The Intersection of Science & Startup Entrepreneurship w/ Dr. Misti Ushio

Intro 00:01
Welcome to Startup Success, the podcast for startup founders and investors. Here, you’ll find stories of success from others in the trenches as they work to scale some of the fastest-growing startups in the world, stories that will help you in your own journey. Startup Success starts now.

Kate 00:19
Welcome to Startup Success. Today I have Dr. Misti Ushio, who is the Managing Partner at Digitalis Ventures in studio. Welcome, Misti.

Misti 00:32
Thanks for having me.

Kate 00:33
So I’m looking forward to getting into your background first before we touch on your current role, just because for everyone listening, Misti was a successful founder, and is going to share her whole founding story and all of that. So maybe, to start, if you could just kind of walk us through your background to give us context that would be helpful.

Misti 00:56
Sure, yeah. And I feel lucky that over the course of my career, I’ve been able to kind of have a lot of different experiences. So my background, I have a Bachelor’s in Chemical Engineering and a PhD in Biochemical Engineering, and I started my career at Merck in what was called the Bioprocess R and D Group. So we really developed the manufacturing processes for biologics. And at that time, which was like the mid-90s, I was really focused on vaccines. And so spent about 10 years doing vaccine manufacturing research, which was a really amazing experience for interdisciplinary teamwork. So it was a lot of engineers, a lot of biologists, and really expertise in ways of thinking together. I’ve spent a lot of my career kind of trying to control biology. So that experience was really about, like, how do we make cells, make more proteins, or make more DNA and products? And so that was really kind of the foundational job I had as, like, kind of an early scientist/engineer. Merck got kind of big for me, and I learned that I probably wasn’t going to be, like, the most successful running a lab. And it was sort of really thinking about, what can I do with my engineering and science interests and expertise? And so started to explore other opportunities, and ended up joining the Tech Transfer office at Columbia University, to sort of learn about how to translate, like cutting edge research, really, kind of on an academic level, but then think about how to commercialize that, whether it’s startups or integrating into bigger companies, learning about intellectual property. And so I ended up moving from Merck to Columbia for only about a year, and I met from here in New York City called Harris and Harris group, and they’re a publicly traded venture fund, and I really didn’t know anything about finance at the time, but they were interested in someone with kind of an engineering, pharma background to help complement some of the early stage investing they were doing. So for me, this was a very opportunistic position that came along, which I took and spent the next 10 years there really learning everything about early-stage investing, capital markets, valuation, finance, and boards. And really grew with that company, and over time, had, you know, different experiences where there were exits or acquisitions. And somewhere along the way, kind of was interested in saying, like, so can you really, like, build a company around recapitulating biology? And started looking at a lot of different technology, like 3D cell printing, or, you know, different organs-on-chip. And so to kind of fast forward, ended up finding a technology around recapitulating heart biology in the lab to be able to test drugs before they go into animals or humans on heart safety and heart efficacy. And so it turned out that there was no company to invest in. And so we made the decision to say, look, you know, from our firm, we’ll form the company. So we worked with the two scientific founders and myself and and really kind of put the whole company together, which was TARA Biosystems, and built that from scratch to over eight years. So somewhere along the way, left the fund and was CEO full-time. At the beginning, it was kind of like, it’s just gonna fly, you know, what’s gonna happen. But as it grew, and as we interface with pharma, it was clear that, okay, I had to make a decision. I was gonna stay with the fund and find a CEO to run TAR or go all in on TARA, which is what I did. And I just thought it was like a great opportunity to combine these different skills that I had. And so I know we’ll dive more into this, but you built a company over about eight years, raised about $20’sh million in venture financing, was about 25 people, and then it was acquired about two years ago from one of our clients. And so was a really amazing experience to kind of go from founding to acquisition. And then really was going to just kind of take a break. And so it kind of fast forward, you know, I’ve known the founder of Digitals for many years, and they’ve been growing their funds and their assets under management. And so I have a really, kind of interesting opportunity here with Digitalis to really kind of apply both my investing experience and my company-building experience to kind of all aspects of Digitalis, whether Digitalis itself or our portfolio companies. So that’s been kind of the arc of my career, and sort of happy to talk about different aspects of that that would be helpful.

