Rational Engagement in a Heated Market: How Investment Firms Effectively Communicate with Scientists

Investment firms focusing on the healthcare sector are currently “shifting toward earlier-stage investments.”

According toVBOrange BureauStatistics show that from January 1 to May 31, 2022, a total of 97 early-stage investment and financing events (seed round and angel round) occurred in China's healthcare sector, with the total financing amountOver 6 billionyuan. It is worth mentioning that among these 97 early-stage investment and financing deals, a total of137 Investment Institutionsparticipation, including manySequoia, Matrix Partners China, Mint Capital, BlueRun Ventures, CDH Investments, YS Capital, Sinovation Venturessuch as top-tier investment institutions.

These real-world data points, coupled with the successive influx of top-tier investment IPs, all underscore the current fervor in the early-stage healthcare investment market. Yet such enthusiasm is always transient; we must return to rational deliberation and take a moment to thoroughly discussHow can investment institutions identify promising original innovative technologies in early-stage healthcare projects? How can they find scientist-entrepreneurs who share their vision? And how should they collaborate with these scientists and their underlying research initiatives?

To address these questions, at the Research Achievement Transformation Forum of the recently concluded “6th Future Healthcare 100 Conference,” a partner at BlueRun VenturesCao Wei, Senior Partner, Innovation and Growth Investment, CDH InvestmentsGao JieLiang, Partner at Yuansheng VenturesLi KechunExecutive Director of Sinovation Ventures and General Manager of the Frontier Technology FundRen Bobing, Managing Director of VCBeat CapitalHe SiduFive guests, on “How Capital Empowers Innovative Research to Accelerate Its Growth into Industrial Applications"This topic was explored in depth."

The following is a transcript of the speech, provided for the reader’s convenience,VCBeat Orange BureauEdited the text without altering its original meaning:

He Sidu (Host): How do you view the trend of investors increasingly shifting their focus to scientists? What are the underlying causes?

Cao Wei: Since 2006, BlueRun Ventures has been investing in technology and technological innovation in China, engaging consistently with scientists and research institutions. Through our collaborations with scientists, we have found that the definition of scientist entrepreneurs is remarkably broad. Based on this insight, we have developed our own methodology and framework.

First, it helps startup teams build their core business capabilities, primarily including technical R&D and product management expertise.As “coaches” and partners to startup teams, investors should possess the core competency to diagnose the strengths, weaknesses, and cognitive blind spots of these teams, while also providing support during critical stages of their development.

Of course, while scientist-led startup teams have pushed technological research to the extreme, beyond core technologies, they must also consider how to achieve “Hard Tech, Soft Landing”? That is, how to transform cutting-edge technologies into user-friendly products or those closely aligned with market demands.

However, scientists are not product managers. From the moment a scientific innovation is ready for productization, we must help the scientific team identify a strong product team and facilitate integration between the product and technical teams, thereby establishing a coherent, self-sustaining loop that accelerates the commercialization of research outcomes.

Secondly, focus on the non-core business capabilities of the scientific team. First isFund Management Capability, including corporate cash management, financing pacing, and cash utilization planning; secondly,Public Relations Capability, involving how to interact with the entire ecosystem and how to convey one’s advantages to the market; thirdly,Talent Management Capability, how can a clear talent development framework and system be established in the early stages? Fourth isCapability to Collaborate with the Government.

In the early stages of a project, there is no such thing as a “perfect team”; every early-stage team has its own weaknesses. Therefore, throughout Bluerun Ventures’ development of its middle- and back-office infrastructure, we place significant emphasis on building non-core business capabilities. We aim to leverage our industry insights and resources to help our portfolio companies diagnose, strengthen, and optimize their foundational core competencies.

As for the concept of scientists, or the frenzied scramble to recruit them, we stillWe hope to find a team that strikes a balanced approach between self-awareness and scientific research.

Gao Jieliang: Regarding the topic of investment enthusiasm for early-stage projects led by scientists, I would like to discuss two aspects: first, why primary market investments are currently trending toward early-stage ventures; and second, why the scientific community is receiving heightened attention within early-stage investing.

