Big Pharma's $180B Patent Cliff: Why VCs Are Betting on Biotech | Sergey Jakimov (4/4)

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, Sergey shared how his path from academia to entrepreneurship led him to biotech investing, what he learned from building startups, and how those lessons shaped his founder-first approach. If you missed it, check out part three.

In part four, Sergey digs into fundraising from limited partners (LPs), how he and his team communicate a science-first thesis, and why they tell a story instead of selling. He also talks about the realities of raising a first fund, what defines good biotech investing in down markets, and why big pharma's liquidity, patent cliffs, and urgency create opportunity for venture-backed innovation. Finally, we'll hear about what's next for Sergey's firm and his vision for longevity as an evidence-driven field.

Jon Chee - 00:01:24: I guess, I'm curious for you. Fund One is fully invested, and now you're working on Fund Two. And can you just talk a little bit about, like, previously, you're angel investing your, like, your presumably your own money, and now you're investing LP capital. Can you talk a little bit about fundraising from LPs and communicating? Right. Like, we talked about the struggle of communicating the importance of combating premature death. What was your experience like communicating that to LPs who perhaps have investment opportunities across all types of alternatives, whether they're in private equity, real estate, whatever? How has your experience been on that journey? And for anyone who's looking to get into VC, what are some key considerations and strategies and tactics and philosophy around it?

Sergey Jakimov - 00:02:13: First, I think that the fundraising narrative that you have is a mixed bag, but the fundraising narrative that you have largely depends on the industry where you play. If you are in the enterprise SaaS VC, you just pitch the return on capital. Like, no one gives a damn about whatever you will be investing. Honestly, no. Everyone is there for the money. You can, of course, try to pitch me on the strategic importance and societal importance of enterprise SaaS, but you will not win by heart over that one. Most probably not.

So when it comes to biotech, look, the first fund was basically 30% GP capital. So that also helps. I think normally it's like 2%, 5% or so, so that helps. And then it was also a first-time fund, which doesn't help because you don't have performance as a fund manager. And whoever is looking at you as a pragmatic investment opportunity, an early-stage fund, small fund for biotech, no previous track record, raises all the red flags if you approach it from the standardization point of view. If you have a pipeline of 40 funds every week that you look to distribute your capital with, I mean, that one most probably falls out of the picture.

So I think the key is you're not liked by everyone, and it's not the point, I guess, at all. I also think that fundraising for a fund doesn't really differ from fundraising for a company. It's the same thing. It's the same startup life. You're still selling a product. You're still selling an expectation of profit. You're still selling a vision.

Our thing—and I'm being absolutely honest here—we never pitch an LP to sell anything to anyone. I actually think—and Gary, my partner, would agree on this as well —that it is not polite to try to shovel something into someone and, you know, try to get money out of this construct. What we do is we tell the story. We tell our story. We tell how we ended up there. I have quite a lot of personal stuff going on, as you now know. Gary has lost most of his parents to age-related diseases, cancer and Alzheimer's. He has quite a lot of personal fight to fight in the field as well. So we just tell about our approach. We tell about the things that we did, the deals that we got into, why we got into those deals, and kind of just, you know, what is the vision for the future for us as an investor, why we're doing this in the first place.

And whenever you look at our build-out for Fund One, nothing in there basically indicates that this was done for the profit of fund managers because all capital in management fees was spent on the team. Everything is over-engineered from the very beginning. A large capital commitment from GP. So it did help. I'm not saying it was a walk in the park. It was not. It was still quite hard to raise the first fund. I think 95% of first-time funds fail or something like that. They're not closed eventually, and they're just getting wound up. So that was the strategy, and it's pretty much the strategy for the Fund Two as well. We never sell.

Jon Chee - 00:05:31: I think that's a point I just want to highlight. It's just like telling your story and putting your perspective and mission out there operates kind of like a magnet, and you start to attract like-minded folks.

Sergey Jakimov - 00:05:45: And unlike-minded folks is the folks you need because we were very open from the very beginning with our LP base that we provide all the resource possible for you to become experts in the field. We provide co-investment opportunities so you can get into allocations that the fund gets. We can kind of tag you along with co-investments if you want to double invest in some sort of company that you like personally and through the fund. We provide all the access to the resource, the scientific advisory board, to longevity clinics, longevity physicians in our network, whatever you want. We're happy to share it. We say we try to help, and some did use it. Some didn't, but some did.

The second thing is, you see, age-related diseases are a very personal topic. And sometimes people are personally engaged by these in the family or personally or as caretakers or caregivers to someone in the family or relative, a loved one. So that also—I can't say it helps because it doesn't really help. It's bad that these experiences happen, but it does sometimes motivate people to join, which is something apart from money and something apart from a multiplier.

