Maverick Ventures: fund news and looking to the year ahead
As 2019 begins, we would like to share fund news, reflections on 2018 and some of our investment themes for the year ahead.
First, a little about us. Maverick Ventures manages a $382M evergreen fund. The critical difference between an evergreen and a traditional venture fund is an evergreen fund has no finite life — hence the name — which enables us to invest with an infinite time horizon. And we have been fortunate to attract investors who understand the long-term nature of our approach. All of our investments go into a single fund structure that is specifically designed to give our companies the flexibility and runway they need to achieve great outcomes, even if it takes longer than originally planned (as history teaches can be the case). We believe that by removing the life of a fund as a constraint on entrepreneurs and us, together we can avoid the pitfalls of having to base company-building decisions on fund age or vintage. The evergreen fund structure allows us to focus on what is best for our entrepreneurs, their companies and our investors. This has served entrepreneurs, with whom we are fortunate to partner, and our investors, whose capital we are fortunate to manage very well. Everyone is in sync.
Over the last 15 years, the Maverick Ventures team lead the investment in over $1 billion at cost (first as a part of Maverick Capital’s broader team and, more recently, through the Maverick Ventures fund) and have been fortunate to help an incredible group of entrepreneurs through 21 IPOs and exits. We’ve learned a lot and think we’ve been able to contribute a lot more than just capital by bringing to bear our experience base and the resources of Maverick.
We partner with ambitious and determined entrepreneurs solving large unmet needs with novel approaches. Typically, though not much is “typical” in true venture investing, we invest early in a company’s life and use our resources to help scale companies through every stage of their life cycle. We obsessively seek out founders tackling big issues ill-served by incumbents in enterprise software, consumer software and healthcare. Over the years some of our most rewarding investments have been at the intersection of these sectors or by funding “deep science,” for example in the fields of gene editing or quantum computing.
The following investments are examples of areas of curiosity that border on obsession where we hope to make more investments in the future. If you would like to learn more about these companies, or any other of our great portfolio companies, please visit our website at www.maverickventures.com.
Data / Security
Data is increasingly becoming the new currency, and the number of attacks, whether phishing, account takeovers, ransomware, etc. increased greatly this past year and will continue to do so in 2019. Passwords are relatively easy to crack, and even if they seem impenetrable there is a reasonable chance they have already been stolen in the Equifax, Marriott or myriad other breaches that have occurred recently. In 2018, we invested in three new companies and added funds to existing companies that help protect data privacy.
We led the $30M growth round funding for BioCatch, a company that has pioneered advanced behavioral biometric capabilities (i.e. the measure of human activity patterns on devices). The technology is currently being used for continuous authentication and identity proofing by building profiles on users that cannot be spoofed by fraudsters. Its technology has also learned how a hacker behaves and can detect fraudulent activity before it happens, all based on how the given device is being interacted with. In 2019, we believe behavioral biometrics will become a mainstream concept leveraged to prevent sizable fraudulent activity and data breaches before they occur.
Healthcare providers have become a bullseye for cyber criminals as comprehensive personal health data is stored digitally in electronic health records (EHRs). The value of stolen medical records now exceeds the value of financial records including social security numbers. The result is hospitals around the globe are being hit by attacks, highlighting threats to medical devices, which are critical to the same hospital networks. Recently, we have seen an increased prevalence of attacks such as ransomware targeting medical devices. Attacks on medical devices directly affect the safety of patients connected to them for lifesaving care. This trend is unlikely to slow, given medical devices are often the most vulnerable endpoints on hospital networks. Medical devices are an integral part of modern healthcare and this growing threat is a unique challenge to healthcare providers. Cylera is on the leading edge of this issue by offering healthcare providers a comprehensive solution to automatically detect and defend against threats while not impeding medical devices ability to clinically treat patients. Unfortunately, we foresee the need of cybersecurity growing as the threat of attack worsens, particularly in healthcare, in the coming year.
We also are investors in Aptible, a platform providing an easy-to-use, all-in-one interface that helps small companies with the incredible complexity of staying in compliance with regulations, ranging from HIPAA, GDPR, ISO 27001, SOC 2, etc. Aptible gives companies software, content, and support that helps them build and run a security management program. Having such a program enables companies to both comply with regulations and compliance frameworks while also actually improving their data security. Doing this both accelerates sales cycle (by helping to show that there are actual comprehensive data security measures in place) and reduces risk of appearing on the front page of the New York Times as the victim of a data breach. As regulation continues to get tighter on data privacy, and customers increasingly demand that companies are protecting their personal data, companies (especially small ones) are going to need a lot of help staying in compliance. Aptible makes that easier by an order of magnitude.
