Earlier this week, Forbes published its annual Midas List, whichshowcases who the outlet believes to be the top investors in the world. Stuart Peterson of Artis Ventures was on the list very fardown, behind the many VCs whose names are instantly recognizable to founders, like Chris Sacca and Peter Fenton and Mary Meeker.
The way Peterson tells it, thats the way he likes it. Theres a reason he didnt put his name on the door 17 years ago when he left the hedge fund Cypress Funds in L.A. to open his own firm in Silicon Valley. Im not crazy about being the center of attention. I never wanted to do this by myself. I think you can be successful if youre part of a successful team.
Certainly, Artis has seen its share of success. In one of its most notable deals, it invested in YouTube before the company sold to Google in 2006. A family connection seemingly helped. At the time, Artisemployed David Lamond, son of renowned VC Pierre Lamond, who spent 30 years with Sequoia Capital, another early YouTube investor.
Artis also invested alongside Sequoia in a number of other deals, including Aruba Networks, whichwent public in 2007 and was acquired by Hewlett Packard Enterprise in 2015. Lamond left Artis in 2012 to form his own firm.
Artis whose newer bets include troubled Juicero , along with Zenrez, a company that sells pricing technology and tools to fitness studios more recently made a killing off the sale of cancer drug developer Stemcentrix to AbbVie last year for $10.2 billion.
Artis led Stemcentrixs Series A round and Peterson sat on the companys board. In fact, though Founders Fund has received much attentionfor leading the companys Series B round (it reportedly returned $1.4 billion off a $300 million investment in the company), Petersonsays Artis made just less than $1 billion from its $35 millioninvestment in the company.
Asked how he landed the deal, Peterson points to a2010 event tounveil a social apps fund created by Kleiner Perkins. At the time, famed VC John Doerr was hosting a panel that included Facebook CEO Mark Zuckerberg and Amazon CEO Jeff Bezos, and Doerr asked Bezos what advice he had for investors and founders.
If I were coming out of school today, said Bezos, I think I would be very passionate about genetic engineering, synthetic life, I think these are incredible areas . . .
Doerr, confused by the change of subject, interrupted, On social networks?
No, Bezos continued, Im talking about test tubes and engineering real biological organisms to solve clean energy and a whole bunch of interest issues.
I was blown away by that, says Peterson, whose firm has invested roughly a billion dollars since its inception, some of itin life sciences companies, and much of it via special purpose vehicles whose funding has come from CEOs, CFOs, actors and sports stars. Says Peterson, They love the idea of access, and theyve added a tremendous amount of value to companies that weve funded.
So where isPeterson who plansto raise a fund for Artis next year getting his leads today? We asked him that and much more in a wide-ranging conversation yesterday. Heres an outtake:
TC: You got behind Stemcentrix at a time when not many in Silicon Valley were focusing on novel biotech cancer drugs.
SP: You had Zynga and Groupon and Twitter and all these seemingly overnight successes that had raised very little capital and were producing great returns. We felt like maybe theres just one YouTube and now its time to move on.
TC: VCs certainly would agree with you at this point. I dont think a week passes withoutanother firm jumping into biotech investing.
SP: Because a lot of benefits accruing to the tech landscape are now accruing to the life science space. Ten years ago, it cost a few million dollars to map out the human genome; now its a few hundred dollars and before you know it, itll be $30. Its collapsing faster than Moores Law.
But its not just about mapping out your genetic instruction set; theres opportunity in everything that lives on and inside of you. Its funny, we dont even understand yet whats going on in our microbiome, yet we want to travel to Mars. I love the enthusiasm, but our bodies are their own solar system. We need to get to a point where instead of having a doctor test you for 20 or so pathogens to figure out whats wrong, the doctor says, Were going to sequence your bacteria, fungi and viruses, and Im going to tell you exactly what you have in an hour.
Its like thisNetscape browser moment. You knew it was powerful, but you didnt know where it was going to take us. Now we know that mapping out your own instruction set is powerful, but where will it take us? I think well find out shortly, and that its going to release a tremendous amount of value.
TC: What are some of your more recent life sciences bets?
SP: We did the Series A of a company called IDbyDNA [which aims to be able to identify any pathogen] a year ago. We funded Fabric Genomics [whose software aggregates insights about cancer and pediatric genomics from around the world, then spits out an actionable report for lab technicians to send off to clinicians].
Were going full circle [in our newfound ability to more easily find co-investors]. When we looked at Stemcentrix and needed to find another investor, it was really hard.We all looked around the table, and we said, We better call Peter Thiel. I didnt have a number two.
[Editors note: Asked for comment, a spokesperson for investor Brian Singerman, who is credited with betting on Stemcentrix on behalf of Thiels Founders Fund, says Singermanwas introduced to Stemcentrix via the debt firm WTI.]
TC: You made it on Forbess Midas List this week. How are you feeling about it?
SP: I see 12 people who funded Twitter. If I was given a choice between funding a targeted therapeutic to cure cancer or Twitter, Id take the therapeutic. I look at the garbage thats funded every day, and even if its hugely successful, who cares? Will it change my life?
TC: Alot of investors do seem to be experiencing a similar shift in thinking.
SP: I think were seeing it. Y Combinator is trying to wrap its arms around the life sciences opportunity. Yesterday we put a term sheet out to a life sciences company, and guess who was there with a term sheet? Andreessen Horowitz.
Whats interesting to watch is how people pivot but try to keep their story intact. The venture firm Data Collective wanted to do everything in big data, but then they began to see the opportunity in life sciences. So what do you tell investors? That genomics is the biggest data opportunity weve ever seen. Andreessen is the same. It was never going to invest in healthcare, then it had to pivot into life sciences without looking crazy.
I think its great, by the way. If youre investing in [the video platform] Vessel [acquired, then shut down, last year by Verizon] or [the pet-sitting service] DogVacay, I dont think you can complain about the lack of exits.
TC: So were talking about Benchmark here. I dont think theyve jumped into life sciences.
SP: Trust me, if [Benchmarks] Bill Gurley went after these targeted therapeutics and he was successful, he would have asmuch liquidity as he could imagine. Sequoia is trying. Kleiner is trying. Either these firms pivot or theyll disappear. They just wont be relevant.
TC: Youve funded an array of companies from different industries. Are you saying youll only do life sciences deals now?
SP: We look at everything. We led a $35 millionround in [the networking company] Versa Networks. Were about to lead another round in a healthcare company thats in stealth and well probably raise $35 million for them. We invest in about a dozen companies each year. But theres no mandate. This may be the last networking deal we do, or the last targeted therapeutics deal we ever do.
As far as the consumer-facing space, I dont know. I mean, [the video editing and movie making app] Flipagram I dont even know what this is. I was like, I cant listen to this for five minutes. It looks like Instagram to me with longer video feeds. Its numbers probably looked just like Googles early on, but I didnt care. [Editors note: Sequoia and Kleiner, Googles earliest venture investors, wound up co-leadingFlipagrams early funding. The company, which struggled to gain momentum,sold in February to the Chinese company Toutiao.]
Same with Jet.com. I just thought: If this is hugely successful, who cares? Amazon is already operating on razor-thin margins.
I think people in the Midwest, when they see five different billionaires that come out of a place like Twitter or 12 different venture funds that helped make acompany asuccess, they might wonder: Is this the best we can do? Really?