Kate 05:24
Yes, thank you. Super fascinating. I mean, what a career. You can see, how the building blocks of it, right, how all your experience kind of led and played off each other. And also, you know, people always say you get these opportunities, and it’s what you do with them, and what you did with it was pretty amazing. So congratulations. So let’s go back to TARA Biosystems and start there, because you were in the midst of, you know, investing and getting all this incredible experience and learning a ton, and the fact that you had this idea. Maybe you could walk us through the idea formation, and then making the move into, okay, let’s make this a startup, and then leading it. Because I think when we talk to founders, they have these ideas, but so many times they’re scared to execute on it, right?

Misti 06:19
Yeah, I mean, and I feel like I came from an interesting point of view, which was, I came from being an investor first, and then a founder. And I feel like it’s a little unusual, and I feel really lucky, because even in my own fundraising, I’m like, how do people do this who have never been on the other side, you know? So it’s because it’s just like, you know, there’s just a lot of things you don’t know that you’re not, you know, kind of learned the problem and lived kind of the constraints. Everyone has their own constraints that they’re dealing with. So that was just a kind of one piece of the puzzle. But really, you know, I’ve been exposed to bioengineering. My husband’s a professor at Columbia in bioengineering. We, you know, just spent many decades learning and thinking and observing and, you know, interacting with people trying to combine and apply engineering and biology, and so it’s always been, like, a really fascinating space. And so in my own field of company building and investing, I’m like, when is this going to be ready for commercialization? Like, is there a company here? How should one think about that? So even though it’s like cool it doesn’t really mean it’s a company, right? So, and I think I’m trying to decide what direction to go here, but like, I think one challenge is a lot of really cool technology isn’t necessarily a product. I think some entrepreneurs think about how to commercialize the platform without really thinking about what are we selling? Like, would someone actually buy?

Kate 07:51
Yes, you’re absolutely right. I think they forget that aspect.

Misti 07:55
What are you gonna sell? Like, what’s someone gonna pay? Are you paying for data? Are you paying for a thing? So with TARA, and even before that, thinking about this concept of 3D biology, or biology in the lab, physiology in the lab, it’s like, what are you selling? And so really, what in these cases, and there’s lots of different technology out there, depending on different tissue types. So you either sell a thing like a platform where a scientist can, like, make the biology in their own lab and test it, or you sort of sell the data. So you do the work at the company, and your customer or client sends you their compound, and then you do the work, and then you’re basically selling them the information. And so that’s really what we did, which was a big decision. It’s something that I think a lot of companies really have to think about early on, is, are you a product or a service? There are pros and cons to both. We chose the service because it was complicated. For two reasons, complicated, and I really worried early on that if we tried to implement it in other’s lives, they wouldn’t be able to do that, and it would be our fault. And so it’s like, let’s just keep it in-house and figure it out and know what we’re doing. And the other piece, honestly, is like, I didn’t want to teach other people how to do it. And so, from an intellectual property and a know-how, and a proprietary kind of component, that was the other kind of piece of the of the puzzle there. So they so that was just kind of the outset. And we, you know, so we started, we couldn’t, it was like, mostly there, but not quite. So I hired two people out of one of the founder’s labs in Toronto, and so that was key. So I think some of the best companies that either I’ve invested in, or I think, I think we’re we did at TARA was the scientific founders, like the professors, stay at the university, but to be able to bring in, you know, the people who in the lab like doing the work, or maybe the original inventors, the students or the postdocs, and bringing them into the company really helps with the translation and the success of saying – Look, this wasn’t just like a science project in a university. This is actually like, you know, we can reproduce it. We can do it better. We can think about it more from a scalability and a commercial standpoint. And so that’s kind of sort of what we did. And we started making healthy heart models in the lab. And the idea was to look at the safety of, you know, new medicines coming kind of through the pipeline and and as you probably know, cardiac safety, heart safety is a big reason why drugs fail. And it’s just catastrophic when they do fail, because it’s usually like in the clinic, and no one wants that. And so if we could have an earlier read on the human response to, you know, these new drugs and development, you know that that’s really important. So that was sort of like the beginning. And the other piece of that was to really demonstrate that we could kind of reproduce human heart physiology and biology in the lab. And so we spent a lot of time just proving and demonstrating the human relevance of our biology. And then that way, whether it was us or a client, when we would test new medicine, and if you saw a difference or didn’t, you could really trust what that data meant. So I think a lot of these technologies, you know, you can measure stuff all day long. Like, that’s not the hard part. The hard part is like, well, what does this mean? And if you don’t really believe you’re starting like, how do you interpret and, so I would say one of the things I’m proud about of TARA was that we really focused on like, kind of the credibility of the company, on like, that fundamental biology. Because then everything else we did, people were like, Okay, we believe what you’re doing because you did the upfront work. But the real value inflection point was we went from making healthy heart models to like disease models of heart failure. And so really being able to now look at like, can you discover new therapies to help curtail heart failure? So that was so that was sort of the trajectory of, like the company, and it was really acquired for the platform for the biology, for drug discovery. And so the great thing is, you know, it’s at a home where, like, this is going to continue to build. I mean, the downside is it’s now not available to everybody. I think, you know, from what we were doing at TARA, we worked with a lot of different clients, both on the safety and efficacy side. But, you know, it’s okay, like, you know, but that’s sort of part of the deal. So it’s nice to see, like, you know, the continued utility.

