From VC to Operator: The Career Move Nobody Recommended | Caleb Appleton (Part 3/4)

Intro - 00:00:06: Welcome to the Biotech Startups Podcast by Excedr. Join us as we speak with first-time founders, serial entrepreneurs, and experienced investors about the challenges and triumphs of running a biotech startup from pre-seed to IPO with your host, Jon Chee.

In our last episode, Caleb shared how he joined Bain, why he left to prove he could operate, and how he nearly started his own company before walking away at the term sheet stage. If you missed it, check out Part Two.

In Part Three, Caleb talks about joining Innovation Endeavors during its spinout from Eric Schmidt's family office, being tasked with sourcing and diligence with minimal structure, and why having no playbook forced him to grow faster as an investor. He shares how his first investment in Vicarious Surgical became his pathway to partnership, why a cold email resulted in a multibillion-dollar investment in Eikon Therapeutics, and the moment he realized good decisions feel liberating while bad decisions feel constraining. He also discusses leaving to prove he could operate, joining TuneIn in 2020 to lead a pandemic turnaround, and managing $50 million in revenue when canceled sports leagues decimated the subscription business.

Jon Chee - 00:01:35: And so now you're at the venture firm. And obviously, you read the book, but I imagine in practice, it is a bit different. What was this first kind of dipping your toes into venture? And what were the key lessons you took away from this experience?

Caleb Appleton - 00:01:50: Yeah. So Innovation Endeavors as a fund was also at a really interesting point in its life cycle when I joined. I don't remember how much of this I was told about during the interview process. It's very possible I knew all of it and just don't remember it, to be honest.

Historically, Eric Schmidt, the longtime Google CEO, was 100% of the capital of that business. It was essentially a venture fund within his family office. When I signed the offer, I was employed by his family office. That's where my paycheck came from.

Less than a quarter later—two or three months—there was a meeting where they said, "Okay, we're spinning out from the family office, and we're raising our own venture fund outside of Eric Schmidt's family office." I don't think I knew enough to know whether that was a good thing or a bad thing.

What it meant was there was just a lot of transition within the fund. It was building its own infrastructure. There was fundraising going on. It was trying to figure out how to cast itself as a leader in the areas it wanted to invest in, beyond just using Eric's name as an attractor to talent.

What that meant was there was a lot of opportunity as well for someone young and ambitious on the team. Really, the team at that point was two partners who were investing full-time, and then myself and two other associates. One was hired at the exact same time as me—also from Bain, also had a background in biology. I thought we were going to be fierce enemies because we were too similar, but now he's one of my closest friends still.

It created this opportunity where, because there was no structure—it was not Sequoia, it was not Andreessen, where they kind of professionalized the investment infrastructure—it meant that I was tasked with doing way more. That was both intimidating and incredibly liberating.

I was evaluated on how well I could source: Could I bring deals to the partnership? How well I could do diligence and partner with one of our partners to ultimately get to a yes or no on an investment decision? I was evaluated on how I supported the companies after that investment decision. And then, could I build a thesis that allowed us to determine how we wanted to invest?

It was very much not, "Hey, I'm reporting to this partner, they have flow, I help them sift through this." It forced me to grow quite a bit as an investor very quickly. I relied on mentorship inside the firm, and you develop relationships with investors at other firms. It's actually a much more collegial industry than I think a lot of people realize. Ultimately, the experience was much more like a mid-to-senior-level investor experience at most other firms, just built out of necessity because we didn't have the other layers to do it.

Jon Chee - 00:04:43: Yeah. Someone's gotta do it.

Caleb Appleton - 00:04:46: Yeah.

Jon Chee - 00:04:47: Very interesting. I'd imagine the spinning out is kind of a dislocation. I wouldn't say it's like a crisis, but the ground is moving.

Caleb Appleton - 00:04:58: Oh, for sure. We also had to figure out our direction. Prior to my joining—and this is just speculation because I wasn't doing it—a lot of the deal flow and thesis was driven by Eric's network, things he was finding interesting. Over time, that gravitated less towards consumer and software products and more towards deeply technical projects.

When we spun out, there was a lot of work that the founding partner, Dror, did around: What is our thesis and reason for being as a fund? They really rallied around this idea they called the "Super Evolution," which was this convergence of data, computation, and engineering toolkits impacting the physical world to allow us to learn 10x faster, cheaper, and more efficiently.

