Giving Compass' Take:
- Six investors offer their thoughts on emerging AI in many biotech startups and its effectiveness in gaining project investment.
- How can donor capital help advance AI in health tech?
- Read about the impact of AI and technology on healthcare disparities.
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As ChatGPT has so aptly demonstrated, AI is now truly entering the mainstream consciousness. That’s why we weren’t very surprised when a slew of investors told us they rarely see a biotech startup that doesn’t incorporate AI in some form or other these days.
“Most of the companies we have seen have an AI component to support the discovery or development processes,” Francisco Dopazo, a general partner at Humboldt Fund told TechCrunch recently.
But despite becoming quite the buzzword, AI’s apparent ubiquity in biotech isn’t actually driving deal flow or higher valuations. So to get a better idea of how AI is affecting biotech in 2022, we asked six investors to tell us what they look for in a biotech startup today.
For Franck Lescure, a partner at Elaia Partners, in biotech, having an AI component isn’t an automatic deal closer. “We do not favor biotech startups with extant AI over those without: Bio-revolution is not only digital. Digital is one tool; the other major tool is the living organism,” he said.
VCs are also increasingly looking for what biotech startups can do with AI beyond just R&D and are wary of companies that use the technology as a marketing tool.
“When evaluating ‘AI for drug discovery companies,’ I view AI as a tool,” Shaq Vayda, principal at Lux Capital, told TechCrunch. “Much like how any modern biotech company is using the latest and greatest tools, AI is becoming more and more common as part of biotech workflows. The bigger question for investors is getting a better understanding of what exactly AI is attempting to model and predict.”
Also, just because a startup uses AI doesn’t mean it can escape being compared to struggling public biotech comparables. “The public markets are the final arbiters of value, and the valuations coming back to earth this year have begun to flow through to startup funding,” said Sarah Guo, founder of Conviction. “I expect we’ll continue to see some digestion through the next year or two, as many midstage companies have built major war chests and don’t yet need to come back to market.”
The survey also covers the implications of U.S sanctions on China for startups in the space, considerations for startups thinking of taking capital from government bodies, how to pitch these investors and more.
Read the full article about AI in biotech by Anna Heim at TechCrunch.