Earlier this week, Forbes published its annual Midas List, which showcases who the outlet believes to be the top investors in the world. Stuart Peterson of Artis Ventures was on the list — very far down, behind the many VCs whose names are instantly recognizable to founders, like Chris Sacca and Peter Fenton and Mary Meeker.
The way Peterson tells it, that’s the way he likes it. There’s a reason he didn’t put his name on the door 17 years ago when he left the hedge fund Cypress Funds in L.A. to open his own investment firm in Silicon Valley, he says. “I’m not crazy about being the center of attention. I never wanted to do this by myself. I think you can be successful if you’re part of a successful team.”
Certainly, Artis has seen its share of success. In one of its most notable deals, it invested in YouTube before the company sold to Google in 2006. A family connection seemingly helped. At the time, Artis employed David Lamond, son of renowned VC Pierre Lamond, who spent 30 years with Sequoia Capital, another early YouTube.
Artis also invested alongside Sequoia in a number of other deals, including Aruba Networks, which went public in 2007 and was acquired by Hewlett Packard Enterprise in 2015. Lamond left Artis in 2012 to form his own firm.
More recently, the firm — whose newer bets include troubled Juicero and Zenrez, a company that sells yield management pricing technology and tools to fitness studios — made a killing off the sale of cancer drug developer Stemcentrix to AbbVie last year for $10.2 billion.
Artis led Stemcentrix’s Series A round and Peterson sat on the company’s board. In fact, though Founders Fund has received much attention for leading the company’s Series B round (it reportedly returned $1.4 billion off a $300 million investment in the company), Peterson says Artis made “just less than $1 billion” from its $35 million investment in the company.
Asked how he landed the deal, Peterson points to a 2010 event to unveil a social apps fund created by Kleiner Perkins. At the time, famed VC John Doerr was hosting a panel that included Facebook CEO Mark Zuckerberg and Amazon CEO Jeff Bezos, and Doerr asked Bezos what advice he had for investors and founders.
“My advice for entrepreneurs just getting started is to pick an area you’re passionate about,” Bezos said. “If I were coming out of school today, I think I would be very passionate about genetic engineering, synthetic life, I think these are incredible areas . . .”
Doerr, confused by the change of subject, interrupted, “On social networks?”
“No,” Bezos continued, “I’m talking about test tubes and engineering real biological organisms to solve clean energy and a whole bunch of interest issues.”
“I was blown away by that,” says Peterson, whose firm has invested roughly a billion dollars since its inception, much of it via special purpose vehicles whose funding has come from CEOs, CFOs, actors, and sports stars. Says Peterson, “They love the idea of access, and they’ve added a tremendous amount of value to companies that we’ve funded.”
So where is Peterson — who plans to raise a fund for Artis next year — getting his leads today? We asked him that and much more in a wide-ranging conversation yesterday. Here’s an outtake:
TC: You got behind Stemcentrix at a time when not many in Silicon Valley were focusing on novel biotech cancer drugs.
SP: You had Zynga and Groupon and Twitter and all these seemingly overnight successes that had raised very little capital and were producing great returns. We felt like maybe there’s just one YouTube and now it’s time to move on.
TC: VCs certainly would agree with you at this point. I don’t think a week passes without another firm jumping into biotech investing.
SP: Because a lot of benefits accruing to the tech landscape are now accruing to the life science space. Ten years ago, it cost a few million dollars out map out the human genome; now it’s a few hundred dollars and before you know it, it’ll be $30. It’s collapsing faster than Moore’s Law.
But it’s not just about mapping our your genetic instruction set; there’s opportunity in everything that lives on and inside of you. It’s funny, we don’t even understand yet what’s going on in our microbiome, yet we want to travel to Mars. I love the enthusiasm, but our bodies are their own solar system. We need to get to a point where instead of having a doctor test you for 20 or so pathogens to figure out what’s wrong, the doctor says, “We’re going to sequence your bacteria, fungi and viruses, and I’m going to tell you exactly what you have in an hour.”
It’s like this Netscape browser moment. You knew it was powerful, but you didn’t know where it was going to take us. Now we know that mapping out your own instruction set is powerful, but where will it take us? I think we’ll find out shortly, and that it’s going to release a tremendous amount of value.
TC: What are some of your more recent life sciences bets?
SP: We did the Series A of a company called IDbyDNA [which aims to be able to identify any pathogen] a year ago. We funded Fabric Genomics [whose software aggregates insights about cancer and pediatric genomics from around the world, then spits out an actionable report for lab technicians to send off to clinicians].
We’re going full circle [in our newfound ability to more easily find co-investors]. When we looked at Stemcentrix and needed to find another investor, it was really hard. We all looked around the table, and we said, We better call Peter Thiel. I didn’t have a number two.
[Editor’s note: Asked for comment, a spokesperson for investor Brian Singerman, who is credited with betting on Stemcentrix on behalf of Thiel’s Founders Fund, says Singerman was introduced to Stemcentrix via the debt firm WTI.]
TC: You made it on Forbes’s Midas List this week. How are you feeling about it?
SP: I see 12 people who funded Twitter. If I was given a choice between funding a targeted therapeutic to cure cancer or Twitter, I’d take the therapeutic. I look at the garbage that’s funded every day, and even if it’s hugely successful, who cares? Will it change my life?
TC: A lot of investors do seem to be experiencing a similar shift in thinking.
SP: I think we’re seeing it. Y Combinator is trying to wrap its arms around the life sciences opportunity. Yesterday we put a term sheet out to a life sciences company, and guess who was there with a term sheet? Andreessen Horowitz.
What’s interesting to watch is how people pivot but try to keep their story intact. The venture firm Data Collective wanted to do everything in big data, but then they began to see the opportunity in life sciences. So what do you tell investors? That genomics is the biggest data opportunity we’ve ever seen. Andreessen is the same. It was never going to invest in healthcare, then it had to pivot into life sciences without looking crazy.
I think it’s great, by the way. If you’re investing in [the video platform] Vessel [acquired, then shut down, last year by Verizon] or [the pet-sitting service] DogVacay, I don’t think you can complain about the lack of exits.
TC: So we’re talking about Benchmark here. I don’t think they’ve jumped into life sciences.
SP: Trust me, if [Benchmark’s] Bill Gurley went after these targeted therapeutics and he was successful, he would have as much liquidity as he could imagine. Sequoia is trying. Kleiner is trying. Either these firms pivot or they’ll disappear. They just won’t be relevant.
TC: You’ve funded an array of companies from different industries. Are you saying you’ll only do life sciences deals now?
SP: We look at everything. We led a $35 million round in [the networking company] Versa Networks. We’re about to lead another round in a healthcare company that’s in stealth and we’ll probably raise $35 million for them. We invest in about a dozen companies each year. But there’s no mandate. This may be the last networking deal we do, or the last targeted therapeutics deal we ever do.
As far as the consumer-facing space, I don’t know. I mean, the Flipagram — I don’t even know what this is. I was like, I can’t listen to this for five minutes. It looks like Instagram to me with longer video feeds. Its numbers probably looked just like Google’s early on, but I didn’t care. [Editor’s note: Sequoia and Kleiner, Google’s earliest venture investors, wound up co-leading Flipagram’s early funding. The company, which struggled to gain momentum, sold in February to the Chinese company Toutiao.]
Same with Jet.com. I just thought: If this is hugely successful, who cares? Amazon is already operating on razor-thin margins.
I think people in the Midwest, when they see five different billionaires that come out of a place like Twitter or 12 different venture funds that helped make a company a success, they might wonder: Is this the best we can do? Really?