Why 40% of Venture Funds Failed Last Year (And How to Avoid It) | Krish Ramadurai (2/4)

Intro - 00:00:06: Welcome to the Biotech Startups podcast by Xceda. 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, Krish shared stories from his childhood in Chicago, the influence of his father's medical career, and how he ended up attending the University of Illinois before making an unconventional leap into Harvard. If you missed it, check out part one. In part two, Krish talks about the moment he decided to leave academia behind and apply his research mindset to venture, joining a small Fund I firm just as COVID hit and treating every investment like an experiment in evidence-based decision making. He shares how market mapping during lockdown helped him to identify a new category of compute-driven biotech companies before the term even existed. He also discusses getting an MBA and how the experience shaped his approach to firm building: breaking rules when necessary, creating structure from uncertainty, and proving that conviction often matters more than credentials.

Jon Chee - 00:01:30: So, you had that pivotal moment. You landed that first gig, which started to open all the doors. Can you talk a little bit more about how you mentioned this kind of shaped you and set you up for a career in venture? Can you just talk about those early exercises in these roles? Can you give us some examples of how it formed your venture path?

Krish Ramadurai - 00:01:51: Sure. Yeah. I mean, academic research teaches you how to take an evidence-based approach to everything. Right? Does the evidence support the claim? I think this was something that carried on as a cornerstone of my diligence in venture. It's like, does the evidence support the claim? Just answering that question repeatedly. So, there are ups and downs to academia. Right? Obviously, there's a very thick glass ceiling in academia. It's like, "Great, you got these research positions, but once you get out of academia, nobody cares ." Most of the time, the people in academia didn't really care. Right? And then you're like, "Why am I doing all this? I've got all these logos and stuff like that ," and here, I thought that some kind of golden door would be opened to some portal in the metaverse, and everything's amazing. And you find out, no, that's not really the case. So, it's cool, great, you get a great website, but other than that, nobody cares. But I think being at the Belfer Center and Taubman and everything, I was still writing books and doing the regular academic stuff , but just realizing the frustration of, "Okay, I'm talking about all this stuff, I'm publishing about it ." Once again, that weird urge, that tickle of, "How can I actually start to interventionally apply this ?" And that was the scratch that I couldn't itch, no matter how hard it was coming on in academia. So, that was probably the thing where I was like, "Okay, I maxed out what I did. I got the institutional affiliations, I published a bunch of stuff. Great. What happens when you do that ?" And, unfortunately, in academia, that's what you do until you die. It don't matter. There's nothing left. I was like, "Okay, I finished this," and that was the point where I was like, "Okay, wrapped up all these research projects , great," and that was kind of that split then. I had that option of, "Should I go into intelligence, or should I go into venture ?" Right? And at that point in time, I was like, "What do I do ?" And this was, like, 2019, right before COVID. And the firm I got a job at was allowing me to be remote. And at that time, there weren't a lot of remote gigs. I was like, "Dude, I can be in my pajamas all day ." And that firm was like, "Yeah, we want to take the same approach you've taken in academia. We want you to do it in venture , but most importantly, give you Play-Doh to build out practices and thesis tests and pressure tests what you want ." Right? And that was pretty applicable to me. I was like, "Wait a minute, I can actually do what I was talking about in a firm and actually pay off my loans! This is nifty." But once again, though, it wasn't a fortuitous, all-of-a-sudden swing. I had applied for a zillion other jobs, right, and got rejected from a lot of them. And the CIA's process for interviewing takes a long time. Right? So, I was concerned because I was like, "Okay, I got this broad mandate between business and science, but I wasn't focused on anything specific ." Right? So when I was applying to venture and private equity and consulting roles, it was still that exercise of how do I get to know myself more, right, and what I'm actually passionate about? Right? And so that was kind of the foray. But at the end of the day, that's still that foundational element of, "Can I find an industry where I can still apply the fundamentals of my research training? And can I do that and make money off of it?" That was kind of the cornerstone.

Jon Chee - 00:04:52: And was this Harmonics? Talk a little bit about just, like, first day in, you're an analyst, what were the early days like?

