Healthcare innovation always takes much more time and capital than anyone ever imagines. However, it can yield surprisingly long-term impact and enduring value.
Jim Tananbaum is founder and CEO of Foresite Capital. Jim architected Foresite in 2011 as a healthcare-dedicated private equity firm specializing in identifying emerging healthcare leaders, which it helps grow to profitability by supplying capital, networks, and information.
Prior to founding Foresite Capital, Jim co-founded two leading biopharmaceutical companies and two healthcare investment practices. He founded GelTex Pharmaceuticals NASDAQ: GENZ), which brought two drugs to market for less than $80 million. GelTex was acquired in 1998 for $1.6 billion when its lead drug, Renagel (Renzela), had an annual revenue run rate in excess of $200 million. Today, Renzela is estimated to produce close to $1 billion in annual revenue, 22 years after its launch. Jim also co-founded and was CEO of Theravance, Inc. who share GSK’s respiratory franchise through a joint venture, Innoviva NASDAQ: INVA), and completed a spin-off, Theravance Biopharma, Inc. (NASDAQ: TBPH). The two companies have a combined market capitalization of approximately $3.2 billion.
Jim’s investment experience includes being a founding partner of Prospect Venture Partners II and III, and earlier in his career, a partner at Sierra Ventures, where he helped establish its healthcare services investment practice. Jim has led numerous investments, including Amira Pharmaceuticals (acquired by NYSE: BMS), Amerigroup NASDAQ: AMGP), Healtheon NASDAQ:WBMD), and Jazz Pharmaceuticals NASDAQ : JAZZ). Jim founded Foresite Capital with the vision of marrying elements of all aspects of his career to create a novel investment platform.
Jim was a math and electrical engineering/computer science major at Yale and received his M.D. and M.B.A. from Harvard and his M.S. from the Massachusetts Institute of Technology. Since high school, Jim has been passionate about the marriage of interdisciplinary hard sciences and computer science with healthcare. He has had numerous long-term productive relationships with many different leading academicians. Jim has been mentored by his collaborators, George Whitesides (Harvard), Rick Klausner (NCI), Roy Vagelos (Merck and Theravance), Bob Gunderson (Gunderson Detmer) and Rick Levin (Yale). Jim is passionate about continuing his evolution of working across fields with leading entrepreneurs and academicians and believes we are beginning to enter a period of great change and growth driven by developing insights in deep learning and science.
Where did the idea for Foresite Capital come from?
The idea of Foresite came from my more than 25 years of being a healthcare entrepreneur and investment strategist. In that time, I can point to several experiences that led me to identify key success factors that would enable successful entrepreneurs and companies— most of which lie in the science behind innovation and the teams that make it all happen.
To me, Foresite truly means to understand and harness healthcare’s future. The insight came from recognizing that because innovative healthcare products and solutions often require significantly more time and capital than most entrepreneurs and financiers appreciate, we as Foresite could play a critical role for emerging leaders by supplying information, networks, and capital to help drive their success. By collecting and digesting all available published information about healthcare advances in an area of need, we are able to understand what is needed to truly impact care, and thus determine the most viable investment prospects with the highest probability of success.
Today, Foresite has invested in 77 different healthcare companies in biopharmaceuticals, medical services, diagnostics and genomic sequencing. Investments of note include 10x Genomics, Intarcia Therapeutics, Aerie Pharmaceuticals and Aimmune Therapeutics.
What does your typical day look like and how do you make it productive?
The vast majority of my work day is spent with the other members of my team on calls and in meetings that are split between discussing existing portfolio company updates, new company presentations and networking with healthcare thought leaders. Family is my highest priority and one of my favorite activities is having dinner with them. If I’m not with my family, I am usually networking or having dinner with friends. I also make sure to find an hour to workout each day in between meetings.
How do you bring ideas to life
To me, bringing ideas to life not only involves capital, but it requires engaging the smartest, most persistent and effective thought leaders in healthcare. Our business is about giving these individuals the means to be able to make the critical scientific discoveries that have the potential to make the greatest impact on healthcare.
What’s one trend that really excites you?
The science behind healthcare innovation is at the core of what I do and I am always inspired by the ways in which entrepreneurs can apply it to solve healthcare’s largest unmet needs.
At some point in the near future, most of you reading this article will have your tissue, blood and/or saliva sequenced for disease prevention and treatment. This is where data science and deep learning will play a significant role. While these concepts are areas that have largely been employed in the tech sector, they have endless applications in genomic sequencing and drug development and can help yield greater biological insights. I am excited to see how these areas evolve in the next few years.