Although in all fairness, the first fund in three years is now more than three times on capital , which is a good multiplier in three years for a VC and biotech, especially in this environment. And once we liquidate, we target a five-times cash-on-cash return. That'll be my internal aim for the LPs.

And interestingly enough—and again, we never think about it in the same way that we don't think that if you end up in a hospital, there is no way of improving your health care with money dramatically if we're talking about the standard of care. In the very same way, if you end up in hospital with an age-related disease, the treatment that you will be getting, especially if it's cancer or neuro or cardiovascular, it will be branded by some sort of big pharma. But there is an extremely high chance that it exists because it was once funded by venture capitalists. And it exists because some opportunistically minded individual or a group of individuals 10 years ago supported a biotech startup that had this idea of this mechanism of action in oncology, and then it was acquired by Roche, Novo Nordisk, whatever that is, and then you got it as a patient. It's just a cycle of life in pharma. But the stuff that we get as patients is very often VC funded. We wouldn't have it if VCs were not there with this kind of risk-taking mentality.

Venture capitalists are very often criticized by, "You're there to take profits and that's it". No. We're also there to take a tremendous amount of risk that no big pharma, no corporate can allow to take. And we're risking our own money, and we're risking our LP money. We have our own stuff on the line, and then we have the fiduciary duty in front of the LPs not to screw up. If you do this job properly, that's a lot of risk-taking, and that's a lot of brainpower that is involved to actually make it proper.

So, fundraising is not a walk in the park. And your track record is never enough. I'm always laughing at it. I fundraised for the last 10 years of my life, as a founder, as whoever. Every single time I go out and fundraise, every single time, everyone is talking about the environment being very bad for fundraising as of now. It's like a mantra. I don't get it. Where are you getting this? Everyone is like, "Oh, in this environment." And it's like, "It's been 10 years, dude". Everyone pretty much talks about the very same thing.

But at the same time, biotech is also very unelastic when it comes to these economic downturns. The general public thinks that, "Oh, biotech is down, valuations are down, everything kind of went to shit at some point". But then in reality, yes, the rounds got discounted. They basically got discounted from hype-inflated valuations to the real valuations of these companies. So it's good to be an investor in this kind of down cycle, whatever you want to call it.

But then, interestingly enough, good science always raises money, and good companies are always acquired. If your portfolio is incapable of doing anything and you are writing off stuff one by one, it just means that you've invested in things that are strategically not interesting to everyone in the market because big pharma doesn't run out of cash. It doesn't run out of liquidity. In fact, big pharma right now is sitting on the largest pool of liquidity. Too much cash to spend on the one hand.

And on the other hand, they're also sitting on the erosion of their IP pipelines. So the major patents are expiring. Keytruda will soon expire, by the way, for Merck. And it's a big moneymaker, that one. And you need to replenish intellectual property pipelines. You have pharma that is doing this successfully, like Novo Nordisk, like the GLP-1 type of craze. And then you have pharma that failed to do the GLP-1, like Merck and Roche and others. So, they are in a rush. It's actually a very interesting time where there is a lot of proclivity to be deployed, a lot of M&A to be done. And urgency is something that pharma is very uncomfortable with.

Jon Chee - 00:11:22: I love that perspective because whenever I talk to my parents, they're the kind of the outsiders. If my parents had heard that, they would have a far better understanding of where we sit in the grand scheme. Talk about how pharma thinks in like 20-year intervals, 30-year intervals, and the time is starting to come now. They have to do something. And I always think about that movie, Forgetting Sarah Marshall. Have you seen that? Where they're in Hawaii, went through a brutal breakup, and he's learning how to surf, and Kunu, the surf instructor's like, "You need to do less". He's trying to learn how to get up on the surfboard. He's like, "Do less." And then he's just laying on the surfboard. He's like, "Now you're not doing anything, man". It's kind of this thing, like, the liquidity can only sit on the sidelines for so long until the point you're just not doing anything. And eventually, there'll come a time when you need to stand up and get on the board and actually get in there. And that's how I feel, and that's kind of what I'm seeing too because we work with early-stage companies, early mid-stage companies, and companies are still getting funding.

Sergey Jakimov - 00:12:24: And they're good enough.

Jon Chee - 00:12:26: Yeah. Exactly. It's like if they're good enough. And I love your approach. This is like science first, science first, science first. And then from there, everything else flows, because I think that's an important thing to remember.

And it sounds like you're very busy. You have Fund One, Fund Two. You have your animal health fund. You have the nonprofit. As you're looking one year, two years down the line, what's in store for you, and what's in store for the firm?

