Biotech Investing Unlocked: Mindset Shift, Risk, and Founder-First Lessons | Johnny Hu (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, Johnny Hu reflected on his time at Cambridge and Harvard, how tool building drew him to engineering, and what the rise of CRISPR taught him about science and entrepreneurship. If you missed it, check out Part Two. In part three, Johnny explores his transition into venture capital, the contrast between scientific and investor mindsets, and how operational discipline, capital efficiency, and decision-making can make or break a biotech startup. He also shares key lessons from his time at Omega Funds, what he learned from early mentors and board experiences, and how thoughtful, founder-first investing continues to shape his approach at Menlo Ventures.  

Jon - 00:01:16: Yeah, absolutely. And there's so many things that stood out to me that, you know, in my head, I was thinking about parallels on my side. So I'm not a VC. I'm in credit. So I'm a credit investor, different mindset. And my, you know, my peers are typically in banking. Love saying no, more so than a VC. They will, you know, banking will say no to you. Their job is almost to say no. And that was kind of for me coming from a wet lab. I just understand life sciences that typical bankers don't really like when I say when I say bankers, I'm not saying like investment bankers. There's, you know, you think about the lyrics of the world, they're very sector specialists. But I'm talking about just like folks who extend credit. So folks who extend credit in banking, like they want slam dunks like you were describing, like they want it to be a slam dunk. And they if it's not a slam dunk, it's enough. Right. And I'm just like, in my head, I was like, if that was the case, there, the opportunities, like, yeah, everyone can figure out it's a slam dunk. So everything gets competed away. Like you're, you know, there, there is no more opportunity. So you have to lean into the things that might be a little bit more complex, a little bit more hairy, take a little bit more elbow grease to understand. Right. And that's where the alpha or just like the opportunity lies. So like sometimes even just like as a thought experiment, like we see it, you know, companies come through all the time, like just because it's like complex, sometimes there's just a pure laziness, people don't want to do the work to understand it. Right. And they just like, yeah, like, you know, this is too complex, whatever, screw it, like, but you just might have thrown out something that was worthy of investigation and might have been a great opportunity. Right. And so like, for us, we think the same way. And look, our parameters of making an investment are different. But we try to take that kind of ethos of like, there are a million ways to say no. And especially in credit, but right, especially in credit, but we do a lot of like thinking about what is the science being done? Who's the team behind it? How, like, what is their operational discipline, that type of stuff? You're like, this could actually become something fantastic. So it's like, we're trying to take a more find a way to say yes mentality, even though all of my peers are like that science, like, you know, what the heck? For example, I had a conversation with like, one of my banking colleagues, and they're like, well, you lease Bunsen burners? I was like, no. Not Bunsen burners. These are like cell sorters and mass specs. But I'm going to stop right there.

Johnny - 00:03:50: I was going to say, I don't know. How much is a Bunsen? I actually don't know. How much is a Bunsen burner? 

