“Doctors give drugs about which they know very little, to patients about whom they know less, to cure diseases about which they know nothing.”- Voltaire (1694–1770)
Voltaire’s wisdom from centuries ago still resonates today as we contemplate the history of medicine. Throughout the ages, medicine’s journey has often been marked by uncertainty, with doctors prescribing treatments without full comprehension. The evolution of medicine has witnessed a progression from nature observation to applied mathematics, alongside the development of groundbreaking instruments such as the microscope and X-ray. A pivotal moment arrived in 1953 with the discovery of DNA’s structure, shedding light on life’s fundamental building blocks. However, the process of experimentation in chemical labs, known as “wet labs,” remained both expensive and time-consuming.
The digital era ushered in a transformative shift, driven by faster computers, affordable storage, decentralized access, rapid connectivity, and innovative database structures. This convergence of technology and biology birthed a new frontier: computational biology, often referred to as “computational bio” or “tech bio”. While “wet labs” continue to play a crucial role in live experiments, the advent of “dry labs,” enabled by digital simulations, holds immense potential for exponentially reducing the costly trial-and-error processes that have long characterized the field.
🚀 Needs and Opportunities:
The fusion of biology and artificial intelligence is fast-tracking our understanding of life and how it can be engineered. It will allow to identify correlations more effectively between patients, diseases, and drugs. Key drivers include:
- Affordable gene sequencing
- Abundant healthcare data
- Digitization of biological data
- Declining data storage costs
- Traditional experimentation significantly enhanced by computational methods
Entrepreneurs are applying computational biology in various areas:
- Prevention and early detection of medical condition
- Personalized treatments and therapies
- Tools and infrastructure to support Pharma R&D
Challenges persist, there is a lot of competition which is emerging from everywhere and FDA needs to adapt to a faster pace of development of drug approvals. Payers (insurances) should also promote value-based care or payment by results and reimburse prevention through early diagnostics.
💸 Investment Landscape:
JPM 2024 highlighted the potential of computational biology, with AI projected to generate $60–110 billion annually for pharmaceuticals. Notably, in 2023, EU and US companies collectively accounted for 18% of investments in biopharma, diagnostics, and R&D. Moreover, in 2023, $2 billion of the $20 billion invested in AI was directed toward drug development (Dealroom, Global Tech 2023).
🔮 Looking Ahead
The digitization of biology through AI and machine learning offers exciting opportunities for companies to streamline processes and innovate, potentially revolutionizing the field. Compared to traditional biotech, computational biology is cost-effective and can significantly accelerate development timelines. However, intense competition, especially in AI-driven drug discovery, and regulatory complexities in healthcare and biopharmaceuticals pose risks.
Understanding the opportunities and risks in the sector is crucial to avoid impatience with genuinely innovative companies Investors need a long-term strategy for the computational bio-opportunity considering the extensive software development and lengthy clinical trial timelines. Both result in a noticeable lag between the introduction of new AI methods and their integration into current practices.
Recently, Isomorphic Labs (Alphabet’s computational biology company) secured $83 million upfront payment and potential $2.9 billion in milestone with Novartis and Eli Lilly. This news signals hope for the industry’s future but raises concerns about Big Tech’s dominance creating barriers for new entrants. 2024 will be a pivotal year for the industry.
🔬 Stay Tuned
At Reference Capital, we are conducting a deep dive into computational biology and will share our findings in more detail in the coming months. Please feel free to let us know if you would like more information about the space or if you have any questions.
In case you missed it…
General Technologies 🚀
🌐 2023: Landmark Year in Generative AI
2023 marks a pivotal year in computing, similar to the internet and mobile/cloud computing revolutions. OpenAI’s ChatGPT, launched in late 2022, brought generative AI into the limelight, showcasing its advanced text and image generation capabilities.
🚀 Industry Leaders’ Insights: Microsoft’s CEO Satya Nadella compares his first encounter with ChatGPT to discovering the web browser. Similarly, Alphabet’s CEO Sundar Pichai believes AI’s impact surpasses that of fire or electricity and Erik Brynjolfsson, a Professor at Stanford, foresees a productivity surge due to generative AI.
💡 Pros and Cons of Generative AI: Indeed, Gen AI excels in creative tasks like coding and poetry. But it struggles with accuracy. Gen AI often produces realistic but factually incorrect content. A phenomenon called Hallucinations.
🏢 Corporate Adoption and Economic Implications: Firms like Salesforce acknowledge generative AI’s potential but are cautious of its limitations, such as hallucinations. The AI hype contributed to a tech stock rally, with Nvidia’s market value soaring by $800bn and Private AI startup investments hitting $27bn in 2023. Yet, slow adoption might lead to overestimated valuations, as companies like Adobe and Microsoft remain cautious.
🚧 Challenges and 2024 Expectations: Accuracy and cost are major considerations for businesses. While generative AI’s business integration is growing, it’s slower than anticipated. In 2024, a more pronounced impact on productivity and business efficiency is expected, along with changes in workplace dynamics due to AI assistance.
🔮 Looking Ahead
Despite its high cost and integration hurdles, generative AI is set to revolutionise business, although more gradually than initially foreseen. Businesses will increasingly explore AI automation in 2024 to justify its expenses.
Read more on the subject ⬇️
The AI revolution’s first year: has anything changed? — Financial Times
Podcasts
🎙️ End of December, Apple had to take its Apple watch off the shelves. Listen to this podcast to better understand why.