What is one habit of yours that makes you more productive as an entrepreneur?
Although I have a focus on the business and investment side of healthcare, I believe I am an academic at heart. My love of learning is what drives me to find the best and brightest solutions science has to offer. That passion, coupled with unwavering persistence and commitment, are what allow me to continue building the firm and expanding our innovative portfolio.
What was the worst job you ever had and what did you learn from it?
Although “synergy” is commonly referred to as a buzzword, I believe it is what drives the most successful teams. The worst professional experiences that I have had are when the people that I am working with don’t complement each other or myself. Team dynamics are critical. Partnerships, in my mind, should be about 1+1 = 3. With your partners, you are able to be substantially more productive. I have been in situations where 1 + .5 = .25. This obviously doesn’t add up to success. When equal partners are insecure or are non-productive, a great deal of dysfunctionalities occur.
If you were to start again, what would you do differently?
If I could go back, I would have believed more in myself. I used to execute a combination of what I thought was best and what others thought was best. This would inadvertently lead me to compromises. In 2000, I had the concept that a large dedicated healthcare fund would have competitive advantages across asset classes (private and public). The fact that everyone told me that I had to set it up like other venture partnerships led me to make substantial compromises. Looking back at the successful partnerships of the last decade, by and large, they did not fit into the models of their times. They marched to the beat of their own drummer. If I were to start again, I would grow my business concepts entirely on what was ideal for business growth as recognized by myself and be less accepting of doing things the way they have always been done. It’s about disruption, not convention.
As an entrepreneur, what is the one thing you do over and over and recommend everyone else do?
I tend to take more risks, especially when I have spent a lot of time understanding a situation. I have learned that if I spend an extended period of time on due diligence, I am much more likely to have a multiple return than a loss. In fact, most people believe the biggest sin, especially as an investor, is to lose capital by making a risky investment. I believe the biggest sin is to not invest in the big returning companies because of fear of losing. The flip side is that it is easy to lose money in businesses that you haven’t studied thoroughly. I believe the best investors and entrepreneurs are diligent and optimistic, the worst are optimistic and lazy, and the pessimists generally aren’t entrepreneurs at all.
What is one strategy that has helped you grow your business? Please explain how.
Healthcare investing is ever changing. This is why I always think critically about “where the puck is going” and who are the best people to synergize with my organizational expertise when the puck gets there.
What is one failure you had as an entrepreneur, and how did you overcome it?
In 2009, I had multiple opportunities to invest in companies that I knew well and that I knew needed capital. I was a senior partner in a fund where my other partners were frozen by the environment and deployed almost no capital in 2009 and 2010 despite having $100s of millions available for investment. When I finally extricated myself from my partners in 2010, I was trying to raise money on my own during the height of the recession. About 99 out of 100 potential investors turned me down. Despite these roadblocks, I put my nose down every day in order to get my new business off the ground. I invested all of my liquidity in people to support my entrepreneurial exploration and deeply believed that if I found something compelling, I would be able to make it happen. My persistence, focus and belief in myself ultimately allowed me to pull together a new set of investments in an entrepreneurial fashion on my own terms.
What is one business idea that you’re willing to give away to our readers?
There is a need for more great entrepreneurs. Many of the readers that are looking for great ideas might also be looking for a process that leads to a successful business. Because of the shortage, they are more likely to run into great ideas by approaching top funders like ourselves to help assemble high quality earlier ideas.
What is the best $100 you recently spent? What and why?
I recently purchased Evernote and subscribed to Spotify.
What software and web services do you use? What do you love about them?
Outlook and Salesforce – we can integrate everything in our day to day.
Big Query + Tableau – we can go through everything we get into one big database that we can pull information from.
What is the one book that you recommend our community should read and why?
Causal inference in Statistics – Pearl, Glymour and Jewell. Someone just gave it to me as a gift and it refreshes many common principles that are used everyday in deep learning.
- I used to execute a combination of what I thought was best and what others thought was best. This would inadvertently lead me to compromises.
- If I were to start again, I would grow my business concepts entirely on what was ideal for business growth as recognized by myself and be less accepting of doing things the way they have always been done.
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Foresite Capital on Twitter: @foresitecapital
Mario Schulzke is the Founder of ideamensch, which he started a decade ago to learn from entrepreneurs and give them a platform for their ideas.