Venturing into Ophthalmology with ExSight

PODCAST EPISODE 263

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OIS is “ExSight-ed” to bring a candid conversation with the dynamic trio that formed the venture capital fund ExSight Ventures. OIS Podcast host Firas Rahhal, MD, and his partners Michael Nissen, MD, and James Murray, JD, describe why they decided to launch a specialized fund focused on investing in ophthalmology start-ups. They also talk about their investment strategy, existing portfolio, and where they see the market heading.

Transcript:

Firas Rahhal: Hello, everyone. Welcome back to the OIS Retina Podcast. This is again Firas Rahhal and I’m a Partner at Retina Business Associates here in Los Angeles. And I’m a Partner at ExSight Ventures, which is centered in New York City. And it so happens that today, my two guests are my ExSight Partners. These are both the guys that I work with. And I’m not going to spend a lot of time giving the history, I’m going to let them give us some of the history because it’s unique in that both of these guys have different completely different backgrounds. One of them has a background very similar to mine professionally. But we’ll hear about their backgrounds and how they got to x site and the formation of ExSight. And then we’ll talk a little bit about what ExSight is doing and and how we’re doing it. So let me start with and by the way, it’s Michael Nissen, and James Murray, but I’m going to give them a chance individually, to introduce themselves a little bit. We’ll start with Michael Michael is my longtime friend. We’ve known each other for over I think, 25 years or in that neighborhood, doing ophthalmology and retina together in New York City. He’s still practicing retina in New York City. He’s on the faculty at Cornell and trains fellows there now for over 20 years. he happens to be one of my oldest friends, and he also is the founding partner of ExSight Ventures. Welcome, Michael, how are you?

Michael Nissen: Great Firas. Thanks for the introduction. And pretty much you’ve said much of what I wanted to say already, which is good. I’ll just add that 22 years ago, I was your student of surgery. So Dr. Rahhal taught me everything I know. And after, say 15 years of working in private practice in Manhattan, I built up a busy solo retina practice and brain Bob of the fellowship training at Cornell, I realized that I’d actually built a business and that I actually was interested in the business of medicine. And essentially, my private practice was a startup. And so I started searching around for other business opportunities within ophthalmology. And after a lot of searching a lot of talking to business people, many of them patients, I settled on venture, at which point I flew out visited an OIS meeting, and got a sense of the amazing opportunity within ophthalmology. And, you know, thinking about it venture I think was very appealing to me, because as a surgeon, you’re on the line, you make decisions in real time, you can prepare as much as you want. But then you have to make the decisions. While you’re in surgery, and I think venture fuels very similar you work, you prepare, you study, you talk to people, but in the end, you have to make decisions that have real impact for your investors and for your portfolio companies. So venture felt like a good fit. At that point. I realized I needed another ophthalmologist and immediately Dr. Rahhal popped into my mind and jumped on a plane. And it took about, I’d say, 15 minutes of explaining the idea to Firas, till he bit in a big way. And that’s been one of my very best decisions. I guess my best decision so far. And, you know, starting out this company, Dr. Rahhal has limitless energy, and knows everybody, which you all know listening to this because many of you know him. We can’t walk through a room at a meeting without stopping to talk to every single person, which has not only been great for ExSight, but it’s also a lot of fun. And so, for us join at the same time, I’d already been introduced to James, who had been moving in this way for a long time, he’ll give you more detail. But moving toward our venture for a long time, and was very like minded. The three of us started working together. And we sourced our seed funding and started ExSight fund number one, and that’s about six years ago at this point. So we’ve moved through several funds and we’re a tight team. It’s a lot of fun working together. We are the managing member of Exsight. And I’ll pass it over to James for his version of how he came to join.

