Biotech venture veteran shares lessons learned over 55-year career

William H. Janeway, who’s been involved in the technology and life sciences investing world for more than five decades, can easily recount the successes that date back to his early days as an investment banker in the 1970s.

But what also stands out to the distinguished affiliated professor of economics at the UK’s Cambridge University is a notable miss.

“We were given the opportunity to engage with Genentech in 1977, two years before its IPO [initial public offering], and we turned it down. We were wrong,” said Janeway, who offered his lessons learned over a 55-year career in life sciences and technology investing during a recent lecture at the North Carolina Biotechnology Center.

“We’re grateful to be able to host Professor Janeway and appreciate his time and insights,” said Mike Carnes, vice president of Emerging Company Development at NCBiotech. “It’s instructive to hear his first-hand accounts about how venture capital has evolved over the years and how startups today should think about the modern VC model.”

Lessons learned

One lesson? Biotech investing is a risky game, Janeway said.

“It’s a game for people who are seriously invested in understanding the science, the technology, and who have a way of reading the market. The characteristics of that market are what’s responsible for the biotech revolution and for why we were wrong not to engage with Genentech.”

Genentech Inc. became one of the leading biotech pioneers, now owned by pharmaceutical giant Roche. Janeway, meanwhile, moved on from that miss. He spent almost two decades as an investment banker at F. Eberstadt & Co. and then joined private equity firm Warburg Pincus to lead its information technology investment team. He is currently a special limited partner with the firm.

Among his high-profile investments was Bethesda Research Laboratories. In 1983, he helped execute a merger between BRL and Grand Island Biological Company to form Life Technologies—an early 1980s saga that provided the backdrop to his lecture, “The Creation of Life Technologies: A Highly Educational Drama.”

The biotechnology paradox

Janeway described the “biotechnology paradox,” a concept that biotech companies’ high valuations can greatly exceed their long-term revenue projections. The paradox was articulated in a 2006 book by Gary Pisano, a Harvard Business School Professor, who described the industry’s business challenges stemming from scientific uncertainty.

Janeway said the scientific and technology risks of biotech stand in contrast to the rest of venture investing. A general lesson in venture capital is that market risk dominates technology risk.

“My old boss, who was a great investor, knew nothing about technology. When we’d start discussing a new prospective company to back, he’d say, ‘If you plug it in, does it light up? Does the technology work?’

“To which my response was, that’s the easy problem. The big problem is, if it lights up, does anybody care? Does anybody with a budget care?”

But in biotech, he said, the greatest risk stems from such factors as: Does the science work? Will the clinical trials be successful? And will regulators approve?

If millions of dollars are invested in developing a new therapy and the science doesn’t work, market risk no longer matters. But if the science does work, there should be predictable demand from patients who could benefit from it.

“The fact that in biotech, market risk is minimal dominates from the investor’s perspective. The technology risk is super huge.”

Role as industry observer

Janeway, 81, said he’s no longer actively investing as a venture capitalist, but he continues to observe and comment on the venture world closely. He’s watching developments in artificial intelligence—especially as they’re applied to informing investment decisions—and maintaining a healthy sense of skepticism about using large language models to help produce better returns for venture investors.

“If what you’re doing is maximizing the alignment of…what the world thinks, I don’t think I’m going to give you any money to invest,” he said.

Janeway’s book, Doing Capitalism in the Innovation Economy, was first published in 2012 and revised in 2018. He read an excerpt during his lecture.