What Do Moderna, Snowflake and Livongo Have in Common?

What do Moderna, Snowflake and Livongo have in common?

Not the sector. Not the founders. A venture firm started each one before it had a product.

Flagship built Moderna. Sutter Hill incubated Snowflake, and its partner Mike Speiser was the first CEO. General Catalyst co-created Livongo with Glen Tullman.

That was the opening question for my guest lecture yesterday in Stanford's CS 522, AI in Healthcare, on how companies get built on purpose. Three ideas from the talk.

1. Venture returns are two numbers multiplied: how big the winner gets, and how much of it you own. A disciplined lead investor owns about 10% at exit. Flagship owned 19.5% of Moderna at the IPO. Sutter Hill owned 17.4% of Snowflake. The firm that builds the company starts with the biggest stake.

2. Tech breakouts route around the system. Health companies have to win inside it. That's the slide behind me in the photo. YouTube didn't need the TV networks. Airbnb didn't need hotels. Uber didn't need taxi medallions. In health, insurers decide what gets paid, the FDA decides what can be sold, and hospitals and pharma decide what gets adopted. So an experienced team on day one matters more in health than anywhere else.

3. Most of the job is killing ideas while they're still cheap. At Averin, every creation runs through six steps with a kill point at each one, and we write the kill test before the first customer call. We expect most ideas to die there.

My favorite part of the talk was the Moderna origin story, which my partner David Berry tells as a chain of phone calls. In 2010 Derrick Rossi showed that modified mRNA could reprogram adult cells into stem cells, orders of magnitude more efficiently than before. He called Tim Springer. Springer called Bob Langer. Langer called David at Flagship and said, "There's a company here, but we need to figure it out." The team made 40 constructs. All 40 worked.

The rest is history. The beginning is the part people forget. Nobody pitched Moderna to a VC. A firm decided it should exist, then built it.