Firas Rahhal: Before I bring James in. I want to let people know that your description of venture and surgery just so people know the backstory. Michael is unequivocally a thrill seeker. He also likes really fast cars and I don’t know his latest thing but might be hanging upside down from an edge of a sharp cliff. I don’t know but Michael likes the role of decision making. And he’s really good at it. And he takes that to some of his recreational activities. I’m not, I’m not sure, which is the chicken or the egg, but you like making tough decisions. I know that about you for a long time. And it is what makes you a great surgeon, and a great venture capitalists now in your second half. And thanks for coming on. James Murray is the other guest and the other partner at ExSight. And now James has become one of my best friends, although for a shorter amount of time, we’ve gotten to know each other pretty well, in these last six or seven years. We spend a ton of time together, obviously, we’re on the phone several times a week. And until this pandemic year, we’re in person meeting together all the time in various parts of the country, different meetings. And James is a lawyer by background in education. He came out of law school, I think, right into the business sector, but I’m gonna let him tell us more about that. James, you went to law school? What brought you to venture? And was that always in the plan? And did you ever actually practice law in the traditional way? Yes. So

James Murray: Thanks. It’s a it’s a circuitous route. So it’s great to be on. After watching and listening to many of the podcasts. And you know, after COVID is over, I can’t wait to get together in person with you guys. But yeah, my circuitous route. So I’d always wanted to go to law school, and all, will bore you guys with the background. But somewhere around my second year of law school, I wanted to do a very specific fake and niche type of practice, which was international corporate arbitration. And so I realized that was going to require more schooling and or additional work that and then perhaps getting into that many, many years down the down the road somewhere on my second year, so I started to rethink you know what path I wanted to go down. And I very much enjoyed some of the business classes, I’d taken a much to my surprise the securities laws, law classes, and thought that that might be an opening, you know, being in New York and big financial hub, I started networking with a bunch of friends. And on that time, I was introduced to some guys that had a startup asset management firm, and it was very startup I was introduced to them, and it was a ragtag group and, and they cobbled some things together, and they said, Hey, you know, we’re looking for someone to do some legal work this summer. How about you come in. And so I did. And you know, my friends, were all working at big firms. And here I am carrying my own laptop in and kind of working on a ledge. But that firm took off very quickly, became much more professional, attracted some really top tier talent, and grew their assets under management substantially. And not long after that I was asked to be the trader. Now, I should say that part of the reason that I chose to go to law school is because I starkly been afraid of finance and numbers. And that was not my, my forte. And now here I am, right, a VC in a life science firm. And so, around that time, I became a trader figured that out fairly quickly, it was a lot of fun, it was through 2008-2009. So learned on the fly, how to trade options. And then ultimately, what happened after 2008-2009. That firm suffered some setbacks with investments and the financial collapse. And consequently, though, is an opportunity for me, as many of the investment professionals left for greener pastures. I was offered the opportunity to work with some of our portfolio companies, and many of them were quite early stage as well. And that firm invested in hundreds of investments into you know, they weren’t venture class investment investments, but they were very early stage companies. And I really enjoyed it, you know, and then kind of around, I don’t know, I was 30 or so I looked and said, Okay, what, what’s next in my career, and I kind of took stock of all the things that I had enjoyed, right? I enjoyed being at that startup firm and the startup nature of it working on on various areas and not specialized, really contributing to the outcome. And then working with those portfolio companies, one of which I’m still on the board of today, and trying to contribute and and help the outcome. So I said, Okay, I want to go into venture. That’s what I liked and just threw myself into it. I started networking a ton around the city. Unfortunately, people in the in the space are very open to newcomers. The tech community here was burgeoning at the time and growing and we were looking to do more traditional tech investments. And we are talking to people with deep domain expertise and in that area, and you know, much like much like anything in life, you kind of know right away whether or not you guys got a vibe, and it’s gonna be, it’s a professional marriage, you’re going to be involved for 10, hopefully longer than that 10 plus years or so. And it just wasn’t working out. And right around that time I was introduced to Michael, and through some other kind of serendipitous factors, ophthalmology, and came to look into it as a complete skeptic. Because, right, here’s venture, it’s very hard as a place to invest. Now you want to go into life science, which by some measures is more difficult and challenging. The biology is hard as somebody advised me when we started this, and and then you want to go early stage. And then you want to focus on one little area of the body. Yeah, yeah, that’s it right here. And I talked to another friend, that’s, uh, I won’t, I won’t mention his name here. But he’s a big well known name in life science, venture capital. And he said that, Hey, man, you know, I support what you want to do. But I think you’re nuts doing. And here we are six years later. So that was kind of my my circuitous route to, to being a VC specialized in ophthalmology.

