Twist of Fate—How A Band of VCs Recruited a Scientific Dream Team to Control Our Cells’ Destinies
“Like all VCs,” Amir Nashat is saying, “we come late to the story.”
Nashat is talking about the formation of Fate Therapeutics, and in one sense what he’s saying is true. Venture capitalists bankroll, advise, strengthen, and help grow companies built around other people’s innovations—and so the story of even a very early stage startup has often begun well before they get involved. But in some cases—as in this case—VCs slip into the earlier chapters of a company’s history by spotting emerging trends and assembling the cast of characters (scientists, engineers, executives) necessary to capitalize on those trends.
Fate’s formation was announced last November 29, to some of the greatest fanfare (some have said hype) received by any new biotech in recent memory. At the company’s core was a dream team of five leading stem cell scientists—from Harvard, Children’s Hospital in Boston, the University of Washington, Stanford, and the Scripps Research Institute. And they were banding together across geographic and institutional boundaries to solve one of the biggest challenges imaginable in medicine, one with untold commercial potential: to control the destiny of cells. Hence the name, Fate.
The venture kicked off with a $12 million funding round led by Nashat’s firm, Polaris Venture Partners of Waltham, MA, and Seattle-based Arch Venture Partners—an initial installment on the more than $100 million Nashat says Fate’s backers expect will be invested in the firm over the next few years. What’s attracting all that cash, and all the attention, are Fate’s rather novel approaches to capitalizing on the science of both adult and embryonic stem cells.
Instead of trying to find ways to isolate adult stem cells, grow them in the lab, and then inject them into the body to repair specific tissues, for example, Fate’s plan is to develop drugs that spur already-present adult stem cells to action right in the body. And instead of turning to ever-controversial embryonic stem cells as the raw material for custom-made organs and tissues for transplant, Fate is developing molecules to reprogram mature cells taken from the patient to behave like embryonic stem cells. As part of the launch press blitz, Ben Shapiro, retired executive vice president of Worldwide Basic Research for Merck and a member of Fate’s scientific advisory board, went so far as to proclaim, “Fate’s approach is the dawn of a new day in medicine.”
Over-hyped or not, Fate is definitely a big idea. And it’s intriguing not just for its scale and approach, but for the way it came about—in large part through the convergence of two venture capitalists, Nashat and a young Arch associate named Alex Rives, who were separately following different paths to commercializing stem-cell research.
“It’s a story of networking,” Nashat begins, in what might be considered an understatement. For the Polaris partner, who holds a PhD from MIT in chemical engineering and studied under renowned researcher (and Xconomist) Robert Langer, it began in early 2006. At that point, he says, a small group of scientists had been working for a decade or two to study the basic biology of stem cells, assembling clues about how to modulate their behavior. There was still so much to be learned, but as Nashat read the scientific literature, he realized that those researchers had made more progress than he had previously thought. “They were filling in a lot of the gaps. The science around the papers was looking really interesting,” he says. This got him thinking of the commercial ramifications of the work—the idea that you could develop drugs to turn particular cells on or off, and thereby rally the body’s built-in resources for repair or block the actions of harmful cells. “It looked like you could start to make drugs based on this biology,” is the way he puts it.
Not long after that, Nashat was invited to a meeting called by a deputy of then Massachusetts Gov. Mitt Romney who was working to help the governor understand stem cells and craft his position on the controversial topic. Some 15 scientists and policy leaders had also been invited, and one who particularly stood out in Nashat’s mind was David Scadden, a hematologist and oncologist who co-directs the Harvard Stem Cell Institute and heads the Center for Regenerative Medicine at Massachusetts General Hospital (among a long list of other lofty titles and honors). Scadden, he says, was extremely thoughtful and “had a very comprehensive view” of not just the scientific issues but public policy matters as well. “I was just so impressed by him,” Nashat says. So a few months later he e-mailed Scadden and asked whether they could get together for dinner.