The face recognition market is growing all around the globe and has made our faces our identifiers. We use our face to unlock our phones, take out cash and cross borders. Companies deploy it for marketing purposes and governments can identify opponents in protests. Our photos contain sensitive, biometric information. This data poses a serious security risk as anyone using these photos with face recognition can identify and track us. Maverick invested in D-ID, developing an AI to protect photos and videos, from face recognition while keeping them visually similar to the human eye.
Even with volatility in the public markets and the specter of a downturn, we believe 2019 will be a year characterized by increased investment in cybersecurity and data compliance by companies in all verticals, and we are especially excited about the investment prospects for companies servicing healthcare providers, device manufacturers, insurance companies and more.
Deep Science
We believe Quantum Technologies will be one of the most important technology trends over the next decade. After years of research and due diligence, we made our first investment in the sector. We invested in ColdQuanta, a company that develops and sells quantum components, instruments, and systems based on neutral atoms. In order to take advantage of the peculiarities of quantum physics, which enable potential step function performance improvements in applications including quantum computing, secure communications, precision timekeeping, computer synchronization, and navigation, particles need to be brought to exceedingly cold temperatures. Employing cutting-edge laser technology, ColdQuanta’s components can bring atomic particles within a millionth of a degree of absolute zero — that’s colder than space — and enable quantum technology in a multitude of applications.
In 2019, we believe that we’ll begin to see more mainstream applications and heavy investments in domestic quantum technologies, spurred by continued maturation of the technology, as well as increasing innovation in China. The quantum race between the US and China should continue to heat up.
Healthcare
Based on our research, we believe the best way to save money in healthcare is to focus on primary care physicians accustomed to taking on clinical and financial risk in preventative medicine. The insurance industry — particularly with managed Medicare (currently 57 million beneficiaries) — needs a higher quality, lower cost solution. Devoted Health, a company that we invested in early on and that recently announced a $300M Series B, takes responsibility for the full cost of care for its members and thus has a true incentive to keep them healthy and thriving.
CityBlock Health (spun out of Alphabet) also addresses preventative care issues, by tackling inequality in healthcare. CityBlock is driven by three main trends: underserved populations yielding disproportionately poor health outcomes, innovation serving only people with means and the increasingly transactional nature within the business of healthcare. We were immensely proud to lead their $20M Series A round.
In 2019, we expect to see social determinants of health (community, education, environment) considered alongside health conditions. We’ll also begin to see scaled solutions on how this works, from the insurer, provider and employer perspectives.
We also anticipate that people will continue to show a willingness to pay for D2C (direct-to-consumer) healthcare services delivering more value and flexibility than legacy solutions. hims, a direct to consumer healthcare platform, raised a total of $97M in funding. With a telemedicine approach, hims allows customers to get diagnosed and treated at a lower cost and greater convenience. hims serves as a good example of direct to consumer companies reaching consumers looking to have their healthcare and prescription needs met on-demand.
In our view, the trend of already hot D2C pharma startups will continue to gain momentum as compliance and regulations evolve.
We also look to back entrepreneurs that tackle important issues in healthcare with a never-before-seen approach. Galecto Biotech develops galectin modulators to treat severe and intractable diseases, including lung fibrosis, non-alcoholic fatty liver disease, and cancer. The company is led by some of the world’s leading fibrosis and inflammation experts, and we are thrilled to partner with them on their incredible mission.
This year has been truly exciting, and the above is just a snapshot of the work we’ve accomplished. To read more about our 2019 healthcare predictions, visit us here.
The views expressed herein are solely the views of the author(s) and are not necessarily the views of Maverick Capital, Ltd. or any of its affiliates. They are not intended to provide, and should not be relied upon for, investment advice. The information provided herein was prepared and calculated based on data provided from public sources as well as the portfolio companies and Maverick Capital, Ltd. makes no representation as to the accuracy or completeness of any information obtained from these sources. Past performance does not guarantee future results.
