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this fund coming up that will support 14 to 16 companies, our goal is to make them all successful. We do a lot of thinking about what we want to invest in before we actually will trigger an investment. I’d say the most challenging thing is we just have very limited—even with a fund this size—we have a very limited amount of resources. You’ve got to be really selective. A lot of it is taking your time, spending your time to get to know the area, get to know the people, and get to understand whether the time is right to jump into an area, and then devoting the right amount of resources like that. You have to do your work.
X: You said in the release today you were oversubscribed for this fund. Why did you turn away some people who wanted to invest? Why cap it at $516 million?
RT: A lot of that has to do with discussions we had with our advisors, and our limited partners, and also, probably more importantly, our model. Unless we really want to grow the firm very significantly, our model, which involves jumping into interim operating roles and working closely with the companies, even after we’re out of those formal roles—it just takes a lot of work. We think that’s a key—probably the key attribute—for success. If the fund was much bigger, we’d really have to have significant additional people. We want to make sure our organization is quality, and that takes time. We’ll continue to grow, but it will be fairly well thought-out and deliberate. The $500 million figure came from Mark (Levin) and Kevin Starr and others on the team who did a lot of analysis. We track all our time, and effort, and did this very analytically. We felt that would be the right size for about the size of the firm we have now, and the type of work we do with the companies. It was a very deliberate number, based on those sorts of analyses.
X: I’ve talked with Kevin once before about his time budget. How do you like to allocate your time, as partners?
RT: Me personally?
X: Well, does every partner have their own time allocation strategy or is it pretty similar across the firm?
RT: We have one strategy, because we meet every week and review what we’re working on, and how we’re spending time. We match that up with the time the firm needs in a certain area. On a weekly basis, and very formally on a quarterly basis, we look at where people are spending their time and where the firm needs them to spend time. It’s because we’re developing these companies ideas internally before we decide to fund them. In other words, we know as they mature, they’re going to need a certain amount of science effort, a certain amount of business effort, a certain amount of effort from junior folks and more senior folks. We really try to match time and re-allocate people’s time—all of us in the firm—based on where the needs are. It’s not really up to the individual, per se. Obviously, there’s flexibility but we really try to match that to developing the company the way we want to develop them. Early ideas require relatively less effort, but as we get close to launching a company, we’ll have sometimes 4-5 full-time equivalent folks working on that. We need to plan for that if we’re going to continue to build these companies on a regular basis. It’s a very deliberate tracking system that meshes with the strategic and the steady-state numbers we sign up for each year in building companies.
X: So for you personally, how does it break down in terms of time spent on existing portfolio companies, new ideas being incubated, meeting new people, etc.?
RT: I’m more of a science/medicine geek. I deal with the science/medicine geeks in the group. For me, I’ll give you a Scenario 1 and Scenario 2, because I flip back and forth between them. Scenario 1 is where I’m not actively working as a chief scientific officer in one of our companies. In Scenario 1, I’ll spend half my time on new company ideas at various stages, before we actually fund them. This is also the discovery phase. So it’s new ideas, and new ideas that are maturing. Then the other 50 percent of my time is split between our partnership meetings and our firm meetings, which is probably about 10-15 percent, and the remaining 35 percent is working with existing companies, with boards, and also being a scientific advisor to companies we’ve already launched.
That’s Scenario 1, which is typically how it is. Now, when I jump into a CSO role, which I just did at Jounce [Therapeutics] a couple of months ago, you end up spending 30-40 percent of your time in that role, sometimes up to 50 percent of your time. The same is true for Mark (Levin) or Kevin (Starr) or Cary (Pfeffer) when they take on a CEO role at one of the companies. A couple of days per week gets spent in that role. What you ratchet back a bit are those early-company builds, the discovery effort. As people come in and out of those C-roles, then they are able to devote more time to early-company building roles.
It’s worked out well. It’s never perfect. Given that we track time pretty carefully, we’re usually able to predict when we’ll have a little bit of a shortfall in people effort. Lastly, I’d say that we have an active entrepreneur-in-residence program (EIR) where we bring in people who come in and help us with 1-2 companies, who are here for a year or couple years, and the goal is to have one of those folks join the company in a senior role. So we’re pretty selective about the people we bring in, but we bring in great people, and it’s been a fantastic way to get help on the discovery programs, but also to staff the companies once we launch them.
X: How much time do you and Mark (Levin) spend on LinkedIn?
RT: Mark spends a ton more time there than I do. Mark is a LinkedIn junkie. The reason why Mark is a LinkedIn junkie is simple—it’s because he’s a people junkie. It’s all about people in this business, as you know, great people with great experiences who really want to be part of a team that does incredible things. Mark epitomizes that, and he’s constantly looking for people like that. We actually joke with Mark a lot that LinkedIn is going to start surcharging him for the amount he uses it. I use it more selectively, usually when we’re trying to recruit people into our companies, or networking around areas where I don’t already have a network in mind. It’s a great tool. But Mark is, by far, the power user within Third Rock.
X: Are you doing anything to celebrate the new fund?
RT: We will celebrate. It’s just very exciting to see the progress you alluded to, which we’re seeing with some of the companies from fund I and fund II. We’ve got 21 ongoing clinical trials in 15 companies. We’re really starting to see results. That’s really exciting. I think everyone is pretty jazzed. It’s an exciting time. It took us a while to build a system, and gather some of the data we have internally about what it takes to build these companies, and the network that we have. And as you alluded to, our reputation is strengthening. It’s really a terrific time to be able to connect with lots of great people. A lot of people here feel the enthusiasm and are really passionate about what we’re doing.
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