Kate 12:17
Super interesting. Thank you for walking us through that. I really like how you started, by framing the questions that you asked yourself, you know, to commercialize it and get it going and what it was going to be, and then kind of the ramp and the pivots that you made. That was really interesting, if you wouldn’t mind doing the same around the fundraising piece, because you had an extremely successful fundraise, which is hard to do. And you mentioned earlier that it would have been a lot more difficult if you hadn’t been on the investor side, if you could walk us through that as well.

Misti 12:52
Yeah. I mean, so there are three, basically three, well, maybe four financing is total. So the first one was just our son putting in a little bit of money to say, let’s get it started. You know, form the company, file, get the IP. So that was just us. And so at that phase of the company, you know, I was kind of like, CEO, lead, investor, board chair, you know everything all in one. And so, you know, at some point it’s like, okay, we need to, you know, kind of like, what’s the next step? So, I was lucky and that I had that. I mean, some people like, you know, you don’t just have that, like, just getting it off the ground is a huge barrier. And so, you know, when I look back, that’s something I was very lucky, that I had that kind of, like, infrastructure set up, and that my team was, you know, willing to say, Yeah, let’s, like, let’s give this a shot and see where I can go and what it led to was, like a proper seed round with a couple other investors from New York. At the time, New York was really thinking hard and actively investing in growing a life science entrepreneurial community, because it recognized that there’s tons of science with the hospitals and the universities and tons of grant funding and government funding that are coming in, and we weren’t, as a community, as a city, doing a great job of translating that into new companies and jobs. And so there was a lot of interest in the economic development piece, and so kind of caught that at a good time. So like our early seed round was, you know, the fund I worked at, plus two other funds that were very much interested in investing the ecosystem in New York. And you know, who I knew and we had co invested with. So again, that was I felt lucky to have had the experience of investing and having those relationships more on a personal level, versus just kind of going cold in terms of fundraising. The A round was different. Those were all like new investors, so all the current investors came in, but in that one, there was an investor from DC, just a really great early-stage kind of technology investor who really understand, like, how there’s like, you need to prove out the platform. And then what happens after that, we have to navigate. And so Craig Asher, he’s now at a fund called OMX Ventures. This was before that, but just kind of very much appreciated, like his perspective and kind of his experience in navigating, kind of where it’s not fully baked yet, but we can sort of have a plan. We kind of know where the risks are. And then that syndicate brought in, I think it was four or five new investors. Again, all life sciences, different kind of theses. But I think really believed in, like, biology is kind of like the next frontier. I mean, this is 2016 to 2017 it was in that time frame. So we were one of the earlier kind of organ-on-a-chip company. So I think only one other company raised more money than us, and it’s a, you know, like the big Delta, and then there’s, like, a lot of smaller ones. So I think, you know, timing is part of it too. But like, I think we caught the front end of interest in the trend of what biology can do and what translational biology can do. And then we raised, so that was the A round. And then we raised a second round with, again, with a new investor. It was just one new investor that time, and everyone else came in. And so, you know, again, it’s, I think what’s challenging is that the landscape on, like, what investors invest in, changes. And so what was happening when I was investing in, kind of, like, the 2000s you know, is really different than in, like, you know, 2016, 2017 and it’s really different now, like, now, like, the shift a lot towards just therapeutics. It used to be much more diversified. And so kind of what’s true in one era really isn’t necessarily true in another. And you kind of catch different cycle of interest. So we, I think we caught the front end of organ-on-a-chip, and organoid and translational biology, and during a time where there was still, like quite a few, say, not a ton, quite a few investors who would invest in tools and technology, which I think has shifted a lot towards fewer in that stage and more on the therapeutic side as it relates to life sciences. So it’s always challenging tokind of thread the needle on, like the good fit for you. And I’ll get into some comments on, like board and investors and things to kind of think about. But that’s sort of the trajectory on the financing.

