10 Questions w/ Joel Dudley — Partner @ Innovation Endeavors

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Joel Dudley is a partner at Innovation Endeavors and an experienced leader, medical professional, researcher, and entrepreneur. Joel previously served as the Chief Scientific Officer at Tempus, a company focused on bringing the power of data and artificial intelligence to healthcare. Before joining Tempus, Joel was an Associate Professor of Genetics and Genomic Sciences and founding Director of the Institute for Next Generation Healthcare at the Icahn School of Medicine at Mount Sinai. He also served as Executive Vice President for Precision Health for the Mount Sinai Health System.‍

Prior to joining Innovation Endeavors, Joel co-founded Onegevity Health (acquired by Thorne), a company developing health intelligence platforms for preventative health, and NuMedii, a company developing machine learning and A.I. approaches for drug discovery. Joel has published 200+ peer-reviewed research papers that have been referenced and featured in the New York Times, Wall Street Journal, Scientific American, MIT Technology Review, CNBC, and other popular media outlets. Joel earned a BS in Microbiology from Arizona State University and an MS and Ph.D. in Biomedical Informatics from the Stanford University School of Medicine.

We sat down with Joel Dudley to ask his viewpoints on everything from top founder portfolio traits, seeking mentorship, to advice on preparing for fundraising…

1

What are the top 3 common traits of founders in your portfolio?

Smart with confident humility: There is typically a deep scientific insight underlying the companies we invest in, and those insights often come out of the founder’s academic lab, where they are among the top scientists in their scientific area of expertise. Spending as much time in academia as I have, it is unfortunately rare to find exceptional scientific ability and exceptional humility in the same individual. That can work just fine within the incentive structures of academia. However, when running a startup, you need to have the humility to know your weaknesses and be open to asking for input and feedback from board members and advisors. And you need to make critical early hires that have strengths that complement the founder’s weaknesses. We are lucky to have scientific founders in our portfolio that move forward with great confidence and intelligence because they have appropriate confidence in their scientific and technical abilities and appropriate humility in decision-making.

The ability to adopt an engineering mindset: Many of our companies are founded on scientific insights that have achieved proof-of-concept in an academic research setting. But in almost every case, the path to value will require developing strategies and technologies to scale up the initial proof-of-concept. Scaling beyond the proof-of-concept often requires adopting an engineering mindset where you think not only about systems designs of robotics, fluidics, data infrastructure, etc., but also the iterative process of design and optimization as well as frameworks for understanding engineering design trade-offs that arise as you engineer scientific platforms. You can hire the engineering mindset onto the team. However, the scientific founders must also understand and value the engineering mindset as a key aspect of scaling, value creation, and company success.

Short-term pragmatism grounded in a long-term vision: In a fast-moving startup, there is always going to be a tension between the long-term, transformative vision driving the company and the short-term pragmatics decisions that need to be made today to move the ball down the field towards the greater vision. When you consider something like a therapeutics company, you know you are signing up for a decade-plus endeavor to build something great and important. Pure scientists are often good at keeping their north star pointed toward an exciting and important long-term vision. However, they can sometimes have difficulty connecting all the key results and milestones between today and the future. That’s why it’s often important to pair scientific or academic founders with strong operators and executors, along with strong engineers who focus on building things and moving the ball down the field daily. And it is also important to hire leaders within the company who are good at navigating their teams along that fine line between short-term deliverables and long-term vision.

2

How does your investment criteria change in a recessionary environment?

“Our firm’s investment criteria are designed and principled to remain stable against the changing macroeconomic environment. For example, we perform thorough and technically or scientifically rigorous diligence on all opportunities regardless of how fast or slow deals appear to be moving. One thing we see now as a result of the changing investing environment is investors requiring therapeutics companies to have much more robust data packages establishing biological and clinical proofs-of-concept to trigger investments as early as Series A. This “raising of the bar” by investors is important to understand if you are building a technology-enabled therapeutics platform company. In recent, frothier years platform companies could raise large Series A and even Series B investments and use those funds to continue building their platform. We work with our therapeutics platform companies to ensure they strike a healthy balance between building the technology-enabled platform at their business’s core and developing a robust pipeline of assets supported by robust preclinical data packages and well-validated clinical hypotheses.”