That had applications across supply chain, construction, infrastructure, but also biotech. They had done a number of investments in the space prior to my time. I don't think any therapeutics businesses at that point, but there were diagnostics. There was Karius and Freenome. There was Zymergen on the industrial synthetic biology side, and a number of others.

They really tasked me early on in my tenure with, "Hey, we have some investments that seem to be performing well here. Zymergen was a unicorn. I think Freenome was on its way to being one. How do we make sure that we're taking this thesis around data, computation, and engineering and investing in companies in the life sciences and biotech that are reflective of that?"

So, ultimately, that ended up being half to two-thirds of the work I was doing, which was really exciting.

Jon Chee - 00:06:39: Wow. You really had the true baptism by fire. Start to finish, you're sourcing, you're diligencing, you're setting the thesis. It's like a proper crash course of what it takes to lead a mission.

Caleb Appleton - 00:06:54: I had a ton of support—you wouldn't do it successfully alone. But yeah, it was both exhilarating, and you have tons of imposter syndrome. I was trying to figure out how the firm should invest in therapeutics companies. I'd never worked in a therapeutics business. I had this lab experience, right? I understood science and biology, but even then, my exposure was somewhat narrow. The technology landscape is constantly evolving. So there's plenty of imposter syndrome. Mine exists today, for sure.

Jon Chee - 00:07:26: Yeah, absolutely. I don't think you ever shake that. For anyone who's looking to get into venture—that almost feels like a startup energy to the fund. Would you recommend those who are trying to get into venture to pursue opportunities that look like that? Or pursue opportunities with structure, like a Sequoia or Andreessen? What's a better way to get into the industry?

Caleb Appleton - 00:07:53: My answer is that it just depends. From a resume perspective, having Sequoia on your resume is likely to be more helpful to you than a fund that's never heard of, unless that firm becomes a benchmark or has a massive outcome.

But I know that I would have found the venture job way less exciting and way less enjoyable at a place like that, where my scope was much more narrow—essentially supporting someone or doing mostly sourcing or mostly diligence.

You have to reflect on management styles. In the same way that there are different types of management styles, people respond to different types of management styles in different ways. I find that I really thrive in situations that require you to motivate yourself and create opportunity. Whereas I know other people—I've managed people like this—who do best when they're told, "Hey, this is what's on deck for this week." They might do excellent work there, but they respond better to that environment.

So as people are getting into venture, you should ask questions about what a day in the life is actually like in this role and try to put yourself into those shoes and see if it fits. The other piece that I'll mention is, yeah, there's just not that many venture jobs. So to some degree, you also just—if you want to be in the industry, you need to start somewhere.

Jon Chee - 00:09:20: A foothold somewhere.

Caleb Appleton - 00:09:22: Once you have a foot in the door, it's easier to find your way through other doors.

Jon Chee - 00:09:26: Yeah. Absolutely. And you're basically getting the soup-to-nuts venture crash course here. I know you eventually leave Innovation Endeavors. When did that fork in the road appear for you?

Caleb Appleton - 00:09:40: The work at Innovation Endeavors was super exciting. I ended up meeting my now-partners through my first-ever investment, which is a surgical robotics business called Vicarious Surgical. I was very fortunate—a cold email resulted in an investment in a company called Eikon Therapeutics, originally in Berkeley, now in the Mid-Peninsula, which has gone on to be valued in the multiple billions of dollars. That was truly a cold email I sent to the professor, which is how we ended up getting in.

Jon Chee - 00:09:50: No way. That's crazy. I love that.

Caleb Appleton - 00:10:12: So I had really cool experiences there. I think what caught up with me was, at this point, I'm five or six years into my career, and I've always been an advisor. In consulting, you're providing advice. As a venture investor, even on the boards of companies, you're an influencer and not a doer. I had this self-doubt: "Could I actually do the operator's job?"

I kind of saw the writing on the wall where there was an opportunity for pretty rapid career advancement within Innovation Endeavors, but I knew that it was only going to get harder for me to leave. It was going to be harder because I was more senior, and my comp expectations would change. It was also going to be harder to find the role that was a fit outside of the fund because I didn't have direct experience that people could draw from.

So I said, "Okay, this is probably a pretty natural time where I could leave and the door will still be open to venture." I could scratch this itch. Actually, going back to that person I mentioned earlier, Paul—one of the pieces of advice he gave me when I was making this decision was: Good decisions often feel liberating and bad decisions feel constraining. Leaving felt like this option that opened many doors in front of me, whereas staying increasingly felt like I was constraining myself to a career in venture, which I wasn't yet certain I wanted to do.