Kate 17:21
That’s really helpful. I like too, how you shared, you know, having an investor with the technology platform experience really helped, right? And something to look into that. One of the things we talked about when we had a pre-call was things you do differently, right? In this experience you had mentioned briefly then, like, bringing in a BD person earlier, and stuff. Some other things that you could share, that you would that you would have done differently, because it’s, I think that’s always helpful to learn from too.

Misti 17:54
Yeah. I mean, I think this is an important one in that I think a lot of CEOs and founders, especially when you don’t have tons and tons of capital, you know, you’re sort of always under a capital resource-constrained situation. And because there’s so much technology you risk, most of those resources go to de-risking technology. So they go to the science, they go to the lab, and I definitely did that. So I kind of put all the resources, and I just, like, took on the rest, yeah, so whether it’s operational or fundraising or business development, and I would say, in retrospect, I think having additional bandwidth on the business development side, because it’s a platform, and there’s so many different applications, we were only able to tackle like, certain applications, because it was just me and like. So depending on what I was doing, it was just sort of what the leftover time was. And I think if there was a dedicated person that could really, like, spend more time developing relationships and expanding into like other spaces that made me more equally as interesting, but maybe not quite as obvious, you know, that would just take a little more time for cultivation. I think if I went and did TARA again, I probably would hire someone earlier. That’s the biggest one that always sort of comes to mind in terms of, like, you know, what would I do differently? I think some of the other things that we had to make decisions about were, you know, because as we moved from kind of making healthy heart models to look at safety issues and toxicology issues, and then being able to do, disease models that really kind of shifted to efficacy and discovery, we really kind of shifted the focus. And I still spent time with like the FDA and the government in terms of like, how can we really get these types of human relevant models accepted by the FDA for talks and for, you know, just like other applications and so it wasn’t not something I would do differently, but it’s something that, when you sort of have like two or more, like distinct markets, you know, sort of, how do you allocate resources for that? And, you know, there are pros and cons. I just think that was something that was constant, that we were constantly evaluating where, you know, really over time, the high-value application, and really why it was acquired was for the efficacy of the disease models, and so, you know, so you end up going in that direction. But we always kept a pulse and, you know, we’re involved in, like, what’s going on with, like, reducing animals, reducing animal testing. How can these types of technologies, like, help, you know, kind of move in a direction? What kind of, you know, regulatory support is required for that? And so, like, I’m on a Scientific Advisory Board for some of these in the government that are evaluating, like, okay, what are these different methods? How do we implement them? You know, how do we, how do we get them used?