Firas Rahhal: I didn’t know that history. But the friend, I’m glad you didn’t tell me that, even two years ago, years ago, that might have thwarted some of this, James, the legal part of it. I know because I’m a member, you bring so much to the table because of that, even though you’re not practicing law in the classic sense. What about for you? Where do you feel that has helped us or helped yourself? in this space? Where does that come into play? Including for portfolio companies? Let’s say?

James Murray: Yeah, absolutely. So I’m frequently asked this question, because, you know, you even asked, right, how much did you ever practice the practice? I would say, at any point in my career, it’s been 80/20, 20 at practice versus non practicing, because the law is involved in so many areas, particularly one so regulated like life science and venture capital. And no time, have I ever regretted that path? Because I actually asked a VC also, during that networking phase, when I figured out what I wanted to do when I grew up. Did you know I’m an attorney by training? Is that going to serve me well, here? I’m afraid it won’t. And he said, No, absolutely. Because it’s the legal education is one in which you, it teaches you to think critically, and issue spot. And that’s exactly what we do. Right? We look at a company, we think critically about the technology and the science and you guys, you know, that are so much better at that than I, but then thinking through all the issues, you know, we play devil’s advocate, and then how do you structure that investment? Right, the legal documents that are associated with that? What are the regulatory minefields that you might get into? And I think that the legal education and training is serves me very well, in that I think it helps with I bring to the table here. And otherwise, you know, I’m still an active member of the bar and chair, the New York City bar merging company and venture capital committee, you know, we work on a bunch of emerging issues in, in both venture and technology, you know, it’s kind of at the intersection of all of those things. We’re working on something that’s kind of hits the nexus of what we do, and, and part of the genesis of ExSight, which is how to bring investment dollars to bear and to work with projects that may be charitable in nature, you know, and the Cystic Fibrosis Foundation did that years ago, with Vertex and they found a way to to innovate there. And we’ve seen that in a number of companies and technologies that we’ve looked at as well. So I think the legal background is extremely useful. Not to mention that I think it saves us some money on the on the legal fees.

Firas Rahhal: Definitely.

Michael Nissen: I’ll just add to that and say, you know, the fact that you’re able to help us navigate the potential pitfalls of starting a firm and growing a firm has been critical. I mean, it just adds to my comfort in this project right from the outset.

Firas Rahhal: I totally agree. I don’t think we could have done it bootstrap the way we did without having that kind of legal expertise. Certainly, you can hire that but it is very expensive. And you can only get so much attention, having someone inside with that knowledge has been I think, critical to us being able to get off the ground. And in with that in mind, Michael, back to you on the history. You guys both touched on the history of how we sort of came together how it started but honestly, my impression has been this has always been your brainchild, literally from, you know, moment one. You have the skill set in building the practice and you have an understanding of ophthalmology, it’s not a hard question ask you why ophthalmology, but when did it become obvious? or How did you formulate a plan? What pieces? Did you feel like had to come together? And who did you talk to? To get advice? Or even to know that an ophthalmology focused VC is a thing? Like, I’m not sure, I would have known that before you came to me? And I’m glad you did. What were those early prophecies like for you?

Michael Nissen: Well, I’ll start by saying, I definitely did not know that it was a thing.

Firas Rahhal: Okay.

Michael Nissen: You know, as I, as I sort of formulated the idea for ExSight. And at first, I didn’t really know what I was formulating. And it took years of discussion with business people and patients, and ultimately, the group of business people and fund managers who introduced me to James, who are also investors and with a leader of a family office, who also helped us to start the fund. And, you know, it took a lot of people’s input. And I think, really only at the time I came to talk to you about it was the actual idea clear in my head. And James was a large part of formulating that, too, because he and I had already been talking probably for a year, at that point a little loosely at first, and then very seriously. So I will say that once it did become together, once it did actually start to come together. And as an crystallized idea, it happened very quickly.