Jon - 00:03:54: Not something that you need to finance. Like, if you need to finance a Bunsen burner, you probably have other issues that you kind of need to sort out. And something that also stood out to me too about what you're talking about. A lot of the time, it's kind of like this operational stuff that causes the disarray of a company. And that was actually one of the things that really was one of the founding reasons for Excedr, frankly. And then also, I could talk about boards too. So my co-founders in private equity, which is like operational efficiency to a T. Like super optimized. Sometimes too optimized. Taking anything to the extreme could have weird manifestations. But the operational efficiency is so critically important. Because like when we were like first kind of goes, you know, we've been doing this for a long time. So we've seen companies do great. Some companies not do so great. And sometimes when a company doesn't do so great, we just saw like, you know, when they were doing, going through the wind down process. We're just like, holy crap, like at the seed stage or whatever round, like they raised like, you know. I don't know, a couple million bucks, three million bucks, five million bucks. Half of it was on equipment. Right. And then they just go into liquidation and they go sell it for pennies. And I was like, oh my God. Like. That could have been finance and you could have had all that money to reach your next milestone. This is heart wrenching because I knew there was great intention. There was great science behind this, but the operational just like there's you kind of talk about it like this decision that led to the next thing. Especially I'm sure for as a VC, runway is top of mind all the time. But you just immediately have this health bar like fresh check goes in immediately depleted because you just decided to spend half of your check on CapEx. What the heck? Like we should have kept the life bar to 100% virtually. And I think sometimes the again, the operational aspect is just like kind of an engineering kind of like mindset, how do we min-max every aspect of this business to be super optimal, just so we increase the likelihood that we hit this milestone. And everyone wants to get to the board meeting, we're just like, whabam, tons of runway, great data. In less time. That's the holy grail. It's like, great data. We've got it faster than we thought we could. And we have a boatload of cash still. And then that board meeting is fun versus like everyone, I'm sure if you're on the entrepreneurial journey, not every board meeting is fun. You flip it, we're like, oh God, data is coming back slower than we thought and not what we think. You're like, we got to squint at these lines and also the candle has been burnt down. And then everyone's like, oh my God, this is like, you know, you know, you get through it, you figure it out. That guidance. Super important, because like, if you don't have that guidance, you just wouldn't know, like just like how I didn't know. when I was doing lab work. I should think about, how what's the shelf life of this thing that I'm working on. I didn't freaking know, I didn't have someone to tell me that. Right. But that's what the board serves at. 

Johnny - 00:07:07: Yeah, exactly right. It's like. sometimes you don't know what you don't know. And frankly like, you know, this is a journey that's, you know, as we said long and like, and you'll learn a lot of things along the way. And a lot of things it's like, the first time you'll be doing that, thing. Right.  

Jon - 00:07:23: Yeah.  

Johnny - 00:07:23: So then like, you know, what are the precedents I would like to say, right? Like what are the precedents? It was like, Hey, like, who has done this before? If no one's done this before, which, you know, could definitely be the case, right? Then like, what are the best learnings I can bring along the way, right? And like, what are the things that I can pull from my toolkit, but also the VCs, the advisors, like, who are the people I can bring around the table? Me think about this right? And I think your job as entrepreneur is to like, ultimately listen, and then decide, and like own that decision. Right. And like, yeah. And like, that's the challenge, right. Which is like, people can give you advice. You have to have your own. Intuition in many ways, right? And your own kind of viewpoint. And hopefully your board and your advisors and everyone also gives, it's that space too that they give you, right?  

Jon - 00:08:16: Yeah.  

Johnny - 00:08:16: Which is like, hey, like... If you're going to take ownership, then you take responsibility, but you also get the right to make that decision.  

Jon - 00:08:25: Yep. Spot on.  

Johnny - 00:08:27: And then you go execute.  

Jon - 00:08:28: Yeah, yeah. I think that's also critically important. Exactly what you're saying is that everyone can give you advice, but you need to figure out what works for you and what feels right to you. Because if you don't, if you don't have conviction in your own decision making, again, there's going to be diverging opinions on the board, especially if you have a diverse one, right? Like, you know, a strategic might feel different than, you know, your co-founder, which might feel different than your venture backer, which might feel different, you know, so on and so forth. And you have to kind of like, I think as management, this is like, pull together what you feel is right amongst all of this and what feels right. And you're closer to it, right? You should be. You're like, you're like in the weeds every day. You're like, all right, this makes sense. And like, you know, I can speak about like my co-founder, I have disagreements with all the time and we're on the board together. And so, yeah, it's okay to disagree. Like, it's all right. Sometimes I'll think he's like, I'm going to veto you on this. And like, all right, we're going with it. Worked. Sometimes I'm like, I veto you. We're going this way. It works, but it's healthy. That aspect is healthy. Again, anything taken to the extreme, if it's just one way or the other, you just have to toggle and balance it. I think it's incredibly important. RA had the super rigorous domain expertise, MDs, PhDs, and the data-driven. When you were building ground floor, when Vida was being built, what was the firm dynamics Vida?  

Johnny - 00:09:57: Yeah, it's interesting that we had this conversation, right? Which is like, I feel like Vida was very intentional in how they built the firm. And, you know, because the founders came from, you know, they have their own experience.  