First, let’s discuss why there is a preference for early-stage intervention.The iteration of the biopharmaceutical industry is taking place against the backdrop of nationwide industrial upgrading.Over a time horizon of approximately 20 years, various subsectors within healthcare, such as pharmaceuticals and medical devices, have undergone industrial upgrading, transitioning from low-end generic manufacturing driven by sales, to rapid follow-up strategies, and finally to innovation-driven development powered by independent R&D.

Macroeconomic factors driving industrial upgrading include:

First is people and technology.Over the past 10 to 20 years, whether they were Chinese scientists, senior executives of multinational corporations, engineers, or professors at domestic research institutes and senior managers of large domestic companies, these talents have joined the entrepreneurial wave, bringing with them technological and managerial expertise.

Second is capital. A comprehensive funding support system covering the entire lifecycle of innovative enterprises—from research grants at various levels, government guidance funds, angel funds, venture capital (VC) and private equity (PE) funds, to public listing fundraising—has been established.

Third is government support and guidance.Across China, policy support for industrial parks has become increasingly comprehensive, with a range of measures—including guidance funds, tax incentives, household registration (hukou) facilitation for talent, and industrial ecosystem support—already implemented to meet the development needs of innovative enterprises.

Fourth is demand. The aging population is driving increasingly strong demand for the healthcare industry.

Why Are Scientists the Focus?

This is becauseEarly-stage investment is often technology-driven, with R&D capability serving as the core competitive advantage. Scientists, who embody the core technologies, possess inherent capabilities for original innovation.

Li Kechun: Yuansheng has consistently focused on investments in early-stage and growth-stage companies. We observed that many early-stage projects previously failed to achieve commercialization, leaving their technological innovations underutilized. However, the current cautious sentiment in the capital market has instead highlighted the strengths of the biopharmaceutical sector. The era of “me-too” drugs, characterized by a shortage of genuine medical innovation in China, is now over. Biopharmaceutical companies are increasingly pursuing more innovative technologies, which in turn has driven up valuations.

In fact, early-stage investing is no easy feat. The more cutting-edge the technology, the greater the investment risk. Abroad, early-stage funds are typically backed by family offices or university endowments; these vehicles have no fixed term and maintain low expectations regarding project commercialization. In contrast, institutional investors’ approach to early-stage projectsExpectations are relatively high.

Furthermore, early-stage investing faces another significant challenge: the founders are predominantly scientists. Among these scientists, one common group comprises university professors. Although they possess a wealth of technologies “in their drawers,” it is extremely difficult for them to translate these technologies into products and bring them to market.

However, many university professors still fail to recognize the issue of dimensionality. Specifically, scientists think deeply along a “line,” entrepreneurs think across a “plane,” while capitalists demonstrate thinking from diverse orientations. In essence, the progression from scientist to entrepreneur and then to capitalist represents distinct dimensional modes of thinking.Early-stage investment requires energetic, strategic, and well-resourced institutional investors to help scientists become entrepreneurs.

Ren Bobing: The surge in interest in early-stage healthcare projects can be attributed to three factors, encompassing both cyclical and non-cyclical elements:

The first is the issue of liquidity.Currently, global liquidity issues pose a significant challenge, leading investors to trade time for space and showing greater willingness to invest in early-stage ventures. However, this is ultimately a matter of timing.

The second issue is that of supply and demand.According to data from third-party research firms, China saw more than 20,000 newly established startups in 2015. However, starting in 2016, the number of new startups experienced negative growth, dropping to just 3,000 in 2020. This contraction on the supply side indicates a declining number of entrepreneurs, with many growth-stage projects becoming increasingly expensive and the barriers to entry for entrepreneurship rising.

The third is the issue of cognition.As my colleagues have just mentioned, there is a growing overall understanding of the healthcare sector, encompassing market preferences, background requirements, and technological frontiers. This evolution is currently in its early stages.

He Sidu (Moderator): What are the investment strategies for the early-stage healthcare market? Which sectors show the most promise? And what is the profile of scientists who can become potential partners?