Firas Rahhal: It did. And I do remember our dinner in Beverly Hills, actually, the Retina Society was going on, on the street that year, and I thought, Man, this is an awfully long wait for Michael to go for to get me to buy him a dinner. This guy’s committed? What a great evening and pitch and thank God you did. Let’s talk about the current ExSight. So you guys have given us some of the history. I know the history, of course. But it’s always good to hear your perspective, because I wasn’t there in those first moments with you when you thought about it. What’s the current structure we can share with the audience about how, how we’re built? Who does what, and there’s some unique aspects to that maybe some is very common to other groups.

Michael Nissen: And the current structure is that the three of us are the managing members. We have several advisors who are important to us, but who we bring in as needed. You know, when we started this, people say, Well, how can two full time practicing doctors be involved in this? And give it their all? And how can you guys work at a distance. And clearly the glue to the whole thing is James, you know, James degree keeps us focused and brings us together, we put a lot of energy into it. And it’s a pleasure to do so. And, and a heck of a lot of our time, outside of our practices. But James keeps it moving in the right direction, that’s critical. We have very regularly scheduled calls, which we almost never miss every week, and we supplement those with calls as needed. That’s important. Usually, it’s the three of us, but sometimes it’s with advisors. And often it’s with companies that we’re talking to. But those calls really are very regular for many years now. And we use business software to communicate in a real time basis. And one of the things I found very satisfying, you know, as a doctor, you’re the product. If you’re not working on a patient at that moment, you’re not really working, you may be working in the business of the practice. And there are other aspects, but you’re not really doing the generative work of your business. But with us, someone’s always working. So if I have a week where I have a lot of emergency surgeries, you guys are looking at prospective portfolio companies and talking to people and vice versa. And I say, you know, as time goes on, we’ve and we come to know and trust each other so much and know how each of us works. We’ve been able to divide and conquer a little more, but never without being in touch at least three times a week on a call. And it’s really worked. And I don’t think our investors question our ability to communicate any longer. I mean, they know we’re working on this all the time we communicate with them. We have quarterly communications, and annual investor calls where we discuss our portfolio companies and how they’re doing we talk with our companies regularly. It’s really worked.

Firas Rahhal: Yeah, honestly, the regularity has been super positive. If you asked me before, and even when we first discussed it, I would have had concerns can we really maintain that level of focus and energy doing all the other things that we have to do to run our practices? And it turns out Yes, and I, I know, you feel this way, I look forward to those three plus calls a week, maybe more than anything else that I’m doing professionally, because we have a lot of fun in those calls to go along with the business. And they’re pretty concise. And James keeps us on point, which is important. But he fails at that sometimes, because people like me tend to gamble on about other things like the Buffalo Bills, and they need Annapolis Colts. We’ll talk about that later. James. James, what about you have anything to add about how we function at this point with regard to structure and or use of other services, advisors, etc?