Krish Ramadurai - 00:05:01: I mean, I started off at the bottom of the barrel. Right? That's the lowest on the totem pole. So, first day in Harmonics, I was in my pajamas. Right? I was remote at a firm, and, you know, at that point, I was like, "Okay, I joined a firm here." It was a Fund I firm, evergreen-style fund for the first fund. I was like, "That's literally a blank slate ." Right? Which is a good and a bad thing. Right? I just came from academia. And great, worked with all these prominent people and whatever, but now joining a shop that doesn't really have a thesis but can be molded to one. So, I remember it was a good confluence of events, but that first year, COVID hit, and then all of a sudden, biotech became important. I was like, "Okay." Like, at that point, I had already finished my MBA and my master's in biology. So, I was like, "Okay, I've got a good tether on this."

Jon Chee - 00:05:53: Oh, I guess, let's pause right there. Hold on. The MBA combined. How did you make time for—so you had your master's in biology, you had two gigs that you're also working—did you also squeeze in an MBA simultaneously?

Krish Ramadurai - 00:06:08: Correct. So, the reason why I went to WashU is because WashU is the only top 20 business school that would allow me to go full-time for business school and work full-time. Oh my goodness. So, once again, carrying this whole nexus forward of breaking every single rule and not really doing anything correctly. Yeah. So, the other thing was, like, I wrapped up my projects at the Taubman Center, and I still had an affiliation with the Belfer Center , and then I had to get another position at MIT to supplement the the Baldwin one. Right? So, I had two jobs, right, at Belfer and MIT in Boston , but then going to do my MBA at Washington Saint Louis because I needed to be done effectively in sixteen months because my contract with MIT was going to end in sixteen months. Like, once again, coming back to the fundamentals, I have no other option here. You either have to do it or you don't. And they were like, "This is a two-year full-time program." I was like, "Correct. Don't really care. We need to ram-rod this into six months for me ." Right? So, to WashU's credit, they thought I was insane, but I mean, it worked. And Booth and Kellogg and all those other schools are like, "No, that doesn't work ." Right? So, there's also another caveat: I only applied to one business school because that was the only program that would let me do this, and they were fully aware of it before I applied. I was like, "I wanted to introduce to you a paradox situation I'm in, but it needs to be done by this date in this timeline ." So, don't also recommend doing that , but also, you're starting to see that there is flexibility in graduate school admissions. Yeah.

Jon Chee - 00:07:49: Yeah. And that's kind of the thing. I think people think that the rules are super rigid.

Krish Ramadurai - 00:07:54: 100%.

Jon Chee - 00:07:55: But they're actually more malleable than you think they are. If you don't ask, you don't get.

Krish Ramadurai - 00:08:00: Yep. Correct. Right? And I was just testing out the hypothesis that I didn't even think... because I was also on the rigid framework. I would look at the grad school requirements and everything and be like, "Oh my God, I can't do this. It's way too f***ing rigid ." And all of a sudden, I'm doing all this MacGyvering duct tape stuff. I was like, "This is a bit crazy, but whatever ." Right? Like, at that point, I was like, "Okay, let's give it a whirl ." Right? But once again, I only did it because I had conviction. I did it as a way of, like, I had the lever to my end. I was like, because essentially, I told the institution, "I have to do it this way. We have to come to an agreement ." And I had zero power to do that, but it was just because this is what I have to do. So—

Jon Chee - 00:08:40: And it's infectious. It's infectious. Like, I think people can get that read. Like, they can read that.

Krish Ramadurai - 00:08:46: Because there are so many people that are like, "Oh, man, this is the rules, and if I don't do them, then that's it ." And it's weird that if you get to know certain people or whatever, the rules become more malleable. But also just because nobody ever had the conviction to push their hand through the screen. Yeah. Yeah. But also, like, you had to be calibrated to get to that point to understand that. Would I recommend somebody just do that from zero to one? Absolutely not. No. Yeah.

Jon Chee - 00:09:12: No. Just look like an idiot. Yeah. But I do love that because I think sometimes, especially in, like, company building, firm building, everyone wants a playbook. Everyone just loves ingesting, like, "Oh, yeah, here's the playbook from someone else ." It's just like, "Yo, that's someone else's playbook ." By no means do you have to abide by that. Like, you can just rip it up and just go do it a different way. That's also okay. Because I think sometimes people just take it too literally. Then you just get the same results, ultimately.