Jon - 00:10:09: Yeah.  

Johnny - 00:10:09: Right. And then so in many ways, it was like trying to build a firm that was like, you know, best practices, if you will.  

Jon - 00:10:17: Yeah.  

Johnny - 00:10:17: Right. We all should aspire to this, right? Which is like, be intentional with your entrepreneurs in terms of like, hey, like. It's not easy to raise money doing all these pitches. And then, like, you know, you're trying to get people's attention and VCs. And usually it's no one's fault, right? It's like you're, like, trying to ping them. You're trying to get answers from them, you know. And sometimes people are just busy. Or they give you very unhelpful, like, feedback, right?  

Jon - 00:10:47: Yeah, yeah, yeah, yeah, yeah.  

Johnny - 00:10:48: And so, like, the one thing I remember, you know, is we always, like, you know, be intentional with our timing. Like, tell people yes or no. And if no, then let's do the work of, hey, these are the things that we want to see. And hopefully it aligns with how you're thinking about it. And next time, we'll have a different conversation, hopefully. Right? Because this is the list, right?  

Jon - 00:11:16: I love that. That sometimes founders just don't know that like... Perhaps this is not like a thematic focus of the firm. It doesn't hit like the investment criteria. Like there's like a multitude of reasons it may not fit, but they just have no idea going in. So which can be really frustrating, obviously, for an entrepreneur, which is obviously, like you said, is like fundraising is hard. So like, I love that you're just like, hey, this is what we're looking for. When we have this conversation, you know, there's kind of like a general rubric of what we're looking for. And, you know, first conversation, you might hit the mark or you might not. Let's talk again later. And then let's see if you hit the mark. And I don't think enough. Folks in our industry do that? Because sometimes you're just like an entrepreneur is like trying to like learn about a firm. I don't exactly know what they, their strategy is or what they do, which leads to like frustration. We're just like, I just, I just took this call. And at the end of this call, I realized, I'm completely like, not even near in the zip code. Of what they're focusing on. And it's like, everyone's upset.  

Johnny - 00:12:27: It is hard, right? It's hard, it's hard because like. Like you said, there's things that every firm's looking for. But also for this particular instance, this particular company, what are the things that as you progress, think about as you progress, this is that inflection point that we think in our mind is your inflection point. Which many times aligns with how. You think is your next inflection point, right? But like, you know, once you get there, then this is why it becomes more in focus for us. But like, you know, to do that, it does take time understanding and kind of like you said, the elbow grease in some ways of like getting there, right? And like, you know, and people are like, well, like that sounds pretty like, you know, like multiply that by the number of companies that you're seeing, right? And so it's not that each, you know, thing, it is not, frankly, like, you know, it's not like rocket science, right? Let's just put it that way. But good firms do it, right? Good firms do do it, right? Because like, you know, and that process like also makes every investor better. Because it forces you to sit down and think about it. You build it yourself. And sometimes you learn something out of the company by doing it. These are my assumptions going in. And maybe you learn that actually, no, I was wrong. Actually, they are farther. They have de-risked this. Or this is something they didn't think about. But it forces you to sit down and to actually make sure that, one, you understand it. And two, like, you build your own model. You build your own... Kind of set of things. Independent of the company, and then you can check that with the company. And sometimes maybe they'll tell you you're wrong. You're like, oh, actually, this is why we believe that we're more de-risked because of XYZ than you think we are, or the thing that you think we need, maybe we don't. Or hopefully, that process is a two-way street that maybe I hopefully told you something that you're like, oh, yeah, actually, we should think about that. And it's not all science, obviously. Sometimes it's like strategy, market, things like that. We're like, oh, actually, yeah, we were going to think about that. We just haven't gotten to it. So let's have that conversation.  