James Murray: Yeah, absolutely. So, you know, and I’ll take the opportunity tonight to kind of digress as well. But I’ll first answer that, you know, you guys know this and running your practices and building those, and managing those successfully, right, the operations is so critical to the success of any organization and an asset management and finance that the upside is typically a negative, right. But in venture people will tell you that if you back any company, it’s the operations that are critical to the success of the organization. And, you know, I think I benefited from working in some of the operational capacities during those early days of that startup fund, I was that right to see how critically important those functions are in facilitating things and, and then bringing that experience to exite. When we started, right, and facing that challenge, we’re in two different time zones. You guys are busy at practices all day. So how can we make this work? And we did so with those regular calls. And you know, you guys taking time out and for us, you keeping us up late on on Tuesdays and Wednesdays and us getting you up early on Saturday, so it comes full circle. But that regularity, I think, has really helped us move forward. Because it imposes those deadlines, and we always have something to talk about and move on. And we certainly have, as you said, I keep things on to that tight schedule, because we have so much to look at. I mean, the opportunity set is so great in ophthalmology and that’s one of the questions we’re always faced with, are there really enough opportunities in ophthalmology and I want to go back a bit to the founding of ExSight. And when I was a skeptic, and one of my early realizations, I, you know, we know this now. But what do you have in in ophthalmology and really in life science, healthcare investing, you’ve got all this money that goes to research in grants and at the university level. And then you’ve got these massive pharma partners and biotech companies, and the later stage massive venture capital funds, but there really are a lack of those early stage investors, right. So people call it a lot of things, right, the valley of death, the missing middle. And they, the larger funds need to invest a lot of money to move the needle, right $30 million. And we’ll get to this later on the capital efficiency and what we look for, but what was key to key realization to me was that you can diversify within even ophthalmology, from seed, you know, we were having conversation, recent conversations about a tech spin out at the university level to a smaller Series B, right. That was our first investment in RetroSense $6 million, Series B catalyzed an acquisition and moved that asset forward. And there are really ways to invest efficiently and without spending or investing $30 million into a seed round or series A that I think is our opportunity set, right the the unmet need in ophthalmology innovation. And, and so that I think that was our key or my key realization say this might actually work and then, you know, to diversify between sectors, like the therapeutics, the ultra high risk therapeutics, balanced against a device that has some eggs, US clinical data already, right, so you can balance those different risk profiles. And I think that was, again, our key realization. And then just one more point on this before before you cut me off. You know, when you started this, but as you said six years ago, right. I was listening and consuming a ton of information VCs and I listened to an interview with with Marc Andreessen from Andreessen Horowitz. And they were just moving into biotech investing, which, which many tech investors had previously failed that and he said, said something that still resonates with me, right? If you look at the tech ecosystem, it’s 60-70 years old now. And as that developed, so too, did the VCs that invest in it from later stage larger funds, or I’m sorry, larger funds that invest across stages. And as they grew, they kind of started to miss those early stage opportunities. So what developed there to meet that need for those early stage entrepreneurs and founders was more specialized type of investing. And now in the tech ecosystem, you have plenty of these early stage specialized phones, whether it’s, its media tech, or SAS, or ribbit capital, famously does fin tech. And we’re simply bringing that model to the less developed ecosystem that is life science and biotech. And, you know, we’re doing so first in ophthalmology, and hopefully, we’ll be able to grow that as we progress. But they’re just wanting to, to get that and because it was a key insight early on, that I think we collectively had, and saying that this is really an unmet need in the innovation space.

Firas Rahhal: I won’t. So did you figure this part of it out along the way? I mean, look, all this stuff you’re talking about, and all the things I’ve learned have been along the way I didn’t take a business degree. I’m a doctor, my background is in. But I get the sense that most of this stuff is learned in real time. on the fly, it with experienced by everyone, even those formally trained, Is that wrong? Can what you just said be taught in the classroom?

James Murray: Oh, man. No, because the I don’t think so. Right? Because I could, we can blog about that we can put that insight on the blog, and then it’d be out there. And maybe it’s learned in a classroom, but the area of innovation generally moves so quickly. Right? So you can’t learn that in a classroom. I mean, we can. Because you’ve got to be ready and willing to look at the next thing, we all bring our different backgrounds to this right? And that gives us unique, unique insights. And I think venture generally and part of the reason it appeals to me so much is that it’s constantly evolving and changing. And so too, with life science, and healthcare investing, right? So

Firas Rahhal: God is an evolution. And I wonder, you probably know this, I wouldn’t but my guess is that’s playing out in so many other small niche specialties like we’re in one, but this previous gap area that may be getting filled in by smaller niche style VCs. Is that becoming more commonplace in other specialties?

James Murray: Yes, I think so. I’m going to toot our own horn here. But you know, we were there was a journal piece over the summer, Wall Street in the Wall Street Journal about specialization in healthcare, life science, and you know, the jury’s still very much out as our wheat, right, we’re, we know the opportunity set is there. But it is going to take 10 or so years to actually prove out whether this is a sustainable model. And we’ll see that but there’s definitely funds out there that are onto similar things. And then you had our friends who didn’t focus on several weeks ago, they’ve recognized this. And there are other examples in other fields, ontology, for one.

Firas Rahhal: James too nice to say so but that in that Wall Street, for those who are listening, that wall street journal article is real. And James was interviewed, and gave some very nice quotes about niche investment in VC. I’ll leave it there. So I don’t botch the paraphrasing of something you said brilliantly that I’ll screw up. But you get the idea.