📹 After 6 successful years at Koshla Venture (investing in DoorDash, OpenWeb), Keith Rabois joined Founders Fund (Stripe, Ramp, Affirm). Last week, he announced returning to Koshla Ventures after 5 years at Founders Fund. Listen to this episode of 20VC to learn more about his comeback and Keith’s views on VC investing in 2024.
Sustainability 🌍
⚡️ The Grid’s Role in Decarbonization
To deeply decarbonize the global economy, modernizing electrical grids is pivotal. These grids, developed over a century, underpin the conversion of primary energy into electricity, fueling renewable energy growth and innovative business models.
🔌 The Importance of Interconnection: Interconnection is the process of connecting solar, battery storage, and other clean energy resources to the electric grid. The International Energy Agency (IEA) warns that without grid expansion, wind and solar penetration will reach only 44% by mid-century, falling short of the 60% target to reach zero-emissions power generation.
💰 The Significant Cost of Grid Expansion: According to BloombergNEF, the expansion of transmission and distribution networks would necessitate an investment exceeding $21 trillion from now until 2050, resulting in the installation of over 80 million kilometers of new wires, effectively doubling the current combined grid network length.
☀️ Challenges with Solar Curtailment: In April 2023, California had to curtail 671 gigawatt-hours of solar energy, equivalent to around 4% of the state’s total power consumption that month. This highlights the grid’s limitations in efficiently managing the increasing solar generation capacity.
🚀 The Importance of Intra-connection: While grid expansion is crucial, optimizing the existing network is equally vital. Intra-connection focuses on building and expanding within the network that exists today. This includes reducing energy losses and embracing innovative solutions like vehicle-to-X models and microgrids.
🔮 Looking Ahead
The modernization and expansion of electrical grids are pivotal in our journey to deeply decarbonize the global economy. Interconnection, though costly, is essential for scaling zero-emissions power generation and meeting growing energy demands. The recent challenges in solar curtailment underscore the urgency of these grid improvements. Equally vital is intra-connection, which optimizes the existing network and embraces innovative solutions.
Read more on the subject ⬇️
Interconnection and Intra-connection — Voyager
Unlocking Smart Grid Opportunities in Emerging Markets and Developing Economies — IEA
💉 Harnessing the Power of GLP-1 Drugs and Polyphenols for Health and Weight Management
GLP-1 has taken center stage, with treatments like Ozempic, Wegovy, Mounjaro, and Zepbound, originally developed for type 2 diabetes, now being marketed as prescription-only weight loss drugs. These GLP-1 agonists mimic the body’s natural hormone, regulating blood sugar, reducing hunger, and promoting fullness. But is there a more natural approach to achieve similar results?
🌿 Unlocking Metabolic Health with Polyphenols: Plant-based polyphenols, present in a diverse array of colorful foods, represent a vital piece of the dietary puzzle as underscored in a recent article by Christopher Damman, an Associate Professor of Gastroenterology at the University of Washington and Advisor to Reference Capital.
💪 Unique Proprieties: Similar to fiber, have the ability to activate hormone production in the gut, including GLP-1, which contributes to the regulation of appetite and metabolism. Moreover, they serve as potent antioxidants, guarding the body against inflammation and safeguarding DNA integrity.
🔋 Supercharge Your Energy: Polyphenols go beyond antioxidants; they also boost your mitochondria, the energy powerhouses of cells. This transformation can help maintain muscle mass and turn white fat into calorie-burning beige fat.
🥡 The Disconnect in Modern Diets: Unfortunately, modern diets are missing out on these essential compounds due to processed foods and agricultural practices, contributing to rising obesity and diabetes rates.
🌈 Embrace the Rainbow
The solution may lie in adding more organically grown, polyphenol-rich plants to your diet. These colorful foods could be your path to better health, guiding you “somewhere over the rainbow” of gut-healthy choices.
Blockchain & Crypto 💸
⚖️ Regulations
- Hong Kong pushes for better regulatory environment around stablecoins, attracting Chinese and international investors.
- The SEC has approved the listing of spot Bitcoin ETFs (10 jan) which has attracted a record of $4bn in inflows.
- Genesis Global Trading will pay a $8 million fine to New York and relinquish its BitLicense due to compliance issues.
- BitGo received provisional approval to operate in Singapore under the Major Payments Institution license.
🏦 Financial Institutions
- Bitwise has become the first financial institution to launch a proof-of-reserves mechanism for BTC ETFs.
- Grayscale and FTX sales of BTC pressured prices despite ETF approval. Analysts from JPM estimate that the transactions should have concluded, and have limiting impact from there on.
- Circle — the company behind the stablecoin $USDC — has confidentially filed for an IPO.
📈 Crypto Exchanges
- CoinList has settled with OFAC for $1.2 million over allegations of breaching Russian sanctions.
- KuCoin will discontinue its operations in New York and has agreed to a $22 million settlement for a lawsuit.
🔥 Top Stories
- Helium has announced a partnership with Telefonica’s Mexican arm around mobile hotspots.
🔎 Research
⚡️ Electric Capital published their annual developer report.
🖼️ Messari and EV3 collectively published the State of DePIN 2023.
📈 Diana Biggs (1kx) wrote an article on ETPs’ impact on the crypto industry.
🎉 Multicoin shared what they’re excited about for 2024.
🤩 Pantera published their market expectations and theses for 2024.
Videos & Podcasts
🎙️ 20VC invited Kyle Samani (GP @ Mulitcoin) and Nick Tomaino (GP @ 1Confirmation) to discuss hot crypto themes.
📹 Bankless invited Chris Dixon (GP @ a16z) to discuss his new book.
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