Krish Ramadurai - 00:09:45: And the other thing is, like, why would I want to live somebody else's story? That playbook, I—no offense to all my consulting friends—they're all clones of each other. They're all doing... I was like, "What is your point of existence ?" Like, seriously, because you guys are doing the same thing. Even your mannerisms and everything are all the same. I was like, "What is the context here for you actually being a human that actually has their own functional baseline for existence ?" Like, a lot of people do the same thing. Like, there's no problem with complacency and being in this, other than me. Like, "Okay, I'm going to go to Bain or McKinsey, hate my life for twenty years, but then be fine ." Right? Like, great, but I find that's not conducive. It's like, "There's a zillion other people doing that." Right?

Jon Chee - 00:10:31: Totally. Totally. And so, okay, you've completed the sprint marathon of grad school. You're now at Harmonics. You're a blank slate analyst. You were mentioning that it was both a blessing and a curse that it was a blank slate. Talk a little bit more about that.

Krish Ramadurai - 00:10:47: Yeah. So, when I joined the firm there, like I said, it was like Play-Doh. And I think the biggest thing was, like, "Here's something, like, I can either do this super well and just go with it and just not really do a fake it 'til you make it, but let me just take the tools that I had from academia and apply this and see if this actually works." Right? So, I mean, what I did was the first time I joined, the first day, I just started mapping. Right? Like, "What are the areas I'm excited about and areas that I think alpha can be derived from ?" And then, like, go from the fundamentals off of that. And when I was market mapping, one of the biggest things that I do in that exercise is situational awareness. It's like, "Okay, think tank. Alright, here's the problem, right, of this market area ." "Can I find a solution, i.e., the companies ?" And then, "Within that solution element, can that become a 10x-plus return for the firm ?" Right? And do that across different verticals. So, one of the most interesting things, with COVID and everything, if anything, it amplified the focus. Right? Because now I'm like, "Okay, I'm at home all day. I'm sitting here on this. I can thesis map and just go full tilt ." Right? And that's exactly what I did. I started market mapping each one of the 'ologies' in health care, and then each one of the prescriptive domains in life sciences when it came to high-unmet patient need modalities, everything. But what was interesting at that time, I started realizing, "What do all these companies have in common that I'm looking for that are actually identifying ?" And this was kind of the big breakthrough of the first year of me being an analyst. So it's like, "Oh, these are all computer architecture companies ." Right? Like, they're all using compute to actually accelerate a redundant R&D process and get to a better, faster, cheaper outcome. I was like, "This is unique ." Alright. I've found a unique solution of essentially what would be the platform for AI-native modalities. Right? And this was before TechBio was a thing and everything. And those first set of investments that I did were, like, in Insilico Medicine, Red AI, CareCentex, and Volumetric Biotechnologies —a lot of companies that would be super successful, realizing that there was something here, but I didn't know what it was. And once again, going back to the literature, refining it, and being like, "Okay, so these companies do have this compute thing that's actually doing it ." "Here's the evidence in the clinical outcome or the ARR tracking or whatever ." But it was identifying that kind of new breed of company and then taking that thesis and presenting it to the partnership and being like, "Well, I think there's alpha here." Right? And when the markets were in free fall during COVID, it was perfect , because what better time to allocate capital when everybody else is scared? That first year, God, I did twelve investments that calendar year. Right? So, once again, breaking the entire prescriptive mold of anything. Right? Should an analyst be doing twelve investments? Absolutely not. Analysts don't pitch much stuff most of the time. Right? Like, you're doing your diligence, mostly. You're just doing stuff into perpetuity. But I think this was where my academic training helped really nicely is because I built basically a thesis in a workbook , and I presented that workbook after the first quarter of me being at the firm. And that workbook was essentially like a Lord of the Rings on crack. "This is where Frodo is at. This is how we destroy the ring of power."

Jon Chee - 00:14:09: Right? Yeah. Yeah.