This is 2020. I don't know if you remember the year 2020, but it was a doozy. I did a couple of things. One, I decided I was leaving and communicated that to the firm. I applied to business school. I had a GMAT score that was expiring that year, so it was "use it or lose it." I applied to one business school, which was Stanford. I got in. Between getting in and having to decide whether to accept, the pandemic happened.

The reason I wanted to go to business school was to meet people, maybe meet a co-founder—the interpersonal dynamics. All of a sudden, it was Zoom class. Like, a $100,000-a-year Zoom class. And I was like, "Okay, I'm not sure I want to do that."

Jon Chee - 00:12:28: Yeah. It's not penciling.

Caleb Appleton - 00:12:30: Yeah. The other thing I was thinking about was that I really wanted to start something myself. It's not on my LinkedIn, but I spent the second half of 2020 focused on a company of my own in the healthcare services space. Up until the point where I went fundraising, I had multiple parties that I think were at the term sheet stage.

Ultimately, I decided not to move forward with that business because I just couldn't convince myself of the massive venture-scale opportunity. Having been on the other side of the table, I knew that—not to diminish the fact that it's very hard to start a company—but especially in 2020, you could raise capital for a good idea. Once you've raised capital, it's much harder to walk back through that door.

So I looked at myself and said, "Is this something I'm willing to dedicate seven to ten years of my life to?" I couldn't get to yes on that specific idea. I was doing it solo—I didn't have a co-founder—which now makes me really think about investing in single-founder businesses, because I think it is just way more challenging.

But I still wanted that operational experience. So I did something that seems like a non-sequitur in my career: I joined a later-stage business of the Innovation Endeavors portfolio by the name of TuneIn. The business, because of the pandemic, was having these massive headwinds related to things completely outside of their control.

I joined as part of a turnaround and a "do-it-all" role, like, "Hey, we need to save this ship." First, I was in a chief of staff type role reporting to the CEO, and then very quickly came to manage about half of that business's revenue—about a $50 million a year business. So I was very rapidly thrown to the operational waves to figure out how to sink or swim. TuneIn was a couple of years of actually doing the job, and doing so in what I would say was an adversarial environment where the business was not stable, and we needed to figure out how to do that.

Jon Chee - 00:14:51: Talk a little bit about the turnaround. That's really fascinating. I mean, look, I'm imagining Bain parachutes you into a Fortune 50. In this case, you're getting parachuted into a company that's on the ropes, but not a Fortune 50. So I would imagine it can be drinking out of a fire hose and probably very scary too. How was that turnaround experience for you, really rolling up your sleeves and getting your hands dirty?

Caleb Appleton - 00:15:19: Yeah. I mean, I think it is true that it is much easier to be part of a rocket ship that is growing than it is to be part of a boomerang. Conversely, though, from a learning and growth perspective, it was this really incredible experience.

TuneIn, for those that don't know it—you've probably interacted with the product even if you don't know about it. TuneIn is essentially a SiriusXM competitor. They provide audio, primarily radio stations, for playback across any number of devices. Where you've probably interacted with it but don't know it is if you own a smart speaker of any sort, you know, an Amazon Alexa or Google Home.

It was pretty funny—anytime we would say it on calls with that company, because everyone had these devices since we were constantly testing them, the devices would come off.

Jon Chee - 00:16:09: They got it. We had to learn not to say them.

Caleb Appleton - 00:16:15: If you asked Alexa to play NPR, it was coming through TuneIn. Or if you own an electric vehicle like a Tesla, the batteries in the electric vehicle impact the radio antenna, so it actually comes through the internet rather than radio, and TuneIn provides that.

About half of that business was a subscription business, and the other half was ad-supported. As I mentioned, the pandemic brought a lot of challenge because their subscription business—and Sequoia was actually the main backer of this business at that point—was based on what was good in live audio: sports and news.

The other thing that happened in 2020 besides the pandemic was that all of the major sports leagues basically canceled or postponed their seasons. TuneIn had the big bill that they were on the hook for, but were getting no content that historically drove subscribers.

So my job was: How do we figure out how to get out of these deals, reorganize them, make them more attractive to the business, and really reposition ourselves around the things that are actually driving positive economics?

That was really cool. The business had 70 million active users or something like that at the time. It was very different than venture. Venture was like, "I make a decision, ten years later I figure out if it's working." TuneIn was like, "We flip the switch, and we know tomorrow morning whether or not that went the right direction."

