What We're All About

Happy Monday

There were two big events in the last two weeks: the first was the Jefferies conference in NYC, and the second was the leadership summit. Some are calling it the first annual leadership retreat; we’ll see how things unfold, but I am prepared to call it at least a success on the merits of what we were trying to achieve. The feedback is still coming in, and please submit it if you haven’t yet, but I for one thought it was great to get everyone together.

I am working on a more legitimate delivery vehicle than sending out this email, and by “I am working” I mean Tyler of course. Maybe by the next one there will be a slightly more official looking Vital Signs. Alas, until then, enjoy it as it is.

What We’re All About

It wasn’t the most important reason, but one reason I appreciated gathering the extended team was that it gave me an excuse to articulate the mission, vision, and values of what I am aiming to achieve at SHV Bio. A lot of these ideas live solely in my head and it’s nice to have a venue and excuse to share them. What follows is partly a rehash of what I shared already, and partly a window into the sausage making. So, be forewarned: here be dragons.

I went back and forth on the mission statement between “we build technology companies that solve the most important problems in medicine” and “we build companies that invent technology to solve the most important problems in medicine.” Ultimately I went with the latter, to emphasize that I do not mean “technology companies” as in the “tech companies” of HBO’s Silicon Valley. I mean technology in the broadest possible sense, leveraging science and engineering to build solutions to real and pressing problems. It also nicely disambiguates “build” from “invent”, both important concepts in how I think of what we do here.

We build, and the companies invent. Building is more than investing, and I take that distinction seriously. Building is an effortful task, and the obligation extends long after we write the check to when the journey is done. Inventing is important, critically so, but that is one thing we cannot do. And many companies out there do not invent either; ours must. That’s why I called it out explicitly.

What is our vision? What does the world look like if we succeed? Therapies exist that would otherwise not, that otherwise could not. Diseases are cured, or even prevented, that would have caused great suffering. There will be an abundance of new, effective medicines that reach the right patients, at the right time.

I want to live in that world. And in that world, if we succeed, we have helped build generational companies and generated fantastic returns. At the end of the day, no matter how much good we do in the world, we only get to keep doing it if the last part is true. We are fortunate to work in a domain where doing good work for the benefit of humanity and generating outstanding financial performance are not in tension.

I tried to articulate the values and behaviors that guide us in the pursuit of this mission and vision, and came up with ambition, courage, and service. These are all undeniably true and core values; I also think they are fairly comprehensive¹. They did not spring unbidden from the depths of my feeble mind, but rather are an expression of how we already approach and have consistently approached our work.

Ambition is essential, because we make so few investments and take on so few opportunities. The ones that we do take on must be bold in scope, so that the upside of success is commensurate with the effort it takes to get there. It turns out the effort to build any company is about the same, and if we are going to stand shoulder to shoulder with a founder as they pour years of their life into it, it should be to achieve something undeniably ambitious.

Courage is the ability to face fear and uncertainty, and to persevere in spite of them. Building new companies is an inherently uncertain activity, and the act itself requires courage. If we demand ambition, therefore, we must demonstrate courage. Courage is what lets us stay focused on an ambitious goal that may not come to fruition for a decade or more, in spite of the uncertainty we meet every day as we pursue it.

Ultimately, no matter how ambitious the goal or how courageously we face the task of achieving it, we are not the entrepreneurs in the arena. Success or failure rests with them. All we can do is help, and our question is always: what can we do, tangibly, to support our companies and their leaders? Our role is fundamentally a service job, in which we work for our portfolio company founders and we win when they win.

Our economic model as a firm reinforces this behavior: there is no management fee, which means we only get paid when we generate a return. That means everything we spend internally, any resource we cultivate to help beyond the direct provision of capital, must drive value into the portfolio directly or we should not do it. That is the mindset that guides all of our internal investments in capabilities to support our entrepreneurs and portfolio companies.

So that’s what we are about. We build companies that invent technologies to solve the most important problems in medicine, to bring about a healthier and more prosperous world, and we pursue that objective with ambition, courage, and service as our guiding values. You know, in case anyone asks.

There is one more thing I want to discuss on the topic of what we are about, and it is more along the lines of what we are not about. First, let me be clear that this team and our portfolio comprise the most talented, collaborative, and high quality group of people I have ever had the privilege of working with. The energy inside these walls and between our companies is nothing but positive and constructive, all the time. Whenever there is an opportunity to lift someone else up, every one of you reliably seizes it.

But we are not in the business of tearing other people down whose only sin is that they are not part of our SHV Bio family. There are many good companies out there that are not good Sutter Hill investments or should never be Sutter Hill portfolio companies; that is more of a reflection of our unique structure and approach than it is of those companies or those companies’ founders. There are many ways to create and capture value that simply don’t fit our model, and that’s okay. Let a thousand flowers bloom.

The first thing any of us should think when we see a new fundraising announcement from a company in a space we are in or looking at is not “those investors must be idiots” but rather, what is it those investors are underwriting? What do they see or know that I don’t? For one, this will help us combat confirmation bias amongst ourselves. And even if our priors are proven correct, we’ll at least learn something useful from the exercise.

Like I said, the vibes were incredible in the building last week, a true reflection of the deservedly high esteem in which you all hold one another. When any of you are out in the world representing your companies, and the firm by extension, that’s what I want other investors and partners to feel instead of any hint of negativity with respect to folks taking a different approach.

What I can promise is that we will work tirelessly every day to help you build your companies, and stand beside you as you work to deliver on your ambitious goals and let the results speak for themselves.

Many thanks once again to everyone who gave their time and energy last week. I think it was well worth both. Onward!

Binding Sites

1. The Dirt That Refused To Die This contribution to the theory of how life emerged is less romantic than cosmic-ray-stimulated primordial soup, but provocative nonetheless. From dust to dust, indeed.
2. Any hammer you can hold Welp, this definitely makes me feel worse about referring to AI as a tool…
3. The Long Illness Persists I thought this would be more of a review of the research on Long Covid, but it turned out to be a little bit of that, and mostly a provocative essay on the philosophy of medicine at work in our healthcare system and how it collides with the complexity of disease. Interesting, if light on solutions.

Footnotes

1. But I reserve the right to add to or modify them as I see fit. ↩