James Murray: That makes Yes, thank you. But that makes, it makes total sense, right? Because if you’re investing in many specialties, then how can you have the real time insights that you and Michael bring to the table when we’re talking about how your clinic flows, or what the treatments are, it would be very easy for me to call up an expert, you know, or an expert network and get there. And so you guys have done this before. But unless it’s not just the clinical or surgical side that you guys do, or the business of running your practice, it’s also the 700 companies we looked at right along the way. And so when we look at a company in a space, we can compare it to 12 others or so immediately, just using a number out there, but you we know the type of innovation that’s going up and with that deep domain expertise, provided there are sufficient opportunities to invest in in the market need is there as we know, then that really should drive your returns, especially in an area, an industry like venture where it’s a powerline industry, and it’s often quoted, maybe too much so, but studies show that 10 to 20% of venture firms are required. To for 80 to 90% of of the returns, and how do you get those returns, you get them by access to the best opportunities. And you have to do that by knowing what you’re doing. Right. So very early on, we were welcomed into a deal and, and we’d been talking to that company for a while. And they were very gracious because we did not have the sun that we thought we would have. And they let us in because of your expertise, your reputations, and our Mo, and they put us on that press release of that financing. And I think that really propelled us because of that domain expertise that we could bring to the table, even though we had a very small modest inconsequential check size.

Firas Rahhal: Yeah, point well made. Let’s move to talk about some of the investments, the strategies, you mentioned balancing. You know, in this space, everyone asks, are you investing in drugs, devices or diagnostics? We of course, do all but and various stages. How would you describe our strategy there is it just catches catch candy? You’re the one who kind of balances our portfolios, our portfolio companies with each other?

James Murray: Yeah. So you know, I just touched upon weighing those, those ultra high risk preclinical therapeutic assets vers a device or a diagnostic that might have some human data. So I think that’s an important way to balance out the the risk profiles within within the, the portfolio. And then early, you know, defining the stages and what we look at, when you mentioned seed stage two, Series B. So in in our world, that means how much data do you have? And have you been able to generate so far? How comfortable are we getting involved there, and for that, I look to you guys, and the investments that you source through your network, and, you know, and the brand that you’ve been very critical and establishing through this platform, and, you know, and being on the stage and in this podcast, but I think you need to look at and that’s why the AI is so compelling, because there are so many opportunities within both stage and sector.

Firas Rahhal: Michael says, similar question, but maybe slightly different for you. Maybe you could start off and James can chime in, everyone always talks about the different aspects of the investment, what are the important features, the asset, the marketplace, or market size? Let’s call it and the management team are always the Big Three? How do you view that yourself personally? And how that’s extended to us as a group? What? Where’s the heavy? Where’s the heavy weighting? Or is there any?

Michael Nissen: Over the last five years, we’ve definitely learned that there does need to be heavy weighting. And it’s become clearer and clearer where it needs to be. It’s on the team, the founding team, of any company we look at has to be very special, they have to be experienced, and dedicated and really driven. And we really have to believe that they can bring an asset all the way through the trials and tribulations of development and possibly clinical trials and additional rounds of fundraising. And that has turned out to be the key aspect, we’ve discovered that you can have a great asset, and you have to have a great asset, like we’re not going to invest in something where we don’t love the asset. But you can have a great asset and a market for something. And it’s still completely critical that the team and especially the leader of the team, is able to drive the whole process forward. So that’s become our number one focus. And other than that, we have to love the asset. It has to be great and exciting. And it has to for us address really important problems in ophthalmology, we are doing this to create returns and to support great technology, but we’re also doing it to solve problems and treat patients expanding our impact. And that’s part of the reason all three of us went into this is to expand our impact on ophthalmology and on the world in general. So it’s got to be something truly important. Other than that we’re open to many different areas. It’s just has to be at this point in our development within the eye within our specific expertise and by the way, I want to include James in that specific expertise. It’s recently happened that other investment companies have actually called James for ophthalmology advice, very vividly.

