Strategy Session is a feature for Crunchbase News where we ask venture capital firms five questions about their investment strategies.
Subscribe to the Crunchbase Daily
KdT Ventures, an early-stage venture capital firm based in Austin, closed its Fund II with an oversubscribed $50 million in dedicated investment to back companies focused on startups at the intersection of data, engineering and biology.
This is KdT’s second fund, following a $15 million inaugural fund in 2017. With its first fund, the firm made 18 investments in companies, including PathAI, 54gene and Checkerspot.
The new fund will target companies in areas such as gene and biological circuit fabrication, novel delivery technologies, biomaterials innovation and consumer biology. KdT already started deploying capital from the new fund into companies, including Elegen, Xilis, Abridge, Dimension Inx and Andes.
I spoke to KdT’s founder and Managing Partner Cain McClary and Principal Rima Chakrabarti to help us better understand what exactly “frontier science” is and how it will change the world. The following was lightly edited for clarity and length.
What is your target for Fund II?
McClary: Now that we have finished raising, we have plans to increase the check size to between $700,000 and $1 million per check for pre-seed or seed-stage rounds. We’re in a position to elevate impactful science at the earliest stages because there are not many science VCs at the seed stage. We are looking at funding approximately 25 companies in Fund II. We already have nine investments.
Not many people are familiar with the term “frontier science.” What does it mean to you?
McClary: We are on the verge of a biological revolution, meaning all of sudden, we now have the source code to the physical layer around us. Genetic sequencing is enabling us to understand the DNA/RNA that’s driving cells all around us — in plants, humans and microbes. In parallel, we have high-powered computation and data science that’s grown up at the same time as sequencing and has become nearly freely available. When you apply computation to biology and chemistry, it redefines what’s possible in these major industries like medicine, agriculture and chemicals. That, to us, is what it is. We consider our companies are rewriting the physical layer around us.
What were the drivers for targeting investment dollars into frontier science?
McClary: Our goal is to elevate impactful science, and we as scientists want to make sure the right science companies are getting funded. There are few VCs who can gauge the science.
Chakrabarti: You see other firm underwriting teams and markets, which is important, but that’s because they don’t have the ability to really look at the science and understand the feasibility of the science and its commercial viability. As we’ve seen in the labs around the country, science is going to reverse climate change and cure cancer, but too many times it stays in the lab. We provide capital at the early stages, and partnership, to get those technologies out of the lab.
What are the up-and-coming areas here?
McClary: There are a few we are paying attention to, including gene fabrication, which is really interesting. Now that we have the source code, companies are fabricating and writing that source code and using it in different ways in medicine, therapeutics, agriculture, or chemicals. You need to be able to fabricate genes and think of them as an engineering science rather than an art form.
Chakrabarti: In the materials innovation space, if you look at how we treat diseases right now, it is typically an antibody or drug. The big thing missing is when that enters the body, how does it form a structure that interacts with the body? There’s a 3D element to healing that is largely overlooked.
McClary: Another is consumer bio. We will see the design and constitution of biological systems become more accessible to consumers.
How do you like to work with founders?
McClary: We like to say that when we invest so early, we are basically employees 4, 5, 6 and 7. We are as deeply embedded as you can be. Myself, Rima and Phil Grayeski are all physician-scientists and understand the complexities of scientific scaling. Mack Healy, our second GP is a former attorney. He’s seen how smart companies are formed, how they communicate with their boards, how to sign an early JDA
One of the key performance indicators in life sciences for investors is that they want to see a large incumbent that doesn’t have access to said technology, and be willing to put up capital and resources in a partnership early on. For future investors, that first partnership is important as a derisking function. That milestone shows commercial interest.
Chakrabarti: We’ve seen what it takes for a startup to transform from a technology to a company, and we know what milestones Series A funders get excited about.
Illustration: Dom Guzman
Stay up to date with recent funding rounds, acquisitions, and more with the Crunchbase Daily.
67.1K Followers