Krish Ramadurai - 00:14:10: And when you provide it in a way that's conducive and actually showing there's a full thought process here in a structured allocation. And this wrapped into portfolio allocation analysis that I've been doing at USAID and how to actually build a diversified portfolio in subdomains. Right? So it was kind of weird that the academic training was feeding into, "How do I build out a portfolio, how do I allocate, how do I thesis map, how do I mix the think tank stuff together," and blah, blah, blah. Right? So that was coming together , and then all of a sudden, alright, now I'm racking deals. And then I was like, "Okay, cool, like, we've got something here." When I had joined, the firm was Fund I. They only had, like, seven positions, and it was scattered. It was a bunch of random stuff. It wasn't an actual portfolio. And then once I came on board, that's when all of a sudden you're building out asset classes or specific subdomains within that asset class and portfolio. Right? And then it's becoming actually structured now. So, I did that. That was year one. And I was like, "Do I recommend that either?" Absolutely not. Right? Because I basically sold myself to the devil. I went full tilt that year. That was eighty-hour work weeks, everything , just because I was, for some reason, perpetually actually curious, but also being like, "This is a good time to strike ." Right? And then that's the basis for why I ramped from an analyst to a partner also in an obscene amount of time, which I don't recommend as well. Right? So, what you're saying is the asterisks are stacking up on each other.

Jon Chee - 00:15:41: Yeah. I'm going to imagine there's a couple steps there. Right? Like, you became a Senior Associate, and then Principal, and then, I believe, Partner after that. Was that a very kind of, like, blended gradient, or were there distinct changes at each of those kind of roles or promotions?

Krish Ramadurai - 00:15:58: It's interesting because one of the biggest problems in venture is shot-calling , right, where if you're really good at what you do, and you call your deals, and you own those deals. Right? And that's why a lot of my friends get stuck at Associate or Principal position. Right? Because they didn't have the conviction to call out.

Jon Chee - 00:16:11: Oh, because they didn't shot call?

Krish Ramadurai - 00:16:13: Yeah, exactly. They weren't like, "I did this deal ." Instead, they'd, like, pass credit and be like, "Well, this partner helped me on it, and then we shared the deal ." Right? And then I was like... I was not like that. And I was like, "I think I'm good at this because I basically did the output of an entire firm by myself, like, the first two years."

Jon Chee - 00:16:31: That's really interesting because my co-founder was one of the first employees or very early employees at Alpine Investors, the private equity firm in San Francisco , and he did the same thing. Just, like, shot-called and went super hard in the very beginning, and that kind of opened up a ton. I'm not in that space, so I didn't know shot-calling was, like, so critical. But now that I'm hearing it, oh God, that kind of makes sense.

Krish Ramadurai - 00:16:55: Yeah, and in general , I feel like a lot of people are always expecting people to be aware of your successes. Right? And I was like, "Unfortunately, human beings are quite selfish ." Right? All the thoughts you have in your head, the other person is not thinking about that at all. Right? Like, anxiety one-zero-one: "Oh, those thoughts you thought about that person that thought about you were not even in the same ." That person was thinking about mac and cheese, not about the email sent without the emoji. Right?

Jon Chee - 00:17:22: So you're like—I mean, it sounds like you were shot-calling even at the analyst role, but, like, Senior Associate, what was it like transitioning to that?

Krish Ramadurai - 00:17:29: Yeah. So, basically, the Senior Associate thing came on because I was like, "Well, I already have an MBA. I shouldn't be an analyst ." Right? And then our chief of staff was like, "So then what title do you want ?" I was like, "Senior Associate ." At that point, I had clipped two years, and I was like, "Okay, now I have actual two years of actual venture experience with the MBA, which would classify me traditionally as a Senior Associate ." Hence, the skip on Senior Analyst and Associate. Yeah. And it's funny because I got put into the Senior Associate position really pretty quickly as well. Because at that point, since I had already made those first set of investments and everything, I was like, "I'm actually doing more work than the Senior Associate would be doing ." Right? Because Senior Associate is you're just analyzing, putting memos—you're not actually pushing deals through or anything. Right? So, it's funny how that manifestation... as soon as I got parked in that slot, our chief of staff was like, "I'm looking at your scheduled agendas. You're doing more than the senior ." It was like, "You should be a Principal ." Right? Because at that point, I was also beginning to take board observer positions with the companies, and that would be more conducive to a Principal. Right? And then also, by year three, your bets that you started making early on start stepping up. Right? And at that point, I was like, "Okay, I'm getting solid markups here. I know what the hell I'm doing ." Right? That should be a Principal. Right? So, hence that kind of thing. So, it was mainly because I was like, "Let me do the work that's required for the next role now ," because then when that conversation comes, I could be like, "I'm already doing this."

