Strategy Session: Foresite Capital Brings In $969M For Companies Transforming Health Care

Strategy Session is a feature for Crunchbase News where we ask venture capital firms five questions about their investment strategies.

Foresite Capital, a multistage health care and life sciences investment firm headquartered in San Francisco, closed an oversubscribed fundraise of $969 million for its Foresite Capital Fund V and Foresite Capital Opportunity Fund V.

With those new capital commitments under its belt, the firm has approximately $4 billion in assets under management and intends to deploy funding into emerging health care and life sciences companies, at all stages, that are solving some of the biggest inefficiencies and pain points of the $10 trillion global health care market.

Foresite began making investments from its fifth fund in July 2020 to companies which include Affinivax, Cullinan Oncology, Kinnate Biopharma and Remix Therapeutics.

We spoke to Jim Tananbaum, founder and CEO, about how the firm works with founders, why health care is having a moment and the firm’s incubator. What follows has been lightly edited for length and clarity.

Jim Tananbaum, founder and CEO, Foresite Capital.

How do you like to work with founders?

Tananbaum: We love doing everything we can to be helpful. We are highly technical and have a heavy emphasis in deep learning, causal inference and data science, as well as biology and medicine. We pride ourselves on being able to speak all of those languages and having resources within science and technology.

Since the firm was started in 2011, how have health care pain points changed?

Tananbaum: Health care is going to go through a massive transformation. We named our firm Foresite because we thought we had an idea of what that transformation would look like. Health care will turn into R&D and delivery will turn into something technology and science-driven, individualized and preventative. The whole idea is we all have a predisposition to disease, which comes from genetic and lifestyle choices. Over time, delivery information will help people have the healthiest possible life they can. It sounds simple, but it is immensely complicated. We see health going through a big overhaul that parallels other segments.

Health care, at the end of the day, is a framework of measuring whether something is statistically better. It is done in other areas; Google uses A/B testing all the time. Those frameworks are making their way into health care in many ways. Health care is going to be personalized, will be available at the consumer level, will be distributed, and people will get the same kind of efficient answers to things about their health. Right now, answers are generic. You get told you need to take these two tests to see what you have, and then we can tell you what you have and how to treat it. Over the last decade, we have invested in the health care economy, as it exists today, and the infrastructure to enable the transition to a new health care system over the next decade.

Why is health care having a moment right now?

Tananbaum: It is time. Digital health was accelerated by COVID and lowered the barrier to entry for people to trust digital delivery of care. Consider how trustful you were of a TeleDoc two years ago. Now COVID comes and you have to rely on this channel. A number of us have said “this isn’t bad.” Once you go through the switch, once you get comfortable with the digital option, you realize this is a viable option. And it isn’t going back. The genie is out of the bottle. People at all ages are open to virtual care, and that has been huge. When you distribute care virtually, you can create frameworks. On top of that, there is an explosion of biological and genetic information at scale that is large enough to be able to give us insights.

Do you think all of this activity enabled you to raise your biggest fund focused on this sector?

Tananbaum: I think it was a number of drivers, and that is one of them. We are fortunate to have quite a run. We were averaging an IPO per month among our portfolio. Others we watched grow up and be visible. Like 10X Genomics, we were the largest shareholder when it went public. We started with Kinnate from scratch in January 2018, which is producing treatments for incurable cancers. A lot of the companies have been moving faster now because of the technology, the systems and the frameworks. They are accelerating the progress pace, and we are going to continue to see that.

In October 2019, the firm launched the Foresite Labs incubator, which has incubated five companies now. How is that going?

Tananbaum: We are excited about that. They will start to be more well known publicly this year. There are some fantastic entrepreneurs associated with those companies. It is quite possible to see one of those go public this year. We believed that tech entrepreneurs don’t speak biotech and genetics as well, and medical entrepreneurs don’t speak tech as well, so we developed a platform that could create cross development. We have engineers who are experienced with human data and then have entrepreneurs tap into tools to build things. No one has done anything quite like this. It required a few years to get up and running, but we are really proud of what it is doing, and the companies coming out will speak for themselves.

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