Jon - 00:14:59: Yep. It kind of reminds me of, I think Founders Fund has like a, they're like, we don't do B2B. We don't do that. That's like, you know going in that they're not looking for B2B. But they did ramp and they did rippling. Those are B2B. But it's kind of this thing what you're talking about. You have these kind of the model, generally. You hold it loosely, though. It's important to be open to the situations where this actually might be, this might be good, actually. It goes both ways. It's just like for the VC and also for the entrepreneur. It's informative in both ways and you shouldn't be so precious about it. There are always outliers or exceptions to the rule. But I think definitely, it's kind of like, again, kind of like setting culture of a company or a firm. It's just like, let's set the table. Like, let's just quickly set the table versus like, everything's in disright. There is no table. Like, let's just, you know, it's pure chaos. And I think that's where the consternation can kind of derive from. But I love that, like where it's just like, perhaps you can take away something from how we see things and then vice versa. And then from there, it's kind of like you evolve the model. Like, you're just like, okay, we're going to incorporate this going forward versus like this thing be a static. Some people get really precious about it, too. And I see that a lot in private equity. There's like a checklist. Just like, you check these four, we're good.  

Johnny - 00:16:26: Yeah.  

Jon - 00:16:28: That's it. And if you don't hit those four, not good. Like, you know, like-  

Johnny - 00:16:32: Yeah.  

Jon - 00:16:32: And there's like, we're just going to keep it pushing. So I've always like, I've seen it go in that other direction. And sometimes they'll just like, you know, in private equity, those like, it's discipline. You're like, no, dude, it's laziness. It's laziness that you can't.  

Johnny - 00:16:46: Yeah. And, you know, frankly, I think there's industries where, like, that lends itself better.  

Jon - 00:16:51: Yeah.  

Johnny - 00:16:51: Like, life sciences is not one of those industries.  

Jon - 00:16:53: No.  

Johnny - 00:16:54: You know, I wish it, you know, I wish it was, right? But, like, it's not because, like, the risk that you're taking, like, what are all the risks that you're taking in life sciences early stage, especially, right? Which is, like, you know, technical risk.  

Jon - 00:17:08: Yeah.  

Johnny - 00:17:08: You know, execution risk. And then there's, like, you know, financing risk and market risk and things like that, right? But, like, you know, most early stage companies are trying to de-risk that technical risk for the first, like, X amount of time, right? And like technical risk is, maybe AI will do it one day, right? But like, you know, assign a score to it and you're like trying to like use it over time, right? But like there's just a lot of inputs into that technical risk.  

Jon - 00:17:36: Yeah.  

Johnny - 00:17:37: And so it's not some kind of number that you can just point to and say, well, it's 92 today and 96 tomorrow.  

Jon - 00:17:45: Yeah. And you're absolutely right, I think. Being in San Francisco and just being in the Bay Area, everyone hopes that Lifesize can just, like, operate like a software company. And we're seeing it more and more, like, it's resembling. We're not there yet, but, like, my wife is in tech and spent her whole career in tech. And it's just, like, the way they can operate, it's just so different. It's just so different. They're not the same. But, like, she's, like, looking at the stuff that we're looking at, she's like, what the heck? Like, you know, like, you can, at least in software, they're, like, it's much more, like, spreadsheet-able, which is, like, what I'll, like, and that lends itself to a different type of investing. But I guess, for me, just really quick, not to poo-poo on all the private equity investors out there. I love my private equity friends. Like, Blackstone does great work. They're in life sciences. The private equity playbook can work in the life sciences. So I'm sorry, y'all. Like, sorry, y'all. Like, I love you guys, but I think it is life sciences. It takes it. There's more, it's, like, way more multivariate. And I think always think about it as, like, in science, we didn't, like, create nature. We're just existing in nature. And we're out here just, like, using machete, like, chopping through the forest. Like, that's all, that's the best we can really do. Like, how can we chop better through this forest? And hopefully at the end of it, there's, like, the promised land. Whereas, like, in software, it's like, we created computers. And I think I was, like, the same, it's just, like, we made computers. The system is something that we created. The confines of it is, like, are limited relative to nature, like, which is, like, this thing we exist in. So it's just, like, different modes of thinking in an environment.  