Jon Chee - 00:19:00: Yeah. It's kind of like taking your grad school class while you're an undergrad.

Krish Ramadurai - 00:19:04: Right, you know? Like, so do I recommend that as well? No. But it's funny how then you're like, it just becomes obvious. Right? So, I didn't have to do a performance review or anything because I was like, "I'm already doing this. Just give me the title."

Jon Chee - 00:19:19: That's so funny. Because this story reminds me even more of my co-founder because in finance, it's super rigid, like, tracks. There's recruiting cycles and all this stuff. And he was like, "Screw that ." It's so funny. I guess the popular track is, like, you go the i-banking route, and then from after i-banking, you move on to buy-side stuff. But he was like, "Screw the i-banking. I'm just going to do hedge fund things now."

Krish Ramadurai - 00:20:00: Right?

Jon Chee - 00:20:02: And it worked. Like, it just worked. He was just like, "Yeah, I'm just going to go f*** it up. I'm going to do that ." And then it's kind of like doing the work. I like how you described it: "It's just like the work that you where you want to be, you just do it now ." And people are like, "Oh, great, you're already doing it. Let's put you in."

Krish Ramadurai - 00:20:07: But it takes a different kind of person foresight to do that because not a lot of people are comfortable. Right? Like, it comes back to that rigidity coefficient. Right? Some people are like, "Well, this is predefined. I have to operate in this role ." Right? Which is a good and a bad thing because you need to have conviction direction, right, to be able to push the mold outside of... if you don't, then you're better off to staying in. But, yeah, it's a good kind of manifestation exercise, I think , because if you're already doing it, then you're like... I already had the Partner line of sight closed in because I was like, "Oh, what do I need to do to be a partner? All I need to do is just talk to LPs."

Jon Chee - 00:20:34: Is that the difference? Is that, like, so, like, Principal, you're getting board observer roles, you're getting a bit more hands-on with companies , and then when you become a Partner, it's like you just have to go fundraise?

Krish Ramadurai - 00:20:43: Yeah. Yeah. So, the hardest attrition, right, is Principal to Partner. Because the carry pool is limited. Right? And you're not going to make Partner unless you have a track record , and that was very important. So, I wasn't able to shotgun-call to Partner until I started getting step-ups and exits with the investments. Right? Otherwise, it would—it's been like you're tapped out. Right? Because you don't get—I mean, you get some carry as Principal, but you're not getting a substantial proportion to be a Partner. Right? And also being like, "Okay, well, I'm realizing that my thesis that I developed here are now being pitched to LPs ." Right? And I was like, "Well, then those are my thesis." And once again, a shotgun call: "That's my stuff. I should be on the call then ." Right? And once again, force them to make me a partner because I was like, "You're pitching my strategy."

Jon Chee - 00:21:26: Yeah. Yeah. That was me, dog. Like, don't regurgitate my stuff.

Krish Ramadurai - 00:21:31: But it's funny because I was doing that. It was a good... it's like what I call a "ball-dropping exercise". Right? Because I was always a people-pleaser. Right? And I was like, "Oh, I'm doing this," but also realizing, "When does the buck stop?" Right, on that? Because you can only do that so long before you're realizing, "Okay, this is my stuff. I've got to own it ." Right? And do it in a way that isn't asshole-ish, but in a way that does show that, like, "Hey, I'm once again calling my wins, and I should be on this level framework ." And that was a conversation that, like, it's a bit of whiplash because some people take it the wrong way. Right? Because I'd be like, "I busted my ass off, I built off these thesis. This is my win ." And some people get insecure about that. Right? So, it's a very delicate dance on that. Like, "How do you do it in a way?" And there were still problems. Like, I was like, "Man, if this is my thesis, then I should be even higher and getting paid way more ." Right? And that's kind of what ultimately led me to transition to another firm. Right? But, yeah. Well, it's quite interesting on that because some people are just like, "Oh, man, should I be doing this? Is this too boisterous ?" And I was like, "No, you're just creating situation weirdness for other people, being like, 'I'm doing this .'" Right? So, and it's hard to refute.

