FoundersX Ventures Makes Headway Toward $100 Million Tech, Life Sciences Venture Fund
7-28-2022, WSJ Pro Venture Capital, By Brian Gormley - FoundersX Ventures, part of a group of technology venture firms making a push into life sciences, is raising $100 million for its second fund.
Menlo Park, Calif.-based FoundersX formed in 2016 and closed a $20 million fund that year. The firm, which has raised additional pools of capital to make individual deals in later-stage companies, invests in sectors including enterprise software as a service, space technology, fintech and healthcare.
Technology investors see opportunity to apply tools such as artificial intelligence and automation to tackle longstanding healthcare challenges.
FoundersX has financed startups including 1910 Genetics Inc., which aims to increase the speed and productivity of drug discovery through technologies such as AI and computational chemistry, and Cognito Therapeutics Inc., whose brain-stimulation device could treat diseases such as Alzheimer’s.
Large technology firms increasing their life sciences investments include Playground Global, also a 1910 Genetics investor; Andreessen Horowitz; Lightspeed Venture Partners; and GV, the venture arm of tech giant Alphabet Inc.
Over the last decade, exponential advances have occurred in the ability to read, write and edit DNA, and computationally mine biological insights from data sets, said Eddie Eltoukhy, a partner with tech and life sciences venture firm Pear VC, who joined the firm earlier this year from biotech company Senti Biosciences Inc. to increase Pear’s ability to make tech-bio investments.
U.S. healthcare venture capitalists raised $15.8 billion in the first half of this year, putting 2022 on pace to top the record $28.3 billion they collected in all of 2021, according to Silicon Valley Bank. Technology investors increasing their focus on healthcare contributed to the rise. In the first half of this year, 50 new tech-focused funds closed with 5% to 15% allocations to healthtech, according to SVB.
FoundersX has raised nearly half of the new investment pool and expects to complete fundraising later this year, said Helen Liang, the firm’s founder and managing partner.
Dr. Liang, who has a doctorate in materials science and engineering, previously had a more than 13-year career with data-storage-technology company Seagate Technology Holdings PLC, which she joined in 1999.
Her roles included working with academic researchers whose technology could mature into a commercial product useful to Seagate. The company provided funding for academic science it saw as promising, similar to how a venture firm makes early-stage investments, Dr. Liang said.
“I really enjoyed that,” Dr. Liang said, adding that the experience sparked her interest in nascent technology.
She left Seagate in 2012 and the following year started a business connecting startups to venture capital before launching FoundersX, whose team also includes Partners Tom Kosnik, a veteran technology investor, and Leo NW Cui, who has a doctorate in bioengineering and works from the firm’s Cambridge, Mass., office.
FoundersX has made tech investments in companies such as ClearAccessIP Inc., a provider of an intellectual-property-management system that was acquired in 2020 by fintech company IPwe Inc.
In life sciences, the firm has been betting on startups with broad technologies, like Cambridge, Mass.-based Cognito, whose work stems from research by Massachusetts Institute of Technology professors Ed Boyden and Li-Huei Tsai.
Cognito’s headset uses auditory and light stimulation to increase the connectivity of neurons and activate microglia cells, which clear harmful proteins from the brain, said Chief Executive Brent Vaughan. Cognito soon expects to start late-stage clinical trials in patients with Alzheimer’s and mild cognitive impairment, he added.
As Cognito conducts studies, it will accumulate a data set on how patients respond or don’t respond to its brain stimulation, which will be a powerful asset as it expands, Mr. Vaughan said.
“That was something Helen and her team understood from the very first meeting,” he said.
Since the brain doesn’t have to be diseased to respond to the stimulation, Cognito could also create a consumer wellness product, according to Mr. Vaughan.
Dr. Liang said she was drawn to what she saw as elegant technology and the toll dementia takes on patients. FoundersX views Cognito not just as a medical-device developer but also as an antiaging company with potential to prevent cognitive decline, she said.