Johnny - 00:19:23: That's interesting, right. Because I think now, with a lot of AI systems and like you know, our investment in Goodfire got announced today, right. Which is a Interpretable AI, and Dede led that investment from the Menlo side. Right. So we today's a good day to talk about it, because it just got announced. But like you know, there's a fundamental like assumption there right, which is like current AI is ,not interpretable, right? Which it is not. Even on the computer science side, the systems are so complex nowadays. And like, you know, just so large and in some ways, like, you know, I wouldn't say self-propagating, right? But they are like, obviously, like have some, you know, ability to train and to, you know, grow, right? And so like that in itself does lead to a different world now, right? Where like, you know, certainly not any one person understands the entire system, right? But like, is there a group of people that could understand it or like, is it now grown beyond? And, you know, from the bio side, as you said, like, which is like, you know, we've spent since the beginning of time trying to understand and like perturb it basically, right? And like, sometimes I like think about what we're trying to do and you're just like, that's like one, impossible. And like two, like, you know, incredible that it works at all, right? Which is like... You're trying to like poke at something without poking anything else. Because, like most things, when you poke at it, it'll like lead to worse outcomes.  

Jon - 00:20:54: Yeah, yeah, yeah.  

Johnny - 00:20:55: You're like trying to poke at one thing and, you know. No drugs like 100% specific, right? But like it's at least specific enough where you're poking the thing that you want to poke while leaving enough things intact to not harm you too much. And you're trying to reset to a higher, healthier state of physical or like mental, right? And like that's incredibly challenging. In a very complex system that we still don't-  

Jon - 00:21:23: Barely understand.  

Johnny - 00:21:24: Yeah, barely grasp, right? Barely. Yeah, right? So like, go. We've designed these systems that allow us to do that. And that's fundamentally incredible. And I think also where like, again, like some of these technological innovations that are happening now, right? Like whether it's high throughput, like perturbations with CRISPR, whether it's like, building these like frontier models, right? Like to actually, you know, make sense of all these large data sets. Just the amount of progress that's going to come in the next few years, I do fundamentally believe it is going to be incredible.  

Jon - 00:21:58: Yeah, likewise. And the pace in which it's like progressing, I'm like, holy, holy shit. Like, I just like haven't seen like, and we're super like tech enabled on our side. And we're just like already, this is not in bio, like, you know, but like just seeing how the ramp, like kind of the ripple effects within our org, it's like already massive. So it's like, I can already, I was a skeptic at first and I was like, oh no, like, oh no, this is legit. This is legit. And so, you know, it sounds like you're, you're dipping your toes and investing. You're reading the tea leaves more and more, but more scientific than that, obviously. But so it sounds like after your PhD that you're like, I'm going to spend my time in investing. This is kind of like where. I'm going to be. Or was there kind of more deliberation on it? You're like, I might go become a professor. Like, what was the deliberation for you?  

Johnny - 00:22:45: Yeah. I love this job, honestly. You know, did I do think about doing other things? Sure. Right. Like when I say a lot of this job, like the ability to translate science into world applications, like that's. We're working with a few professors right now, right? And we're incredibly passionate about what they do. Their passion carries through and it energizes all of us at our firm. And to be able to play some small role in that. I feel incredibly fortunate, honestly, to do this. And even if I'm the only person who derives meaning from it, that's okay with me. I think it's like, one of the best jobs in the world honestly so like and and like one that allows me to be like still like very curious to learn things that are new every day, right? That like, you know, touches a lot of different fields, right? As you're saying, like, you know, to see this rate of progress that's happening right now. Right. And to like work with whether it's founders or entrepreneurs or other people who are like just incredibly passionate about what they do. And you just like see that every day. This is your this is your baby. Right.  

Jon - 00:24:04: But like life's work.  

Johnny - 00:24:06: It's like your life's work. Right.  

