Q2 2024 Venture Financing Report – Interview With Laura Tadvalkar

Key insights from  Laura Tadvalkar

On recent advancements toward human health:
“We’re seeing the incredible impact of GLP-1 drugs not only for weight loss and diabetes, but across multiple disease areas, including cardiovascular, fibrosis, liver disease and even, potentially, neurodegeneration.”

On the outlook of later-stage private rounds:
“Today’s late-stage private rounds might be the last round before IPO but are often intended to fund the company through one or more significant data catalysts, so investors are looking for lower valuations to make sure they get paid for taking data and market risk.”

On her approach to identifying promising founders and companies:
“We always look for the ‘killer application’ that a technology is uniquely positioned to solve – and make sure that companies are funded to meaningful value inflection points, plus some buffer – because science takes time!”

You have an educational background in chemistry and chemical biology. What brought you to RA Capital, and were you always interested in pursuing a career in venture capital?

I joined RA Capital because I knew it would be an incredible platform for a venture investor – the team, the knowledge resources (with our TechAtlas research group and maps), the capabilities, and the capital to support companies and entrepreneurs from seed through the public markets is a rare combination in the industry.

I first got interested in early-stage biotech investing and company creation as I was finishing my PhD – my adviser, Vamsi Mootha, started a company as I was graduating, based in part on the research I had done in his lab. That was my first up-close experience with taking academic research and turning it into a company and, ultimately (hopefully), into medicines for patients. I knew I wanted to operate at that early stage, so after a few years in healthcare consulting, I made my way first into corporate venture capital and then to RA Capital.

The advancements being made across the life sciences space in regard to human health are vast and rapidly progressing. What are some of the major challenges you see newer companies trying to solve for that we could see more of in the next few years?

I’m very excited about recent advances in cardiometabolic disease and neurodegeneration. We’re seeing the incredible impact of GLP-1 drugs not only for weight loss and diabetes, but across multiple disease areas, including cardiovascular, fibrosis, liver disease and even, potentially, neurodegeneration. Emerging companies are looking to make these drugs more tolerable and convenient for patients, and to develop drugs with complementary mechanisms (e.g., muscle preservation). In neurodegeneration, we now have two approved drugs targeting amyloid beta for Alzheimer’s disease – donanemab and lecanemab. These are important medicines, but for now, they’re hard to administer and come with some risks, and physicians are still trying to figure out how to integrate them into practice. Newer companies developing next-generation drugs could improve some of these issues.

Our data shows parallels between life sciences and technology companies with slight increases in the number of venture financings, but a decrease in average reported deal size. What are some of the key drivers for this trend in the life sciences sector, and do you think they are specific to the industry or applicable at a macro level?

Financings are starting to pick up, but investors are largely gravitating to focused financings that efficiently drive one (maybe two) programs to key value inflection points. With a few notable exceptions, mega rounds to support large platform builds have fallen out of favor – though we are still seeing large rounds for Series A or B companies with clinical assets to advance. With the IPO markets still cool, more companies are raising additional venture rounds and planning to stay private longer. On a macro level, you can think of deal size as an equation: total private funding divided by the total number of companies equals average deal size. The numerator hasn’t meaningfully changed, but the denominator has increased due to the lack of exits coupled with a steady stream of new entrants, so average deal size would naturally come down.

In Q2 2024, we saw the largest increase in deal volume in Series Seed and Series A deals, starting to show an upward trend for the year. Does this align with what you’re seeing in the market and, if so, what are some of the underlying factors contributing to this?

After a period of intense focus on their existing portfolios, where investors felt the need to reserve more capital than expected to support prior investment, we are seeing investors willing to make more net-new investments. This year has also seen the launch of a number of new biotech funds with fresh capital to deploy and no existing portfolios to support – including TPG Life Sciences, J.P. Morgan Life Sciences Private Capital and Ascenta Capital.

In your role, you work on new company creation and making early-stage investments. What qualities do you look for when determining which founders and companies have the most potential?

RA looks for driven, committed founders who are focused not just on developing a new technology, but also on solving a specific problem for patients. We always look for the “killer application” that a technology is uniquely positioned to solve – and make sure that companies are funded to meaningful value inflection points, plus some buffer – because science takes time!

What do you find most rewarding about working with companies so early in their life cycle?

The earlier we engage, the sooner we can offer RA’s expertise and capabilities that can make life easier for early-stage companies – from our TechAtlas team advising on competitive landscape and emerging trends in a particular disease area to our Blackbird clinical trial accelerator that can provide early regulatory and clinical advice and execution. We support NewCos with a menu of capabilities that includes recruiting, finance, legal, graphics, corporate development, lab ops, marketing and even grant writing!

Any other observations on this quarter’s VC data worth noting?

I expect valuations for later-stage private rounds to remain somewhat constrained until we see the IPO market open up again. In today’s market, few late-stage private rounds are true “crossover” rounds where the company plans to IPO within three to six months at an approximately 20% to 30% step up. Today’s late-stage private rounds might be the last round before IPO but are often intended to fund the company through one or more significant data catalysts, so investors are looking for lower valuations to make sure they get paid for taking data and market risk. Peter Kolchinsky, RA Capital’s co-founder and managing partner, wrote a great article that covers this in more depth.

About Laura Tadvalkar

Laura Tadvalkar is a Managing Director on the Venture Team at RA Capital Management. Laura works on new company creation and early-stage investments, and serves as a Board Director for Cidara Therapeutics, Be Biopharma, Expansion Therapeutics, Hemab Therapeutics, Hyku Biosciences, Typewriter Therapeutics, and Aliada Therapeutics. Laura also served as a Board Director for Mariana Oncology until its acquisition in 2024. Laura has a BS in Chemistry from Yale University and a PhD in Chemical Biology from Harvard University. Prior to RA, Laura was a Principal at MP Healthcare Venture Management. Prior to MP, she was a Consultant at Clarion Healthcare (now Lumanity).

About RA Capital

RA Capital Management is a multi-stage investment manager dedicated to evidence-based investing in public and private healthcare, life sciences, and planetary health companies. RA Capital Management forms and funds innovative companies, from private seed rounds to public follow-on financings, allowing management teams to drive value creation from inception through commercialization and beyond. RA Capital Management’s knowledge engine is guided by our Tech Atlas internal research division, and our company creation team, RA Ventures (RAVen), offers experienced entrepreneurs a collaborative and comprehensive platform to explore the novel and the re-imagined.