Firas Rahhal: You mean, somebody called James to fix their eye. We haven’t even given him the fellowship yet. Michael and I, here’s about giving James a fellowship and posterior segment surgery. We figured we just skip right to the back of the eye since you’re not going to do cataract anyway. The team comments or your points are very well taken. And I’ll speak for myself for a minute. We in our process, we you know, we have some interaction, get a slide deck, exchanged some emails, learn about the asset there in sort of an electronic form, and get ourselves comfortable with the asset, maybe do some background reading, go back into the literature. And then there’s the first one or two calls and I find myself viewing those first one or two calls. And I didn’t plan it this way, that I’m really just sort of listening to the team, or the leader of the team present their case. And it’s almost more like a what’s the style and goal of the presentation rather than the discussion of the asset? We’re gonna have a lot on that later, for sure. But do you find yourself Michael viewing that first 30 to 60 minute call more of an assessment of the presentation?

Michael Nissen: Yes. And I like the way you put it. You didn’t plan it this way? Right? Yeah. It’s a surprise to me, too. I, when we started this expected to be analyzing science and data. And we do that, but not in the first stage in the first stage, do we have before we take a call, we want to make sure you have some interest in the asset. But even from the deck, we’re assessing the style of the presentation. And we’ve seen so many now that we can get quite a lot out of that. And especially during those first one or two calls, and it’s critical. And you know, it reminds me of one of your earlier podcasts with Steve Schwartz, where he said, to do something great surround yourself with great people. Yeah, you guys, of course. But we’re looking for that in our portfolio companies to you know, is there some depth of great people in the company passionate, interested, competent people, but especially the leader, it’s just not going to work. And I think it’s important to say too that we’re looking for companies with with a strong lead, we need somebody who we need companies that have a real leader, or plans to if they’re very early stage companies to get a real CEO with experience who we believe can actually develop the company.

Firas Rahhal: Yeah, I totally agree that the CEO, the the lead principal of the company, makes all the difference. And we’ve experienced the furthest extremes in that regard. And we, I think we’ve gotten pretty fast at trying to recognize what we believe in, in those conversations and change about you. Do you have the similar view of that? And then ultimately, maybe you can move us forward into after telling me your view on the management team and it’s relevance? What about deal sourcing, then, once we, how do we get there in the first place to that first conversation? Yeah, absolutely.

James Murray: So I mean, you guys hit it, it’s the team, we could talk here about, you know, what the ownership percentage valuation, capital efficiency, all of which is extremely important. I don’t want to minimize that. But the team is, is the most critical, particularly the founder and the types of people they can, they can attract to them. Right. So we our processes, typically, even though we’re early stage, we still follow companies for a while. And part of that is to get to know those teams and see how they deal with adversity, right? Because as an early stage founder, you’re going to deal with stages of adversity. And do you exit? Leaving the perhaps the team in the lurch, or or do you manage the process? And do you have tenacity and are you able to attract other qualified people and investors along? It’s so critical? Can you get non dilutive grant funding and things like that? Can you be resourceful and tenacious? And then, on top of that, just being able to communicate for us You said, you said he’s kind of sit back and listen, and I like to think of that. And I think you you guys may have have said it before, kind of the Columbo effect and you’re giving away some secrets now, but I mean, it’s pretty obvious. It’s like.

Firas Rahhal: I am smoking a cigar during most of those calls. You guys don’t we don’t zoom yet for those calls that I learned French coat and a cigar.

James Murray: I’m picturing you in your beautiful backyard with that view, looking at place in that. But yeah, you know, you just listen and you ask questions and and you listen to the responses and to use an extreme example. We were several years into this at this point, I was at a conference meeting with a bunch of companies developing our deal flow and our network. And I met with this company and they could not clearly articulate they were they were technical founders, but they were they had some experience. They could not clearly articulate their technology, right, even to a lay person like me. They couldn’t tell me what it was sufficient for me to go back and tell you guys. And to me, that’s a huge red flag. Yeah, you can’t clearly communicate things then. Then that’s a problem. Not just to me. But to the general market and to attract investment and to attract talent and to be able to move that technology forward. And they said some to me. And this is a big No, no, for anyone out there wondering, don’t be condescending to a potential investor. They said, Oh, just take this back to your partners, they’ll understand it.