Jon - 00:24:07: Yeah. I feel the exact same way, by the way. Maybe it was a bit more of like, for me, I was just like, damn, I don't got what they got. I was like at the bench. I was like, holy shit, I can see what excellence is like. And I don't got that. But you know what I can do? I can play a support role. I don't know if anyone out here plays, like, MMORPGs or, like, whatever, League or Dota. Like, it's okay. Not everyone can DPS. Like, not everyone DPSs. Sometimes there's a support, and the support is a crucial part of the team. Like, you know, when there's five DPS on the team, that's when you lose. Like, for anyone who's game's out there. But, like, that's where I had that realization. It's like, it's okay. Like, you know, I'm going to, in pursuit of, like, supporting people's life's work, I find the exact same thing. And especially in science, too. Just, like... Because academia and industry are so tied, you get to see the life work translate into and get to patients hopefully eventually, which is so freaking awesome to see.  

Johnny - 00:25:09: Yeah.  

Jon - 00:25:10: And, you know, I'm glad that academia is becoming a bit more welcoming to this translational science aspect because before it was like, stay away. Like, it was like, stay away, church and state, like, fuck off. Like, you know, right? It's like, it's way more now. It's like, not to say that, you know, there are still times where it's like, it's more of a gradient than anything. So, you know, so you're wrapped up your PhD and I believe your next... Role was at Omega. Is that correct? Can you talk a little bit about how that opportunity came about and what was that like for you? 

Johnny - 00:25:42: Yeah, so I was wrapping up Vida and this again the benefit of Boston it was an incredible network, right. Like-  

Jon - 00:25:52: Was this all in the cafe? You're just like everything was like in this cafe.  

Johnny - 00:25:59: Yeah, yeah, one cafe, exactly.  

Jon - 00:26:00: Like, one cafe to rule them all.  

Johnny - 00:26:04: It's probably not like, I could probably trace it back to two streets.  

Jon - 00:26:09: Yeah, yeah.  

Johnny - 00:26:10: I don't know if it's like, Boston, or Commonwealth in Cambridge, I don't know if it's Main Street or Cambridge or whatever. But it's probably just a few streets but yeah, it was just like convergence of opportunity and Omega was looking for someone they were talking to the guys at Vida they were like do you have someone? Vida made an intro it was fortunate. They recommended me and my boss at Omega Rich Lim, I've stayed close with ever since. He started his own from now doing early stage company creation that's doing really well. And like, you know, I'm sure we'll collaborate with him. But like, you know, ultimately, like you find people in the industry who are like both thoughtful and like mentors. And like to find that, you know, kind of early on in your career is just like you feel fortunate when you do.  

Jon - 00:27:02: Yep. Absolutely. And, you know, it sounds like you found a mentor at Omega and I guess like taking away from like great mentorship. What were some like, key lessons that you took away from Omega, like specifically your experience there?  

Johnny - 00:27:15: Yeah, I think for me, coming from the science side, it's like learning everything else.  

Jon - 00:27:19: Yeah, yeah, yeah.  

Johnny - 00:27:22: It's like learning everything else, right? Like, yeah, you can do this. Like, even now, right? It's like, hey, like, you know, I still read papers, right? And it's like, I enjoy reading papers. But it's like all of the other things, right? Like, and everything from the nitty gritty of like, hey, like, constructing a cap table. Writing term sheets, things like that. Those are the operational things that you need to learn. But then also the other part of it, which is like, hey, what are the best practices of a company? What are the things that you're ultimately trying to achieve? So the story behind Omega is like, Omega is the last letter in the Greek alphabet. And so then that's the way it's like, you start from the end and then you work towards the beginning. And so when you're starting from nothing, as we talked about, like, what is that ultimate? And how do you decide that?  

Jon - 00:28:11: Yep.  

Johnny - 00:28:12: Right. Especially with a lot of these like technology platforms. Right. I was like, great. You have a hammer. Right.  

Jon - 00:28:18: Yeah.  

Johnny - 00:28:19: Like, what are the nails that you want to, you know, what are the nails you want to go nail, right?  