They met that fall at a French restaurant very near Massachusetts General Hospital. It was a, um, fateful meeting, because it turned out that Scadden had been thinking much along the same lines as Nashat. He worked with blood stem cells, and had been considering that if he could control their behavior, he might be able to affect the outcome of cancer and AIDS. Not only that, Scadden says, “I had been thinking about it as something that might be a broader principle that could be applied to other adult stem cell populations resident in other tissues.” He had shared at least some of these ideas with other venture capitalists, but, he says, “there wasn’t really traction.”
Until, that is, the dinner with Nashat. As Nashat describes it, Scadden detailed some of his previous commercial ideas and they began talking about why nothing had come of them. It was then that they realized the effort had to be much bigger than any one person or team. “We reviewed those ideas and then thought of a new way to do it, which was to bring in everybody, bring in the best,” says Nashat.
This idea of a big collaboration would prove to be one of the cornerstones of Fate. But it didn’t get put into action right away. Nashat says it was some time later that he asked Scadden who else they should pull in, and Scadden brought up the name of Leonard Zon, director of the Stem Cell Program at Children’s Hospital in Boston and a prominent researcher in the fields of stem cell biology and cancer genetics.
Not only did Scadden speak very highly of Zon, but so did Polaris partner Alan Crane. Nashat saw this as an important validation and set out to bring Zon into the fold. Now, here the story might provide a case study of the kind of walls that can arbitrarily exist between colleagues, and how often it takes somebody from the outside to bring them down. Because it turns out that Scadden and Zon already met almost weekly in the course of their jobs, but had never really talked about how their work might fit together. Now the two discovered, says Scadden, that they were actually working in parallel on some of these cell-modulation efforts. Zon also shared Scadden’s excitement about the idea of forming a commercial venture around the work. And thus, the East Coast component of Fate was born.
Meanwhile, on the other coast, a strangely similar string of events was unwinding. Since the fall of 2005, even before Nashat became engrossed in stem cell science, Alex Rives had been sniffing around the scene. Armed with an undergraduate degree in biology from Yale, a strong background as an entrepreneur, and the blessing of Arch co-founder and director Bob Nelsen, he had also been looking for a new approach in stem cells—something focused on developing drugs that modulate adult stem cells in the body rather than cell therapies in which doctors would inject cells into the body.
Rives approached Randall Moon, director of the Institute for Stem Cell and Regenerative Medicine at the University of Washington, to explain his idea. Moon was an expert in the Wnt (pronounced wint) pathway, one of the two dominant signaling pathways that regulate stem cells. Moon had already been thinking about the commercial ramifications of the work, and put Rives in touch with two of his collaborators—renowned Stanford University biologist Philip Beachy, and Sheng Ding, a young rising-star researcher at Scripps Research Institute in San Diego.
If you put this West Coast group together with the East Coast team, you had a comprehensive picture of the state of the art in stem cell research. Nashat describes it like this: Moon, Beachy, and Ding studied basic pathways inside the stem cells and ways to regulate those pathways. Zon and Scadden were focused primarily on the clinical applications and implications of that modulation.
Of course, the two groups weren’t together—yet. But page forward to the next chapter and you’ll find Polaris’ Nashat and Arch’s Nelsen both in San Francisco at the January 2007 JP Morgan biotech conference. Although Nashat had never worked with either of his Arch counterparts, Polaris and Arch had done a number of investments together, including Nanosys, Alnylam Pharmaceuticals, and deCode Genetics. So it was only natural that the two teams spoke. And as Nashat shared some details of his effort to create a company that developed drugs to modulate stem cells, Nelsen immediately made the connection. “Hey, it’s funny. I’ve been reading the same novel you’ve been reading,” Nashat recalls Nelsen saying.