Sergey Jakimov - 00:12:52: Look. I mean, I wouldn't blast you with some sort of grand vision of things, to be honest. I don't have a crystal ball. I do hope that I remain healthy for the time that that is enough to achieve something with a fund or with whatever we're doing. I think that eventually individuals are evaluated or stored—bad word, but we can keep it—by the added value they create for the society, for the others. It's not necessary to know the others. I don't like being in a crowd or in a party or something like that. I haven't even started using alcohol in my life, so I'm not socializing or anything. But still, I believe that you need to create added value. And we're creating added value through investing.

So what I would really love to see is these first fund companies reaching patients, reaching some sort of logical continuation of their work in actual patient population. And some of those can really move the needle. We have people with data on full tumor elimination in certain tumors. And that would be an absolutely tremendous effect right there.

For the second fund, doing what we know best, I think our goal would be essentially a large Array Capital or Sequoia-like structure in longevity, which is still not there. One of the reasons why there is none is that the space is not big enough yet, I guess. And something that I'm always talking about at the conferences is that I really want to spend the next few years with our work, for example, on translating our work into creating universally understandable success stories in the longevity space. Because so far, the space is still very reserved for specialist investors, and history teaches us that in order to make any space grow, you need external capital, and you need more generalist capital.

And the only way you get the more generalist capital in is you basically show the other world, the non-specialized world, that there is money to be made here and there is growth to be experienced here, and you show it in the language that is accessible to that world. A professional can explain very complicated things in very simple language to anyone. This is how you understand that the person actually knows his stuff. We really, as an industry, we really need to learn how to speak in an accessible language, and we need to show the world how these success stories were created in this field. We need to show exits. We need to show these kind of money-making activities as well so that generalist capital flows in. And once generalist capital flows in, this is where you have growth.

Jon Chee - 00:15:42: And I was going to just say, like, just on that aspect, one of the motivations or things that gets me fired up about just this podcast is being able to have these conversations.

Sergey Jakimov - 00:15:53: Oh, I can imagine.

Jon Chee - 00:15:54: Right? Just having these conversations where I think a lot of time in science, there's a lot of naval gazing, like, inward looking. Whereas exactly what you said, we need more people to join the cause if we want this to be exactly what you said, where we want it to be in the next few years. So it's a motivation. And that's why I really enjoy hearing all this because if we continue to just look inward, the progress isn't going to be nearly as fast or nearly as big.

Sergey Jakimov - 00:16:23: I really hope that our work also contributes to staking longevity as a data-driven field as a concrete evidence-based field , and we help combat all this snake oil that is out there as well. Because one of the issues that we face with the industry is a lot of companies are essentially deteriorating the image of the field by just exploiting it. And the thing with consumers is that consumers are mostly uneducated in specific fields. So it is sometimes easy to get some celebrity endorsements in or even take AI to generate these celebrity endorsements, which is the new thing apparently now, and just sell useless crap, which is, in the best case scenario, harmless and useless, and in the worst case scenario, harmful. We are going through a lot of these cycles back and forth in the longevity field and with useless supplements, with questionable supplements, with questionable therapies, with potentially harmful therapies.

But we really want to contribute to the field in this value-based, evidence-based way with our approach. So apart from building an evergreen fund, we also want to shape the narrative. To some level, I think we've succeeded already because in 2021, when we started the first fund, I was very unpopular with my narrative of going after diseases versus going after aging. But now it changed. Now the industry is talking about, "Hey. Let's go after diseases. Let's go after assets". Pharma only buys assets, so only molecules. So if you want to partner with pharma, you need to have your own pipeline. And, "Hey. If you're an AI for drug discovery company without your own pipeline, then what's unique in your AI for drug discovery engine? Where are they?". Things like that.

And it's changing. It's changing from this, you know, romanticized, sometimes water-in-the-sand in terms of capital type of unsustainable structure into something really sustainable, into something very evidence-driven. And we're honestly just happy to see that because we've been with the industry from the very beginning, and we would like to see it grow. And we do not mind new people come in. We welcome new people come in. We're happy to share deals. We're happy to share experience, competencies, et cetera. I'm very certain saying that we're not competing with anyone in the field. We're not competing over deals. If anything, we need more people in the deals. So, yeah, these things, I think that's the outlook, really, for the firm.

Jon Chee - 00:19:08: I love that. And, Sergey, you've been so generous with your time. I've learned a lot, and I've had a lot of fun. It's a rare opportunity to hear one story like this, so thank you for sharing and being willing to share. And in traditional closing fashion, we have two questions. First question, would you like to give any shout-outs to anyone who's supported you along the way?

