Luciano Santollani is currently working towards his PhD at MIT developing novel cancer therapeutics, and is also working as a venture capital associate at Pillar VC. He recently wrote an insightful analysis A Founder's Guide to Data-Driven Budgeting in Biotech, featuring survey data on biotechs ranging from 2-60 employees across various applications, and providing quantitative answers to questions like “How much money should a biotech startup raise?”, “How much should one budget for R&D?”, “How much does it cost to attract top talent?”, and other actionable information.
In the interview below Luciano expands on the topic of biotech startups, emerging trends in the biotech industry, and convergence of technology and biology.
Andrii: Tell a bit about your vision in life sciences. To start with, what is your research focus and why did you decide to combine research and venture capitalist careers?
Luciano: My biotech journey began towards the end of my time at Stanford, where I teamed up with 2 bioengineering colleagues to commercialize a hypothesis around targeted protein degradation for neurodegenerative diseases. At its core, the idea was to engineer designer E3 ligases that would selectively recognize and break down harmful proteins associated with neurodegenerative indications. As three naive undergrads, we stumbled our way through designing the key experiments to de-risk the idea and ultimately managed to raise a bit of money to get started in the lab. In the end, the science didn’t pan out, but the experience made one thing clear — in the long run, I wanted to be involved with starting early-stage therapeutic start-ups.
That realization pushed me toward grad school, where I’ve been working on developing novel immunotherapies for cancer treatment with Dane Wittrup and Darrell Irvine at MIT. Specifically, I use protein engineering tools to help improve the therapeutic index of cytokines, a class of immunotherapies that has always been promising but plagued with toxicity issues. Having such an exciting project and incredible mentors has made grad school the perfect sandbox for learning the ins and outs of pre-clinical development.
I joined the team at Pillar VC about a year ago as a venture associate, helping bridge the gap between translational academia and early stage biotech. I still see myself as being a founder in the future, but understanding fundraising from the investing side has been an eye-opening experience. Of course, I’m not proclaiming to know how to start a biotech company (yet!), but the pattern recognition has helped me build mental models of best practices when fundraising. Combining research and VC play very well into each other — my deep immuno-oncology and preclinical experience helps with diligence on potential investment opportunities. I hope to continue operating at this interface between academia and early-stage start-ups after graduate school.
Andrii: Can you outline some trends in the biotech entrepreneurship area, did it become more (or less) difficult to start a biotech company in 2022, than it was 10 years ago? What about raising money?
Luciano: I think the early stage biotech ecosystem is at a really interesting inflection point. Over the last decade, an explosion of exciting new discoveries and technologies ushered in an unprecedented level of capital into biotech VC. However, the number of companies started during that time did not scale accordingly. Instead, capital became concentrated in a handful of deals, with Series A raises often surpassing the $100 million mark. We are seeing some changes to this given the recent biotech sell-off in the public markets, but the conclusion remains the same — as my mentor at Pillar, Tony Kulesa, aptly puts it, the limiting resource for starting a biotech company may no longer be capital or technology; it’s founders!
For this reason, I think it’s a great time to start a biotech company. In fact, I think this moment in biotech may have parallels to the rise of the technical founder that the tech ecosystem went through a couple of decades ago. Inspired by the success of the Google founders and others, this model quickly became the norm in Silicon Valley. Even though manipulating biology to develop drugs has innate differences and difficulties over a software business, I believe there is room for young, technical founders in biotech as well.
I don’t think raising money will ever be easy, but I do believe there are a lot more resources for newcomers today than there were 10 years ago. At Pillar, we’re doing our best to help catalyze new biotech companies with events like Frequency and Founder-Led Biotech summit as well as our Founder Playlist, which includes guides on budgeting, IP, and fundraising. There are also new programs like Nucleate, which directly help scientists in training spin out their research into companies. I’m optimistic that as an industry, we’re moving in the right direction to help maximize the translation of academic discoveries to potentially life-saving medicines.
Andrii: What areas of biotech will be booming in the coming years? Where future entrepreneurs should be paying their attention?
Luciano: One that won’t come as a surprise is robust in vivo delivery. Over the last few years, we have seen the potential for gene and cell therapies — everything from base and prime editing to RNA therapies — to revolutionize treatment. Ultimately, the limiting factor for many of these approaches will be delivery — ensuring that the payload is delivered to only the correct location. There are many approaches, including LNPs, AAV, lenti, virus-like particles (VLPs) being explored, and I don’t think there will be a one-size-fits-all solution. For example, in DNA editing applications, where the effect is permanent, transient delivery of protein via VLPs may be the best solution to minimize off-target editing. In the case of RNA editing via ADAR, you may want constitutive expression of the guide RNA via a viral vector. Finally, for in situ CAR-T generation, RNA delivery to T cells via LNPs may be the best approach. This is a complex puzzle that will require breakthroughs in tissue and cell-type specificity, endosomal escape, and nuclear translocation in some cases. There’s a lot of value to be unlocked in this space, but I think there is still a long way to go and I’m excited to follow this journey.