Jon Chee - 00:22:37: How was the transition to Partner and having to go fundraise? I guess, founders nowadays know, but back in the day when you're raising before the internet, and you had to go down to Sand Hill Road and bang on doors, there was more of this black-box element to what venture's like. But founders do know that VCs had to go fundraise, too. Like, how was that experience?

Krish Ramadurai - 00:23:00: It's funny because I always tell founders, "At least VCs have a working website and stuff like that ." Our—they pay to be off the internet. Barely have a working email. Right? And it's funny, it's like you're talking to ghosts, essentially, that manage the most amount of money on planet Earth but never want to be found. Right?

Jon Chee - 00:23:19: Yeah. Yeah.

Krish Ramadurai - 00:23:20: And we were fundraising during COVID. Right? LPs, as you know, don't cut checks—they're old school. Right? This is a very high-touch business. And I was like, "Doing a virtual raise? Is that even a thing ?" Right? So, I think that was the hardest part. Right? Because I think of it as, like, going from a CTO to a CEO. You're super dialed in, you're technical. Now you have to figure out, "How do I speak the LP lingo ?" right, which is a totally different lingo. Right? You're selling something then. Right? And it's not like most scientists—you're not trying to sell stuff. You're just trying to call a spade a spade. Right? And I think that was the hardest part of being like, "Okay, now I have this opaque system of talking to people, but then I have to figure out how do I actually market myself ?" Right? And this was a very good exercise. It's probably the best learnings I got. It was like I actually started to realize, "How do I actually sell myself ?" Right? Because that's what LPs will—they were investing in a jockey. And that was an exercise I'd never really done because normally, like, I was calling my wins, but I was calling my wins to myself and to other people. I was not calling my wins to the population at large on a consistent basis. Right? And actually, very much it helped with kind of an anchor exercise of being like, "I'm pretty good at this stuff ," but also understanding, "This is how all VCs get an ego because they're talking about how great they are during the capital raise ." Nonsense. Right?

Jon Chee - 00:24:42: It's that feedback loop.

Krish Ramadurai - 00:24:44: Well, come on. Right? And that's why you kind of see the cockiness of it and everything because you have to—you're selling yourself to a hundred LPs, and two of them might write you a check. Right? And you're doing that every three years like clockwork. Right? So—

Jon Chee - 00:24:58: I guess, like, a question for you. There are tons of different types of LPs, and I'm sure talking to different LPs takes a different kind of language. I guess, for those out there who may not be aware, like, what is the universe like—these ghosts? What type of buckets do they fall into or segments? Or what is an archetypical LP, and where do they fall?

Krish Ramadurai - 00:25:17: So, the hardest thing for venture, right, is the emerging manager bucket. So, everybody knows, statistically speaking, the first three funds will outperform any other fund. Right? Because the manager is squeezed for capital, you have to get the substantial returns. Otherwise, you're just not going to attract enough to get to the next fund. Right? So, LPs come in all shapes and sizes and forms. But, typically, emerging funds are going to raise from multi-family offices, single-family offices, and ultra-high net worths. And then your goal is to eventually pivot out of the emerging manager bucket into Fund IV and beyond , which is when you actually have an established track record, a rinse-and-repeatable strategy, and you become institutionally backed. Right?

Jon Chee - 00:25:57: And you're considered emerging when you're in the first three?