Cao Wei: First of all, generally speaking, the investment style of our fund isEmphasizing interdisciplinary,We favor startup teams with cross-disciplinary expertise and hope that they remain sufficiently open to embracing new ideas and constructive collisions.

Secondly, we hope that the startup team hasExceptionally strong foundational capabilities.Because in the medical sector or within the realm of innovation in healthcare services,Quality, efficiency, and inclusiveness are important criteria for evaluating technology.

Quality reflects the high standards demanded by the clinical side, namely, close alignment with clinical needs to achieve excellent therapeutic outcomes. Efficiency refers to high interaction efficiency in products or services, ensuring they are not delivered to patients through complex operational or interactive processes. Inclusiveness is primarily related to pricing; in China, the national medical insurance system possesses strong bargaining power. If a product can collaborate with medical insurance in the future, it will have sufficient profit margins.

Gao Jieliang:The first question concerns investment strategy. As an early-stage investor, weParticular attention is paid to technological innovation and clinical value.

Specifically, clinical value refers to unmet clinical needs and the target disease indications. Unmet clinical needs imply that a product can deliver greater clinical value, while disease indications determine the size of the patient population covered. Together, these factors define the product’s market size and social value. Technological innovation represents competitive advantage; a high technological barrier signifies a distinct competitive edge. Our key focus lies on substantial market and social value coupled with a clear competitive advantage.

The second is the layout of the track. WeThe primary focus is on technology-driven sectors., including in the fields of innovative drugs, biotechnology, medical devices, in vitro diagnostics, and digital healthcare.

Prior to our strategic positioning in the sector, weWe typically begin with industry research, proactively identifying high-potential sectors based on the aforementioned investment strategy. We then conduct in-depth analysis of companies within those sectors to ultimately select investment targets.

As for the profile of entrepreneurs, there is no uniform standard; several key points are what we focus on:

First is technological innovation capability; second is possessing a certain level of management ability; third is strong team spirit and inclusiveness.

Li Kechun: When investing in projects, we also need to follow a certain logic.

First, it is actually difficult to define the profile of an entrepreneur, as most top-tier scientists do not achieve favorable outcomes in their entrepreneurial ventures. The primary reason is that these scientists apply a scientific mindset to corporate management. Therefore,Scientists starting a business need to find a partner,Capable of strategically aligning the company’s overall layout and optimizing team operations.

Regarding the selection of track directions, we primarily considered four tracks:Innovative Drugs, Medical Devices, Healthcare Services, and IVD, among which the innovative drug sector has the highest barriers to entry, requiring a doctoral degree and substantial professional experience.

Therefore, for early-stage projects, if the founder's team has not been formed, it will be difficult to attract new partners. To address this issue, a high-quality investor is needed—one who not only provides scientists with funding for research and development but also contributes strategic guidance and resources.

Ren Bobing: At Sinovation Ventures, when we incubate or invest in scientist-led enterprises, we often help increase the proportion of industry professionals, balancing the scientists’ academic roles while supplementing the team with industrial experience. Meanwhile, these companies are not necessarily led solely by scientists; we strive to maximizeMulti-scientist collaboration, multi-technology integrationproportion.

Furthermore, relative to the Chinese market, most of the companies we incubate or invest in adopt a globalized team structure, leveraging talent and technological advantages from various regions from day one. Additionally, project implementation often emphasizes deep collaboration at earlier stages. We also organize annual competitions and training camps to empower early-stage projects with fresh talent and exploratory technologies.

He Sidu (Host): How can we reach scientists? And how can we communicate with them effectively?

Cao Wei:In terms of outreach channels,Friend Recommendationis an important channel source. Throughout the industry, we have accumulated connections and a network of professional contacts. Additionally, there isPlatform Interaction, including some empowerment and industry activities; the third isIn terms of industry research, actively participate in industry exhibitions; fourthly,Expansion,Proactively engage key stakeholders.