Sergey Jakimov - 00:19:31: I think the standard set of actors, pretty much all the colleagues. The team that we're working with and the team that I've been working with in all my endeavors, because people are the most important by a mile. Generally, the ones that I've worked with, I think I owe everything to these people. And I think in the funds, we owe as managing partners everything to our deal team and others to spend their time and share their vision with us and get their work done. Because you should be, as cliché as it sounds, the dumbest in the room. Otherwise, it doesn't really make sense. So that's really the shout. I won't go cliché with all the thanks, Mom, sort of thing.

Jon Chee - 00:20:11: You got to thank your mom, man.

Sergey Jakimov - 00:20:14: Well, thanks, Mom.

Jon Chee - 00:20:15: Yeah. Thanks, Mom.

Sergey Jakimov - 00:20:16: She knows I'm grateful anyway, and she will probably not see this interview.

Jon Chee - 00:20:21: You'll be surprised. Maybe it'll find her way.

Sergey Jakimov - 00:20:23: She knows. But, yeah, generally speaking, I think we owe everything to people we work with and people that decided to spend their life and their careers with us as managing partners. It is of tremendous importance, honestly.

Jon Chee - 00:20:38: Absolutely. And it's a responsibility, too, and I think I feel the exact same way about that. Life is just comprised of moments in time, and life is short. And your team has chosen exactly what you said to spend these moments in time with you and with the team and the rest of the team, and that's not a trivial matter. So I love that.

And the last closing question is if you can give any advice to your 21-year-old self, what would it be?

Sergey Jakimov - 00:21:04: The only advice I can give to my 21-year-old self is advices don't work.

Jon Chee - 00:21:09: Yeah. You just got to go figure it out.

Sergey Jakimov - 00:21:11: But whenever you actually need advice on something that you do not know how to start or how to solve or how to figure out, you should really remember that someone in this world has already figured it out. It's not that you were the first one. It's not that you were stepping on the moon before the Apollo mission. And you should only take the advice from people who already did whatever you're asking your advice about. Do not take advice from these couch analysts, living room analysts.

I think that's important. Generally, advices don't work. But if you need one, seek one from the person who has already achieved whatever you're trying to achieve and whatever you're asking about. That would give you the actual perspective, and that would also eliminate the jealousy factor because the person already has it anyway. So that would eliminate the bias of just saying something to you or trying to diminish or devalue your eagerness to do something just because. I think that would be a good piece of advice. I'm very generalistic, but 21-year-old me wouldn't understand, I guess. Although, honestly, if a 33-year-old me right now would lay all this stuff ahead on the 21-year-old, like, all the shit you need to plow through, the 21-year-old would take a long, hard look at the stuff ahead and maybe stay in the parliament. No. No. I'm joking. I will not stay in the parliament for sure, though.

Jon Chee - 00:22:52: Well, Sergey, thank you so much for your time. This has been so fun, and I know all the listeners out there are going to find incredible value in kind of your journey and all the learnings that you've gathered along the way. So the next time you're in The States, do let me know. I'd love to grab coffee with you.

Sergey Jakimov - 00:23:08: San Francisco. I'm going to be there.

Jon Chee - 00:23:10: Yeah. Let me know, and we'll plan for a sunny SF day.

Sergey Jakimov - 00:23:14: Hopefully, get rid of the fog.

Jon Chee - 00:23:15: Yeah. Thanks, Sergey. Talk to you soon.

Sergey Jakimov - 00:23:17: All right. Thanks, Jon.

Outro - 00:23:21: Thanks for listening to our four-part series featuring Sergey Jakimov. From his early years in post-Soviet Latvia to founding startups across data and medtech and now backing science-first founders in longevity, Sergey's story highlights how conviction, adaptability, and clear thinking can turn vision into impact, both for patients and for the future of longevity. If you enjoyed the show, subscribe, leave a review, and share it with a friend.

Join us for our next series featuring Krish Ramadurai, partner at AIX Ventures, an AI-focused seed-stage venture capital firm backing top startups and practitioners in artificial intelligence, healthcare, and life sciences. At AIX, Chris leads technical diligence, deal sourcing, and portfolio operations, having sourced and managed more than 45 early and growth-stage investments, driving over $20 billion in cumulative portfolio value. His track record includes successful exits and unicorns such as Volumetric Biotechnologies, Pathology Watch, Trials AI, and more. A Harvard and Oxford-trained biomolecular engineer, Chris has supported more than 25 pioneering scientific breakthroughs, from the world's first AI-designed drug to enter human trials to the first commercial rideshare satellite launched into space. He has served as chairman and board member for leading AI and life sciences companies, lectured at Harvard, and published research spanning applied engineering, AI, and medicine. From startups and venture creation to global efforts in AI and healthcare innovation, Chris's path reflects the level of vision and commitment needed to advance how we think about science, technology, and the future of human health, making this a conversation you won't want to miss.

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