New Bio Fund Partner Describes A16Z Investment Strategy

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using computational and theoretical methods to tackle challenging problems in chemical biology, biophysics, and biomedicine.

According to Pande, Andreessen Horowitz sees opportunities in biomedicine to both change the world of healthcare and reap great financial returns. “We want to invest in software companies that are in the biotech space, which differentiates us from firms that are investing in biotech,” Pande told me.

He emphasized that the enormous advantages that Moore’s Law has brought to computing through an exponential decrease in costs also has been playing out in online data storage and in Web-based computing as a service. As the costs of computing and storage get closer to being essentially “free,” big data and machine learning likewise become increasingly affordable, Pande said. And as the cost of mobile computing falls, the cost of collecting biomedical data from inexpensive sensors also becomes more or less free.

“Things that used to be phenomenal, or groundbreaking, or impossible, become cheap or even free,” Pande said. “That’s a huge, dramatic change. But biotech doesn’t work that way.”

If anything, Pande says, the biotech industry’s ever-escalating cost of drug development is an example of “Eroom’s Law”—the exact opposite of Moore’s Law.

In terms of investment focus, Pande said he’s chiefly interested in three areas:

—Digital therapeutics, which uses Web-based services to encourage behavioral changes to treat people for depression, PTSD, smoking cessation, diabetes, insomnia, and other behavior-mediated conditions.

—Computational medicine, which uses image recognition and machine learning to analyze X-rays (radiology), assess skin lesions (dermatology), or examine your eyes (ophthalmology). Just as computer vision has had a huge impact in non-medical areas, Pande said computational medicine could flag the most-important images for radiologists and other doctors to review.

—Cloud biology, which involves both computational services and Web-based programs for conducting (reproducible) experiments in remote labs.

In a Q&A announcing the new bio fund, Pande added, “If you look at how the state-of-the-art in biology has always been done, it reminds me of something almost pre-Industrial Revolution. It’s rows and rows of people working with their hands at benches, and in an apprenticeship-like way under a master biologist (often a professor).”

Pande joined Andreessen Horowitz about a year ago as the firm’s first “professor in residence,” and helped guide some bio-related investments even before the firm raised the new bio fund. While the $200 million bio fund is a fraction of the firm’s last general fund, which checked in at $1.5 billion, Pande says the firm expects to grow bigger in time, “so establishing a separate fund is also about our thinking years down the road.”

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