be Moderna or 10 times better than Moderna, or one-tenth of Moderna. ”
In addition to institutional innovation, FP also has a team of up to six or seven hundred people, which is probably much larger than the team of most institutions, and there are a lot of industry professionals in it, such as Stephen Hahn, the former director of the FDA, who is now the CEO of Harbinger Health under FP, last year; there are also some government agencies and schools that work closely together, which gives it great advantages in production, education and research.
However, behind this is also inseparable from the benign interaction and cycle formed between the US government, schools, and investment institutions. I won't expand on that here.
Of course, both investment and entrepreneurship will fail. FPs also have many failures. Recently, Kaleido Therapeutics, a star company of microbiome therapy incubated by FP, declared bankruptcy due to setbacks in clinical trials and serious losses.
In Afyan's view, failure is inevitable. "The reason we use the word 'pioneering' is that we jump into the unknown and try to make them a reality, and that jump inevitably makes you jump to worthless places."
Last June, Afyan raised $3.4 billion for one of his new funds. With this new funding, the FP will continue to invest more in human healing, agriculture and nutrition.
On Affyan's desk was a sign with the words: "Trust your crazy ideas." (Believe your crazy idea), that desk he's been using for over twenty years.
"It's an interesting word game because belief is held out long enough to make crazy ideas turn out to be actually transformative." If you don't believe it, then you won't have the patience to stick with it, and you'll immediately turn to a safer idea. ”
Expect Afyan and FP to bring more innovations and surprises to the world.
Resources:
1.https://www.bloomberg.com/news/videos/2021-08-19/the-david-rubenstein-show-moderna-chairman-noubar-afeyan-video
2.https://www.barrons.com/articles/moderna-biotech-flagship-pioneering-noubar-afeyan-51634199301
3.https://www.forbeschina.com/billionaires/58322
4.https://hbr.org/podcast/2021/09/the-innovation-system-behind-modernas-covid-19-vaccine
5.https://www.flagshippioneering.com/