Kate 20:44
Interesting, yeah, I can see where you, you know, back then you it would be a balance of your time and figuring that out. You mentioned earlier too some advice around like board and investor communications. What? What can you share there?

Misti 21:02
I felt like, you know, when your questions, like, what kind of advice might you have. And there are kind of like two buckets that came to mind. So one is definitely around your board. So I sat on a lot – this is the other thing, the benefit of having been an investor is I sat on a lot of boards, so I knew what it was like to be a director and kind of see functional and dysfunctional boards. And I think having that experience when building TARA and really thinking hard about – or sometimes you don’t have a choice, like, you don’t can’t choose everybody. But when I talk to founders and new CEOs, I tell them to really think about what the board’s role is and who you want on the board. And there are different roles for different people. So like, if you want an expert on something, they don’t necessarily have to be on your board. They could be on an advisory committee. Because the board is really like the governing body. You report to the board. The board is there to have fiduciary responsibility to shareholders, and it’s to help collectively guide the company and govern. You know, it’s not to micromanage. It’s not to design your experiments for you. But when you think about building a company, you need all kinds of help. And all that help doesn’t necessarily have to be on your board. And so you can allocate expertise and advisors to different, you know, areas. And so I really challenge people to think hard about what the board is, the governing body, you know, and there’s a scientific advisory board. There are other consultants you can have that might help you with other aspects. But I think when you know you want a board that’s experienced and kind of knows the role, you know, and I think that’s really important, and sometimes the near term needs of like, I need help on this, can maybe sometimes override, okay, wait, what is the long view? Because they’re kind of with you for a while. So that’s one big kind of bucket of that I find maybe isn’t like at the top of the list of what people have time to think about, but ends up being really, really important, and it’s hard to unwind. So that would be like, one piece. And I think the other kind of piece of advice that I did not go in eyes wide open on at all, but it turned out to be super, super valuable, was the value of your brand and the value of your culture. I came into the CEO role of, like, we’re signed to, like, really high-level scientists in pharma who cares about everybody else. And, and I learned through the designer we worked with, it’s that, you know, and because we were, like, making hearts on the lab, I was like, that’s what we do. But it was like, Oh, right. That might sound weird to some people,. So there was this whole awareness of like, our message, how our credibility, how that kind of created a culture, how that culture created retention for the team, how that culture created recruiting opportunities, how it sort of like, what I would have said was like, oh, marketing stuff that we don’t need, which turned out to be, like, actually really, really important asset of the company. And like, the ethos and the values all wrapped up to it. And that is just something like, totally did not understand or was aware of, and that I do think a lot of you know, at the end, when it was acquired, I think a lot of it was, it was the brand and the credibility and what the brand meant. And it meant, like, high quality data, high quality biology. And it was kind of, that was an accident, but it was something that I didn’t really focus on. And it was happening, but I didn’t really, kind of, like, realize and then, and then there was a point where I was like, Okay, I need to, like, actually pay, like, really kind of double down and invest in this, because the brand matter. Because you could tell it was weird, you could start to see we were developing brand value and and then realizing, like, Oh, this is something you can actively, like, pay attention to and manage and cultivate. And it was really interesting too, because the culture the company kind of represented a lot of this, you know, it was about, you know, just high integrity. You know, you can lose your credibility scientifically so fast. So it was always like that, you know, we have to be, like, super buttoned up, you know, everything, you know, the teamwork, everything we did, no one could work in isolation. It was like a whole continuum. So, anyway, that’s something that I can’t really say, when to pay attention to it, but I think, for founders who are like, you know, always, you know, we’re just doing 1000 things, you know, to kind of pause every once while and think about what am I saying? You know, what’s the message? How do people think about our brand? What’s the reputation of a company and that, and What do I want to say? Like, what I want to proactively say, versus having people come up with their own ideas. So that’s like, again, I think it’s something like, is really important. May not be top of mind all the time, because we’re…I have like this analogy I use a lot where it’s like CEOs, it’s like, we should be playing chess, and you have your chessboard, and you have your plan, and you like, maneuver to win. And really what you’re doing is like playing Tetris. Like you’re playing Tetris. You got this crap coming at you. You’re trying not to blow up stuff that’s like coming, and it’s coming at all different times, and you’re just having to respond. So it’s like this balance between being thoughtful and proactive and like reacting and just like getting it done, because, like, that’s what you have to do. And I think that balance is really hard.