Jon Chee - 00:17:45: Yeah, yeah.

Caleb Appleton - 00:17:46: It was really, really cool. It was a turnaround, so there weren't a lot of resources to invest. We were really having to be smart, scrappy, and agile, and that meant I worked a ton. I lost sleep over these metrics that were constantly moving, but ultimately, that business got to a place where it was profitable and growing sustainably.

I can actually say this while we're on this call—they announced an acquisition, that they were acquired. So that was a really cool experience to be involved with and helped scratch this itch. Like, hey, if given the right sandbox, I found that I could operate and operate effectively.

Now as an investor, it's made me much more empathetic to founders. I have a much better sense of why—it's easy for me to sit in the boardroom and be like, "This is the right strategy, you need to do this." It's like five million reasons why at the next board meeting, it was harder than we thought to execute. So I have much more sympathy and empathy for the operator because it is hard. You're trying to do everything you can to make that company successful.

Jon Chee - 00:19:04: That's wild, to be honest. No one was planning for that. I'm trying to put myself back in 2020—just no one anticipated your revenue streams would go kaput. So, not only is this a turnaround, but a turnaround where you have this exogenous factor that comes in and absolutely gut punches the company. Being able to turn it around to profitability is incredible.

Were there some key levers? Did you guys change your revenue lines, shift things around, get a new product? How did you do that?

Caleb Appleton - 00:19:44: The honest answer was, as I mentioned, the business had a lot of really great fundamentals. Tons of users, they were using it frequently. I think it had been led astray by a strategy focused on the premium subscription user—essentially pursuing the Netflix model.

Netflix acquires new users—they release Stranger Things season four or whatever, a bunch of people come in to watch that, and they stay for the other content that's on the platform. TuneIn tried to do that same thing through sports leagues. The NFL would drive lots of people to the platform. But unlike Stranger Things, they wouldn't stick around for the other sports. They would be like, "Okay, I really need this because I want to listen to the Packers play while I'm driving," or whatever.

This is also hard to believe, but when they were first doing these deals—2014, 2015—you couldn't stream video for an NFL game. So audio was where you went. That shifted right underneath their feet. Cell phones got better, 5G became a thing, and ultimately, it was less critical.

So a lot of the work we did before myself and the rest of the management team joined was looking at: What is really special about this business? Why did so many people start using it? And how do we lean into that specialty and not the things that are highly expensive bolt-ons?

That looked like two things. One was really investing in the ad-based business, the free product. This is like, "Yeah, I grew up in Texas, I really like my hometown radio station, but I live in California now. I want to listen to that. It brings me closer to my home." It hadn't done a good job of monetizing that as effectively as possible while still preserving that free user experience.

On the subscription business, which ultimately I managed, the question was: How do we double down on the content that is working and is retentive, and eliminate the things that aren't driving ROI for us and have significant cost?

It was a lot of data science and ultimately hard decisions. The NFL was like cocaine, right? You got this quick high that came in at the beginning of the season—the subscription numbers would balloon—and then it was just as fast of a decay. So it's like, that's actually not good for us. It's junk food. We shouldn't be sustaining ourselves on that. What is the vegetable equivalent here?

It was a couple of things. It was premium versions of stations people already listened to and liked, but might remove the commercials. And then the other thing that already existed, but we doubled down on, was the news products. We had simulcasts of CNN, MSNBC, Fox, Bloomberg, etc., in audio form that you could listen to 24/7. We had a team that would actually, when they would go to commercial break, splice in other content either from earlier in the day or from their podcast. So you got true 24/7 news.

You probably realize this if you're watching TV—depending on the station, like 22 minutes an hour is advertising. So we were able to take that out and make it premium content. Let me tell you, the people that love MSNBC listen to MSNBC twelve hours a day.

Jon Chee - 00:23:26: Yeah, yeah.

Caleb Appleton - 00:23:28: Really just, how do we find things like that and structure deals with those content providers that made sense for both parties. So, yeah, we got the business to a place where we were able to eliminate substantial amounts of fixed costs related to ongoing content without fundamentally upending the user base. That gave us flexibility to start trying other things to induce growth.

Jon Chee - 00:23:52: I love that. The lesson that I take away—and I think for any entrepreneur—is sometimes you just gotta take the medicine versus just the shock to the arm of the NFL. It sounded like a very unsustainable path, even though the highs are super high. Probably the news is not driving the same amount of traffic as the NFL, but it makes a lot of sense. Sometimes you gotta go through that painful reinvention of the business model to make it more sustainable and steady state.