3

How has your worldview evolved since you first started your VC career?

“That’s a really interesting question. My first thought is that I’m really blown away and humbled by many of the scientific funders who follow their conviction and go all-in on their startup idea. I’ve met so many passionate founders who are leaving tenured faculty positions, high-paying positions in biopharma, or other very comfortable and secure positions to go all-in on startups that have high degrees of technical or scientific risk. You tend to only hear about academic breakthroughs that make the headlines, and those are indeed important, but our society and industries benefit from so many intrepid founders who trade comfort for the challenge and risks required to turn science fiction into reality at scale.”

4

Outside of operating experience & higher education, what is one seemingly random thing you look for in a founder’s background?

“I doubt I have any particularly novel insight regarding this question, but I appreciate it when founders are fond of science fiction. I’m probably dating myself here, but I’m a huge fan of Star Trek the Next Generation (STNG), and it’s amazing to see how many issues and concepts explored by STNG are relevant in A.I. and biotechnology today. It’s quite difficult to envision truly revolutionary science and technology when you iterate toward the future from today in incremental steps because it’s easy to become encumbered by the limitations of today’s science and technology. Science fiction offers the freedom to envision paths to future worlds of science and technology without those limitations.”

5

Outside of investing, what is one seemingly random activity that helps make you a better VC?

“Strangely enough, I’d have to say it’s weightlifting. I spent a lot of time getting into powerlifting as my main form of exercise, and nearly every injury I’ve suffered as a result of powerlifting came from “ego lifting.” “Ego lifting” refers to self-indulgent behaviors that cause you to become impatient and undisciplined due to chasing bigger and bigger weightlifting numbers. For example, you might try to lift a weight that is probably beyond your current strength level, but your ego convinces you to try it because you are so focused on hitting bigger numbers and getting that P.R. (personal record). Lifting heavy weights beyond your ability will almost always result in injury. I have several long-term injuries that are a result of ego lifting. Whenever I feel pain in my joints from a past ego lifting injury, it reminds me about the cost of giving into one’s ego. In my opinion, the proper course in powerlifting and investing is to keep your ego in check and stay the course and be patient enough to let good fundamental processes work and compound over time.”

6

What has been the most helpful piece of advice you received throughout your career as a venture capitalist?

“I’d say it’s one of the core values of our firm, which is to invest with high conviction. People sometimes ridicule the VC industry for having a herd mentality. While that characterization may be unfair and overplayed in most cases, I’ve experienced that there is some truth to that characterization in some cases. If all good investments were obvious, then you would not need to pay skilled partners to make hard investment decisions. I’m grateful that our firm hires investors with deep knowledge and experience and encourages them to follow their convictions in making investment decisions. I believe our firm’s track record speaks to the value of this high-conviction approach to investing.”

7

As an early stage investor, we often pick companies whose directions change. Can you talk about pivoting vs. staying the course?

“Given that I’m fairly early in my investing career, and the majority of my investments have fairly established go-to-market paths through the drug development cycle, I don’t think I have anything profound to say about pivoting with my investor hat on. I would highlight two things I think are important to keep in mind here. One, I’d refer back to my earliest comments about having humility and keeping your ego in check. Things go off the rails when you have stubborn founders who fail to heed well-intentioned and valuable advice on potential pivots from board members and other mentors in that founder’s life. The “sunk cost fallacy” is a dangerous trap for humans in general, so it can be hard to keep those cognitive biases at bay in any situation. The second thing I’d mention, and maybe this reveals my scientific background, is to have really clear questions (i.e., hypotheses) on potential pivots and clear sets of data and outcomes that would help you make more objective and informed decisions on pivoting. Unless you are a one-in-a-million founder, “winging it” on a pivot will likely end in disaster.”