Kate 26:30
That is a great analogy.

Misti 26:34
I’ve used it for a long time, and it still totally rings true.

Kate 26:40
I bet it resonates with a lot of people listening, and I love the two callouts you gave for advice. First of all, no one’s really shared – articulated in such a strong way about the board and the power of the board and how important it is, and the thought that should go into it. But then also what you said about culture and values and brands, I would have to say most of the successful founders on this show, they all say that, and they all say it was a surprise to them how important it was. And how, like, real values guide your decisions, guide your teamwork, how you you know, where you pivot, how you treat each other, and so I appreciate you sharing that this has been really interesting. We’re almost at time, but I’d love to just quickly if you wouldn’t mind, touch on Digitalis ventures, where you are right now, and just kind of give us an overview of what you all are doing and how people can find out more information. But again, I just want to thank you for everything you’ve shared about your own founder journey. Super helpful.

Misti 27:45
No thanks for having me. It’s been, it’s been great talking to you. And I hope, you know, I hope people find value out of the conversation. And Digitalis, we’re about 1 billion under management. About half of the capital is allocated to Life Sciences and Health Tech. So kind of we call it, like the human health side of it. And we do, like seed to the series B kind of as an entry point. And you know, traditional venture follow-ons. And you know, kind of grow with the company. And you know, kind of want to help wherever, wherever we can. And the other half of the capital is really dedicated to animal health. And so we have two separate teams. And so again, on that side, it’s kind of seed to growth, so we sort of span more of the space just because there’s just, it’s a different type of opportunity. Yeah, so it’s great. So we have, like these two teams looking at deals, doing deals, managing deals. I kind of manage the portfolios in terms of, you know, allocation, valuation, you know, I get involved on some of the boards, especially as it relates to first time CEOs. And then we also have a not for profit affiliated with funds, and this is interesting, called Digitalis Commons. And when we have a big partnership with ARPA-H through that where we, which is a new government agency, kind of deploying $3+ billion into healthcare innovation. And we really help them with commercialization advice in strategic advising on, okay, just if this stuff works, what are all the challenges to actually getting it to patients? Because in some of the other like government-funded innovation, there’s agencies like the Department of Defense or the Department of Energy that can pick up some, of this that we’re just not in our country set up like that for healthcare. So that’s been also just a really interesting compliment to kind of the venture side, to say, okay, how can we help ARPA-H and the government, like deploy this money in a really thoughtful way so that the investment in the innovation can really get to patients, because there’s so many points along the way that it can just kind of go sideways. It has nothing to do with the science. It has everything to do with IP, regulatory, market forces, price, you know, just the whole hose delivery. So that’s the kind of the nutshell. And definitely, you know, check out digitalisventures.com, we actually have three newsletters that are great, that kind of highlight, you know, not really, necessarily, where we’re investing, but just kind of like how we think. And so there’s one around human health, one around animal health, and one around the Commons and the not-for-profit.

Kate 30:13
Thank you. It sounds like it’s very rewarding work. Yeah, that’s great, especially you forget about all the complexities that come with health and technology. So makes sense.

Misti 30:26
Yeah, it’s nice to kind of use all the different pieces.

Kate 30:29
Yes, your background. Yeah, absolutely. Thank you so much for being here today. This was super fascinating. I appreciate you being so candid about your founder experience. It’s always super helpful to our listeners.

Misti 30:44
No thanks for having me. It was a pleasure.

Kate 30:46
Thank you.

Intro 30:47
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