Jon - 00:28:25: Yeah, yeah, yeah. That's exactly it. And I think, you know, I love that. Like, the working backwards element, it is counterintuitive. Like, especially if you're, like, you know, coming from the bench, it's, like, company building backwards. It's just, like, or just anything. Building backwards is always kind of like, huh? But it just, like, makes, like, you get into trouble when you don't work backwards. And you're just, like, kind of, like, aimlessly going. And that's just, like, it's kind of in sales. They're always, like, sell first before you build. This kind of feels kind of, like, counterintuitive versus, like, we're just going to build this thing. Or, like, if anyone watches South Park, they're, like, the underpants gnomes where they, like, collect underpants. And they're, like, step one, collect underpants. Step two. Step three, profit. What is the step in between? And you kind of have to work backwards to get to the step two.  

Johnny - 00:29:16: On the tech side, it's like finding your product market fit.  

Jon - 00:29:19: Yeah.  

Johnny - 00:29:20: You're spending all your like time in the beginning doing that.  

Jon - 00:29:23: Right. But I even think in the life science, it applies to like, sometimes the analysis isn't being done on really, really downstream stuff. You're like, like what is obviously think about the TAM what about the reimbursement mechanisms what are like all of the like the insurance players like all you know there's like you know great science that comes to fruition gets approved but like getting it into patients' hands actually was the problem. You're just like, and like, we can't even get compensated for this because of whatever, there's all these other like effects or kind of, you know, variables at play. And there is, I like, you know, I think like, just like tech, you can like work backwards. Like, all right. Like if this thing does get approved and can be prescribed, are we going to get paid for it? Like, and that gets back to like the econ, does the economic infrastructure allow, you know, for this to actually get paid? Cause like, if you can't get paid, the investment is like, you know, moot to begin with. Not to say like, it's always like that, but like, you know, it's hard.  

Johnny - 00:30:23: No, it's not always like, exactly. Right. But I think you just, you have to do that gut check at the beginning as like, as in, you know, and then maybe as unfortunate as it is, right. Which is like, you have to do that gut check at the beginning. And like, you run into trouble sometimes when, when you don't. And, and like, you know, and sometimes it's not to like, be like, yes, no. Right. Like that's, that's usually not the point of any of these. Like it's, it's just like, Hey, like how can I strategically align myself? So that I get to that point that I want to be.  

Jon - 00:30:50: Yep. Yep. And it's adding kind of like, I always think about it as the models, like you, you update the model for like this potential risk factor. It's not impossible, right? Like Apple made a smartphone, which created a market that didn't exist. If they were just like, well, there is no market for smartphones. We're not going to make the smartphone. You know, there are always kind of these exceptions to the rule, but it's just like, you know, you kind of like update your model a little bit. You're like, all right, well, maybe we've got to do a shit ton of lobbying to wait to, to change how like the reimbursement, you know, I'm kind of like, you know, theorizing here, theory crafting, but it's just like, okay, that might be hard. Like, but it's not impossible.  

Johnny - 00:31:25: There's an entrepreneur who, who told me this once. Yeah. I don't want to use his name just in case.  

Jon - 00:31:30: Yeah. Yeah. No worries.  

Johnny - 00:31:31: He told me, he's like, well, I want to join a company that requires that like two or three miracles, let's call it. Right. Cause like two or three miracles is like the right amount of risk.  

Jon - 00:31:41: Yeah. Yeah. Yeah, right.  

Johnny - 00:31:45: It's like, you know, you don't want it to be like, kind of as we said at the beginning, you don't want it to be like zero, right? Because you're like, well, like, you know, that's, and you know, maybe you're not thinking big enough, right?  

Jon - 00:31:55: Yeah, yeah, yeah.  

Johnny - 00:31:56: But you don't want it to be like, you know, on the other side, like, you don't want it to be like five or six or like 10 either, right? 

Jon - 00:32:03: Yeah, yeah.  

Johnny - 00:32:03: Or maybe the better way, or, you know, a different way to put it is just to say, like, decide on what risks you want to take.  

Jon - 00:32:12: Yep.  

Johnny - 00:32:13: And whether that's technical risk, whether it's market risk, whether it's and like. Try to think about whether you want to minimize the risk in the other thing.  