8

As a founder building something new in the world, you are often in need of knowledge you don’t possess. How would you recommend founders go about seeking mentorship?

“This is a really important question. Some of the most impressive founders I’ve met, and this includes first-time founders, are the ones who had an innate inclination to seek out mentorship. Our firm is a big believer in supporting founders through feedback and mentorship, and we have some formal programs in place to encourage founders to establish these types of feedback-driven mentorship relationships. I’ve found that many successful entrepreneurs in the later stages of their careers almost always remember where they came from. They remember what it was like to be taking their first steps into entrepreneurship, and most of them are willing to give back to younger founders. So reaching out to late-career entrepreneurs in your field will yield a surprising willingness of experienced folks to offer some form of mentorship to younger folks. That being said, experienced entrepreneurs in the later stages of their careers will likely have more people asking for their help than they have time to give help. In my experience, mentors are willing to offer their time to individuals they perceive as receptive mentees. Meaning people who are humble and willing to listen to advice and people will apply mentorship insights towards some greater purpose other than enriching themselves. Experienced mentors are usually quite good at sniffing out transactional, self-serving folks from genuine ones. Many mentor-mentee relationships will develop organically between co-workers, etc. However, I would encourage young founders to reach out to potential mentors in their field with clear, succinct, and humble appeals for mentorship. You’d be surprised how many folks are eager to help total strangers achieve great and important things.”

9

How does your evaluation process change when it comes to backing first-time vs. repeat founders?

“I generally see the world through a Bayesian-type lens where I always try to estimate prior probabilities to help estimate conditional probabilities on various potential outcomes. So with repeat founders, you have access to a different set of prior probabilities that you don’t always have with first-time founders (though it is still often possible to derive useful priors in the latter case). That being said, the world is a complex dynamic system. So, while it is true that adages such as “past performance is the best predictor of future performance” and “failure is the greatest teacher” tend to be useful rules of thumb, I think you have to consider all possible variables when making an investment decision. And that includes checking your assumptions about the relevance of a given founder’s previous experience as a founder (or lack thereof) to a given investment thesis.”

10

How do you advise founders in your portfolio to prepare ahead of time for future fundraises?

“When planning for future fundraising, founders often hear me state one of my favorite adages as a skeptical optimist, which is, “Hope for the best, plan for the worst.” Again, I don’t think I have any particularly unique insights on this topic compared to more experienced investors. But I have noticed that many founders often underestimate the time they need to put into fundraising preparation and how long it will take them to raise the next round. Many founders also underestimate how important it is to build long-term relationships with investors and how important that can be for future fundraising. For example, your Series B lead investor may come from a relationship you build starting at the Seed stage. There is a big signal vs. noise problem when you look at the world from the investor side of the table, and I think that many founders forget about that because they are so laser-focused on executing their startup, as they should be. And firms have different sets of criteria and things they need to believe before making an investment, so you want to learn those different criteria and world views early on so you can have productive fundraising interactions. So you need to keep some time and focus on the longer arc of your fundraise, which includes thinking about rounds past just the next round. Circling back to my earlier comment about hoping for the best and planning for the worst, this means having a very clear and detailed plan for the various fundraising scenarios that could play out. For example, what happens “exactly” in the case of a smaller-than-expected raise or a failed raise altogether? Can you raise an extension? How exactly will you cut burn, and what milestones precisely will you hit to get another swing of the bat at raising the next round? What about the high-class problem of having an oversubscribed round? Would you take more money, and if so, how would you put that money to work exactly? And what about all the possible scenarios between those two extremes? We like our companies to have deeply prepared minds when they head into fundraising so that they can be very intentional in their fundraise, provide crisp and detailed answers to investor questions, and also so they don’t get derailed when fundraising doesn’t go as they envisioned. A lot of this seems obvious, but it takes deliberate and conscious effort to develop a prepared mind ahead of fundraising rather than seeing it as a necessary nuisance that is distracting you from purely grinding on the core business.”

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❤️ Thanks Andrew Yashar for your help in putting this together :)

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