Krish Ramadurai - 00:26:00: Correct. Right. So, every manager, you'll see why they're hell-bent on getting out of that bucket , right, because your capital source is extremely constrained , right, because you're taking bets on somebody that you don't know. But this is also why you see the Icarus phenomenon with a lot of managers where they'll raise super quickly multiple funds, stack the management fees, and then utterly collapse , right, because they actually didn't have a robust repeatable strategy. Right? And I think most venture managers forget that they're asset managers. Right? Like, you're not just hanging out on Twitter all day. You actually have to build. And I think this is great for our firm because we're an institutionally backed emerging fund, which is extremely rare. And the institutionals put you through the full gamut of diligence, reporting, all of that stuff. Right? And you have to put your big boy pants on immediately, have three funds to do that in a progressive way. Right? And that's the kill point. I mean, that's why last year, we saw 40% of venture funds die. Right? Because they just didn't have an institutional grade book and really robust strategy that's differentiated, but also the returns. Right? As you know, venture returns are horrible. And oftentimes, you're better off putting your money in an S&P 500 index fund. So, most LPs are already conscripted to only investing in top-quartile performing managers. Right? And that's why you see the same logos being backed all of the time. Right? Because if you're not top-quartile performing in venture, that's it. You're not getting alpha. And that leaves that stratification of capital where 10% of managers are getting 90% of capital. And that's what we're seeing these days. Everybody's AI adjacent. There are a lot of people now raising AI funds. But LPs value a strategy that is a twenty, thirty-year relationship of the same playbook, rinse and repeated, and that's it. Like, you don't deviate. They don't get what's called "drift" , right, where all of a sudden you're changing allocation structures and mandates and everything. And that's where a lot of managers kind of screw up. And also the other thing is, like, in this business, you're only as good as your last deal. Right? So if you had a bad route and your fund is performing terribly, unfortunately, a lot of times LPs will just be like, "Great, that's it, we're done ." Right? So, you have to be on edge. Right? But the LPs, that opaque capitalization is what's set up the curve for investing and innovation in America. Right? And the other thing is, like, if you add up all the venture funds in the United States, they're less than the holdings of BlackRock. It's still a very hyper-niche asset class.

Jon Chee - 00:28:30: Yeah. It's a venture just has a loud speaker. It's the loudest checks. But then you—

Krish Ramadurai - 00:28:35: Right? But they're the smallest. Like—

Jon Chee - 00:28:37: They're the smallest but loudest. Like, that tends to be the case because they're used to—yeah. You go look at BlackRock, you go look at Blackstone. It's like, that's massive. It's like massive checks. And I guess the question for you is, like, at Harmonics, when you got promoted to Partner, were you guys in the Fund I through Fund III zone at that point?

Krish Ramadurai - 00:28:54: Yeah. We wrapped up Fund I, and then we were in Fund II and deploying out of that vehicle. And the hardest fund to ironically raise is actually Fund III. Right? Because Fund III is when you get to the point where there's actually a track record of Fund I and Fund II. Right? Otherwise, LPs are like, "Oh, you're raising your Fund II off of a couple good bets in Fund I, but nothing actually materialized ." Right? And then Fund IV, you know, it's always like the next fund is based on your fund two funds ago. So, Fund IV is based on Fund II, et cetera.

Jon Chee - 00:29:22: Oh, and so, okay. So, you crossed the chasm at Harmonics. You went to the Fund IV?

Krish Ramadurai - 00:29:26: No. So, I only got to Fund III and then cycled out of that into AIX. Got it.

Outro - 00:29:34: That's all for this episode of the Biotech Startups podcast featuring Krish Ramadurai. Join us next time for part three, where Krish recounts studying nanomedicine at Oxford while investing full-time, how he navigated Oxford's tutorial system, and what his mRNA research focused on. He'll also unpack the trade-offs and boundaries that came with operating at that pace, his pursuit of becoming a General Partner, and how he found his people at AIX Ventures alongside advisory work with Nucleate and ARPA-H. If you enjoyed the show, subscribe, leave a review, or share it with a friend. Thanks for listening, and see you next time. The Biotech Startups podcast is produced by Xceda. Don't want to miss an episode? Search for the Biotech Startups podcast wherever you get your podcasts and click subscribe. Xceda 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 Xceda, 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 Xceda or sponsors. No reference to any product, service, or company in the podcast is an endorsement by Xceda or its guests.

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