Jon - 00:32:24: Yep.  

Johnny - 00:32:24: Because you don't want those other risks to come up and be the thing that derails you before you answer the one or two risks that you were working on.  

Jon - 00:32:36: Yep.  

Johnny - 00:32:36: Right.  

Jon - 00:32:37: Yep.  

Johnny - 00:32:37: And like, you know, because that'd be unfortunate. Right. Like you didn't actually get to the answer that you were hoping to get to, even if it's yes or no.  

Jon - 00:32:45: Yeah.  

Johnny - 00:32:45: Right. At least you got to the answer. 

Jon - 00:32:47: Yep.  

Johnny - 00:32:48: So I think that's the thing where, like, you know, especially when you're coming from, a place where like all that has frankly taken a wave on purpose.  

Jon - 00:32:58: Yep.  

Johnny - 00:32:59: In academia where you're like, hey, like, I just want to focus on developing and de-risking, you know, whether it's biology, chemistry, you know, new tools, et cetera, right? That's my focus. When you start a company, then you got to think about all these other things.  

Jon - 00:33:18: Yep. The separation of church and state. Like, this is where it's like, let's keep the economic pressures out of it for a moment and let us just focus on doing basic research.  

Johnny - 00:33:29: Yeah.  

Jon - 00:33:29: I love that. And it's something I'll add to that, that I think as an investor and a operator is important to consider is like, what's your personal tolerance? Like, exactly. It's like a personal decision. This is like, there is no, again, right or wrong, but like, for example. I would not survive in venture. That is not my style of investing. And it's not my risk profile. I'm a credit person. That's different. It's a contractual return. I like, you know, I sleep better at night. And that's okay. That's okay. It's just different. You know, we don't live by power laws in my world, but in venture you do. And again, for anyone out there, it's like, this is a personal decision for you. Like, does your pH in your stomach flip based on the risk that you're taking on? And if it doesn't, then maybe you should be like, okay, maybe this is where I want to be. Versus like, if you go in every day and like, you're living the power law and like, you're like, my God, I'm losing my hair and I'm not sleeping. And everything is like a meltdown. Perhaps you shouldn't do it. Maybe you should come to the world of credit or maybe not being investing at all. You know, like it's kind of a, you know, my wife is not an entrepreneur, but she loves it. Like the, that, you know, the big little economy, just pretty large tech company and just like loves doing that. And I'm like, and she works with the public sector, which is like another different beast of working with like government agencies. I'm like, that couldn't be, that's like the opposite of my life. Like, I just want to be like, you know, in entrepreneurship land, working with like, you know, the private sector. And something too, to think about too, is like, again, we talked about being risk. Like you've got to take some risk. You've got to break some eggs to make an omelet. But like, like if you don't, there is no omelet, like, you know, like, right. There's some things that are just going to work out and don't let that stop you from getting to that. Yes. Because you're scared of breaking a couple eggs. Yeah. It comes with the territory.  

Outro - 00:35:23: Thanks for listening to part three of our conversation with Johnny Hu. In the final episode of this series, Johnny shares what brought him to Menlo Ventures, how the firm is approaching biotech and AI, and why now is a pivotal time for life science innovation. He also reflects on the evolving role of venture investors, what he's excited to build next, and the importance of staying curious in an ever-changing field. If you enjoyed this episode, be sure to subscribe, leave a review, and share it with a friend. See you next time. The Biotech Startups Podcast is produced by Excedr. Don't want to miss an episode? Search for The Biotech Startups Podcast wherever you get your podcasts and click subscribe. Excedr provides research labs with equipment leases on founder-friendly terms to support paths to exceptional outcomes. To learn more, visit our website, www.excedr.com. On behalf of the team here at Excedr, thanks for listening. The Biotech Startups Podcast provides general insights into the life science sector through the experiences of its guests. The use of information on this podcast or materials linked from the podcast is at the user's own risk. The views expressed by the participants are their own and are not the views of Excedr or sponsors. No reference to any product, service or company in the podcast is an endorsement by Excedr or its guests.