Another area which I’m excited about but is less appreciated is glycobiology. Specifically, I’m interested in the role of glycans in disease and our ability to generate therapeutic hypotheses around these discoveries. A great example is Carolyn Bertozzi’s lab showing that by upregulating sialic acid on their surface, cancer cells inhibit the anti-tumor response much in the way that the PD-1/PD-L1 axis works. This hypothesis is now being explored by Palleon Pharmaceuticals through a tumor-targeted sialidase that aims to inhibit the interactions between the sialic acid and its cognate receptor on immune cells. I believe there will be many more glyco-immune hypotheses 10 years from now.
I also believe molecular glues will continue to grow in the coming years. Targeted protein degradation by PROTACs has paved the way for new induced proximity approaches beyond degradation, and I’m excited to see what comes out of that. In general, the best way to know what will be booming is to always be reading and keeping up with the best academic research. I find the biology and biotech communities on Twitter to be a great resource for keeping up with novel research that may have commercial potential. One final thing to pay attention to are the new hires at top biology and bioengineering departments. These new professors are often working at the cutting edge and will likely bring a new perspective to a field that may result in a key discovery.
Andrii: Launching a biotech startup is difficult, but knowing benchmarks helps. In your recent post “A Founder's Guide to Data-Driven Budgeting in Biotech” you explained how much money one has to raise to run a biotech startup. Can you summarize key conclusions and advice on this matter here?
Luciano: We often get asked by future founders how much money they need to raise for their idea. So the goal here was to try to crowdsource some data and lessons around budgeting from the community. We surveyed 12 early-stage founder-led biotechs to get a sense of their burn and specifically what were the key cost drivers. At a high level, these companies, regardless of application or stage, are spending around $20k/month/employee. Of course, this is simply a heuristic, but it can serve as a tool for planning your fundraise. Once you have honed in on the key milestones to validate your platform or asset, work backwards: figure out how many people and how long this will take, and use the $20k/month/employee to get a ballpark figure. It’s still necessary to pressure test this number by granularly calculating a budget, but it can be a helpful figure to get started. Another key finding is that even though R&D can be expensive, people will be your biggest cost driver, accounting for about 50% of overall burn for the companies we surveyed. Finally, we give benchmark numbers for how much equity an SAB member should cost, how much to budget for initial patent filings, and much more!
Andrii: Do you agree that one of the most important trends in modern day Life Sciences is the convergence of “technology” (like AI, robotics, high-throughput experimentation) and “biology”? How do you think this influences the biotech business models? For example, do you think that we will see more “virtual biotechs” in the coming years, compared to more traditional “wet-lab” companies with offices and production lines in-house? Or, maybe, the drug discovery will be dominated by “platform-based” models?
Luciano: Tech and software breakthroughs will definitely unlock efficiency in biotech development, but I don’t think it will fundamentally alter how we develop drugs. CROs are also making an impact on the ecosystem, with some entirely “virtual” biotechs. One interesting use case of this model is for small, lean teams to take the next step in de-risking a technology without having to rent lab space or hire an entire team. Another benefit of this approach is being able to operate across a wider therapeutic space and potentially having programs in many areas — Cullinan Oncology is a great example of this. That being said, of the 12 companies we surveyed, only one heavily relied on CROs. The rest all chose to build their R&D pipeline in-house, so I think we will continue to see both models, depending on which is a best fit for each application.
In terms of platforms, we saw them become the norm over the last funding cycle. However, with many mature assets being offered at a discount on the public market, we may see this work backward in private financing as a push toward single assets again. In my opinion, even though platforms theoretically give you the possibility to generate multiple assets, there are not that many cases of true platforms with differentiated products across multiple spaces. In early stages, I think “platform” can be a bit of a misnomer: you will likely be focusing all of your resources into your first indication and no one will give you money to try again if it fails. In this sense, platforms can be just as risky as single assets. Very likely, we will see them wax and wane in popularity depending on the funding ecosystem.
Andrii: What is one lesson you’ve learned as a venture associate that you think would be useful to future biotech entrepreneurs who plan to start a company?
Luciano: This might sound straightforward, but my biggest lesson so far is that the fundraising process begins long before you actually start collecting term sheets. There is a lot of nuance to investor relations and knowing what VCs are looking for, so the earlier you start, the better. Specially in early stage biotech, where there are only a handful of firms that are investing in this space, it can go a long way to know all the details behind them. Start by building a list of target investors and their attributes, including who the key contact would be, what areas they focus on, any areas they do not invest in, typical check size, how far along they are in the current fund, etc. If you have any connections to investors already, start there — warm intros are great and can many times lead to subsequent introductions. Many of these firms also host community dinners or other events. Even if you’re not at the fundraising stage yet, it can be helpful to start showing your face around those circles and start building excitement about your idea. Don’t oversell what you have, but it’s always good to be on investors’ radars. Finally, I’ll say that even though there is no recipe for successful fundraising, there definitely are things that can make you look either more experienced or more naïve. You will learn these things over time, but practicing your pitch and getting advice from founders who have successfully raised money can be hugely helpful to hone your craft and avoid potential pitfalls.
Topics: Biotech Companies