“If you could nail one event that made this happen, it was that meeting at JP Morgan,” says Rives, who wasn’t party to that particular encounter but was at the conference and quickly brought up to speed. Both sides were excited, he says. “The timing was almost perfect, because Amir approached us right around the time all this [talks with Moon, Beachy, and Ding] was starting to coalesce,” he says. “I think it really helped to have Polaris working on it from a very similar but slightly different angle with other thought leaders.”
The two venture firms quickly decided to unite their efforts, and it turned out the scientific team was all for it as well—the power of their combined pedigree must have been hard to resist. All were top researchers in their fields. All except up-and-comer Ding were senior scientists well known around the world. They already shared many connections. In fact, says Rives, to different degrees all five men “had worked together in scientific collaborations.” And, Nashat says, “When we had the core group we realized we could pretty much go after any problem in stem cell biology.”
What’s more, all believed in the power of an even bigger collaboration. Zon, for instance, has been a big force in getting the international community to work together on stem cells. “The sense of community is a huge part of Fate,” says Nashat. “It’s a very inclusive group of people,” he says. “We definitely don’t have a ‘not invented here’ syndrome.”
And so it began in earnest. “By like the second quarter of ’07 we’d pretty much got everybody lined up,” says Nashat. Then came the hard part of negotiating licensing agreements across five universities and the Howard Hughes Medical Institute (the work of several members of the Fate group is supported by the institute), as well hammering out terms with the founders themselves. “Everybody was great, but it was just a lot of legal work,” says Nashat. “It’s an awful lot of people. A lot of paperwork.”
As the momentum built throughout the spring of 2007, Fate also turned to a different kind of collaborator—on the venture side. Polaris and Arch would act as co-lead investors for the Series A round that closed last November. But to strengthen the financial team and its connections, they brought in two other notable firms. One was Venrock, with whom both Polaris and Arch had worked well in the past. Bryan Roberts, managing general partner of Venrock’s Menlo Park office, was very keen on the idea. Also joining in was OVP Venture Partners of Kirkland, WA. Carl Weissman, a venture partner at that firm and CEO of the Seattle-based Accelerator Corp., which is backed by a syndicate of venture firms to help nurture biotech startups, handled the deal for OVP. Both Roberts and Weissman brought a lot of contacts and knowledge to the venture. Roberts has a PhD. in chemistry and chemical biology from Harvard. And Weissman’s father is Irv Weissman, a renowned scientist at Stanford’s Institute of Stem Cell Biology and Regenerative Medicine.
The last few months since the funding closed have been good, Nashat says. With the core group in place, it has been relatively easy to attract other top scientists, both to the scientific advisory board—which includes Langer and Ram Sasisekharan from MIT, as well as former Merck exec Shapiro—and to the company itself. “We’ve added a ton of people, a lot of whom we haven’t announced formally,” Nashat says. “You kind of see the gravitational pull. It was very, very exciting.”
The one big personnel chore remaining, he says, is to identify the right CEO to lead the company. The board has been working on this for months, and Nashat expects the process will likely take several more months. To date, the company has been spread out across the Seattle, Boston, Palo Alto, and San Diego turfs of the five founders. Going forward, Nashat says, “It will definitely have an East and a West Coast presence. [But] I think that we’re probably going to put the nerve center wherever we find a great CEO.”
But even presuming there’s one official headquarters, that CEO will have to preside over a large, far-flung collaborative venture—and that goes against the grain of how young biotech companies are traditionally run, Nashat says. Typically, he says, biotechs are built around an invention or insight from one person or lab. A massive collaboration could be hard to keep together, he acknowledges.
But of course the Fate principles, who forecast some big announcements from the firm in the not-too-distant future, have an answer to all this. “Our formal hypothesis of the space is it’s too big, it’s too complex a biology, for there to be like one trick, one target, one pathway, one thing,” says Nashat. “You need to create a collective wisdom.” At the same time, he concedes, “It’s a big snowball. It’ll make a mess if you don’t throw it right.”