Caleb Appleton - 00:24:38: It's a really hard thing. We were outsiders. When I joined the business, I wasn't burdened by the last ten years of that business's operating history. I was able to come into it with a clear mind and make dispassionate decisions that I thought were best for the business.

This is a really hard thing for entrepreneurs that I work with today to do. In the world of AI, the world around us is moving faster than it ever has, and successful entrepreneurs have to be constantly adapting themselves. It's a really hard thing to do—to walk away from months to years of investment and say, "Actually, no, we need to be doing this other thing because the equation has shifted." I learned that out of necessity. It's something that I try to work with entrepreneurs I spend time with to make sure that every incremental dollar we're investing and every incremental hour we're spending is actually on the right things. Sometimes that means really hard and scary decisions around reprioritization.

Jon Chee - 00:25:41: For sure. Absolutely. Especially when time is of the essence, there's a clarity of thought sometimes that you get from this "make or break" moment. I can think about experiences on my side of the entrepreneurial journey where there's inertia. Sometimes you just need to break that inertia. Business momentum is real, but you can have momentum in the wrong direction.

Caleb Appleton - 00:26:10: It might even be the right direction, but there's something else that's coming that has way more momentum. You run the risk of missing out on that by being too myopically focused on the thing that you're currently pursuing, and that's really hard to pull up and evaluate.

Jon Chee - 00:26:28: Especially when identity is tied up into it too.

Caleb Appleton - 00:26:30: Yeah. I think, necessarily, entrepreneurs, their identity is 100% tied up in what they are building.

Jon Chee - 00:26:37: Yeah. Absolutely. And so now you've really rolled up your sleeves, you got the operator experience, the crash course. When did you know, "I'm going back to venture"? When were you like, "Okay, enough is enough"?

Caleb Appleton - 00:26:52: Honestly, the answer was I was working just an insane amount—an unsustainable amount, more than I'd ever worked in my career. So that was part of it. I need more solid footing underneath me. I felt I was being less good of a partner to my wife, that I wasn't able to do the things that brought me joy outside of work. So I knew that something had to give there.

And at the same time, the business was also in a much more sustainable place. It was profitable. The big existential things had been shed. There was still work to be done, but I didn't feel like if I wasn't there, the house of cards would come crumbling down. We had done enough investment in that business that it was resilient to any individual person.

Jon Chee - 00:27:39: You could stand up on its legs.

Caleb Appleton - 00:27:41: Yeah. And probably nine months before that, a person I knew, Ben, who I co-invested with in that surgical robotics business, announced that he was leaving his prior role—investing at Cascade, which is the family office of the Gates family—to start what is now Bison Ventures.

I saw that on LinkedIn. I sent him a text and said, "Hey, congrats. That's really awesome. I'm sure it was a scary decision to make. Excited to see where you take things." Expecting nothing of it, other than to say congrats.

He followed up, I don't remember how quickly, saying, "Hey, we should chat." So we ended up connecting and he's like, "Hey, we're doing this. Eventually, we're going to be hiring people. Is that something you might be interested in?"

I was like, "Well, I'm doing this other thing right now. I need to get some things across the finish line to feel comfortable, but let's continue to have the conversation."

It was really probably almost a year from that date where ultimately I ended up deciding to join Bison. It was a combination of TuneIn being in a more comfortable place, and Bison having also matured—they had done some of their fundraising, and there was actually capital to deploy and intent to have more people on the team.

It was this awesome opportunity to join, again, a firm that was creating itself—similar to what Innovation Endeavors was in those early days—but this time do it in a more senior capacity with more responsibility directly at my feet. So that was in May 2023, I ultimately joined the firm.

Jon Chee - 00:29:14: Very cool.

Outro - 00:29:17: That's all for this episode of the Biotech Startups Podcast featuring Caleb Appleton. Join us next time for Part Four, where Caleb recounts turning around TuneIn by repositioning around what drove positive economics, why operating taught him more than rocket ship growth, and how seeing results the next morning differed radically from Venture's ten-year timelines. He'll also unpack joining Bison Ventures as a frontier tech fund, why he focuses on revenue-generating biotech that validates product-market fit like software, and his framework for whether data platforms should sell technology or build drugs.

If you enjoy the show, subscribe, leave a review, or share it with a friend. Thanks for listening, and see you next time.

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