From a communication perspective, it is essential to emphasize industry research and one’s own accumulated expertise. Our interlocutors are highly distinguished in academic and professional capabilities; without our own depth of knowledge and insights, it would be difficult to achieve effective communication with scientists.

In communication, weOn one hand, it involves cognition of the professional knowledge domain., ask insightful questions to assess the expert's true capabilities;On the other hand, it involves general capabilities., because our goal is to invest in an outstanding CEO. This individual must fit our profile of scientist-entrepreneurs and demonstrate a strong willingness to embark on entrepreneurship. However, at present, many scientists are open to fundraising but reluctant to serve as CEOs. Therefore, we need to engage in dialogue to understand their true intentions.

During this process, two points should be noted: the first point isProfessionally, one must be able to engage in meaningful dialogue with peers., to understand the expertise and technical skills of scientists; the second point isPerspective-Taking, by addressing scientists' cognitive blind spots and providing them with alternative perspectives and case studies, thereby enabling them to better appreciate the value of their partners.

Gao Jieliang: In fact, my understanding of this issue involves three steps. First, what kind of scientists should we look for? Second, how do we find these scientists? Third, once found, how do we engage in discussions with them?

First, what kind of scientists should we look for? My approach isSet the Direction First, this is a relatively systematic research approach that identifies key research directions through a systematic analysis of academic hotspots, early-stage projects, and academic conferences.Once the direction is established, then seek out scientists at companies or research institutes.

Secondly, how to find them? Scientists behind early-stage projects may be located in two places,One is at a startup company, and the other is at a school.Within companies, we can establish contact through a three-dimensional network comprising industrial parks, investors, and industry chains; within universities, we can connect via technology transfer centers at research institutes and scientist networks. Of course, these resources require long-term accumulation.

Finally, how should we approach the conversation? I believe it is essential to make “dual preparations,”One is technical preparation., understand the scientists' academic backgrounds and professional expertise;The other is industrial preparedness,Understand the current state of the industry. Only when both technology and industry have done their homework can effective communication with scientists be possible.

Li Kechun: Before investing, we canLeverage professional networks to identify scientists and projects. We can be considered “veterans” of the industry, with an extensive professional network that serves as a valuable resource and provides channels for project sourcing.Learn to Screen ProjectsIt is also a critical step in deal sourcing; for instance, among 100 companies, 10 may be shortlisted for focused screening and attention, with only 2 to 5 projects ultimately selected for investment after evaluation.

Furthermore,Further communication is required.First, enable scientists to understand our institution’s resources, clarifying what we have and how we can assist them. Subsequently, on one hand, we need to identify projects by evaluating the configuration and development potential of existing tracks; on the other hand, we should explore investment and financing opportunities while discovering promising technologies and scientists.

Once scientists are identified, how should one approach them? First,Mastering the Pace of Conversation, allowing scientists to accept it step by step; furthermore, engaging in more exchanges with peers can bring diverse resources and provide deeper insights into industry knowledge.

Ren Bobing: The Frontier Technology Fund, which I oversee at Sinovation Ventures, primarily focuses on seed to Pre-A round investments and project incubation. With a team of 15 PhDs who are fluent in the “language of scientists,” well-versed in interdisciplinary technologies, and deeply knowledgeable about industry dynamics, we proactively identify scientists with high potential for technology translation and collaboration opportunities at the earliest stage.

Therefore, in this process, we will alsoAdopt the Perspective of an Entrepreneur, consider what kind of company to build, what opportunities exist within this space, what capabilities the company should possess, and what strategic path it should follow. Of course, in addition to scientists, we alsoContinuously engaging with executives in the industrial sector,This is especially true for senior executives at major pharmaceutical companies, both in China and abroad. As a result, we have successfully incubated four startups in the frontier field of AI + biotechnology over the past year.

How to discuss it? This requires usTargeted Coverage, Awareness, and Execution, helping scientists achieve phased progress, such as refining and validating technologies, and building a team that balances forward-looking vision with practical execution. At this stage, we can establish a foundation of trust through individual projects, using this group as a starting point to engage more scientists and entrepreneurs, thereby forming a network for the translation of scientific achievements.