Firas Rahhal: Yeah, not good. You know, it’s funny that’s a great point. And Michael, and I’ve talked about this many times, we’re always hearing you know, ophthalmology pitches. Obviously, if we can’t feel like we can candid into a two to three minute cohesive presentation to one of our colleagues in the O.R. while we, you know, get ready to do a case to get their interest or their opinion, then then it hasn’t been presented that well to us, we should be able to encapsulate it in a few minutes. And there’s a lot of them, I just struggle to put together a story myself, which would be needed to get my investors interested in it. But even our colleagues interested or to comment on it, if it’s an area that Michael and I don’t sub specialize in, like, say glaucoma, or refractive surgery, we have to be able to encapsulate it. So a lot of times, that in itself is a bit of a diagnostic of how well was the story told to us?

James Murray: Exactly. And it’s a it’s a good, it’s a good initial test, right? Because as you guys started, what we’ve seen at this point is volumes of these, we’ve taken an insane amount of pitches, and in early meetings, and other people have referred to this and there was a bit of a buzzword in venture a few years ago, right pattern match. Right? And all we’re doing is we’re just looking for those types. And I think at this stage, we know what a successful CEO looks like. And it’s not to say that it has to be a person with a certain resume or track record, right, three successful exits or anything like that. But it has to be an honest person, somebody that’s intellectually curious, somebody that is willing to admit what they don’t know. I mean, how many questions and pitches? Do we ask that there can’t reasonably be answers to at this stage? Yeah. How important? Is it when they’re honest with that? You don’t need that.

Firas Rahhal: Yeah, that’s critical. Because you know, that’s going to play a role later, when you’re trying to get straight answers about timing and how funds are going to be deployed and when. And that’s important for us to be able to be transparent for our investors. And we need that transparency from the portfolio company leaders.

James Murray: And it’s nothing in this space is linear, right? Like even the best companies will.

Firas Rahhal: Unfortunately, no. It’s always a complexity. Let’s talk a little bit. In the final minutes here about some of the portfolio companies I want to give you guys a chance to maybe pick one and, and go over these are obviously companies that have checked those boxes that we were just referring to, and much more because there’s a lot more to it than just what we’ve been able to cover. But I’ll first I’m going to list the eight or so companies that we have invested in up till now. And then you guys can each maybe take one and tell us a little bit about it. So these are and they’re not in any particular order. All the first one I list is the first investment we made, which did ultimately exit RetroSense Therapeutics and Vision Diagnostics, LensGen. Trefoil Therapeutics. ONL Therapeutics, Cura, DTX Pharma and Re-Vana Therapeutics. Unless I missed any I think that covers them. And I don’t know, Michael, you want to go first and tell us I think you wanted to talk a little bit about Re-Vana.

Michael Nissen: Yeah. So Re-Vana is a drug delivery company. And when we, again, when we first started ExSight, we identified specific areas of need within ophthalmology that we wanted to try to fill. And at the top of the list was drug delivery. I think that’s at the top of a lot of people’s list. I know. You know, Robin Ron of infocus that we share ideas with regularly have the same idea. And we began to look at drug delivery companies right off the bat. And I don’t know how many drug delivery companies we’ve looked at, but we’ve gone into pretty deep diligence with a number of them. And Re-Vana is a clear standout. So Re-Vana is CEOd by Michael O’Rourke who has extensive experience in drug delivery within ophthalmology. And Michael has a technology out of Queen’s University in Belfast that is designed to release either large and small molecules into the back of the eye and into other parts of the eye potentially, but the focus right now is on delivering large molecules to the back of the eye. The technology is a biopolymer system with a proprietary cross linking technology that works with what works especially well because it limits the D naturalization of the proteins that we need to deliver. And at this point, they are able to deliver at least four months worth of large molecules to the back of the eye. And they’re able to tailor the design of a prospective implant to the size of the drug the dosing need, and the potential duration. And it’s pretty spectacular. And, you know, one of the things that struck us right off the bat, in our conversations with Michael and his team is number one, the depth of the team. And the fact that they were able to take our questions, and by the time we talk to them, we really had a lot of ideas of what we needed to know. And each conversation back and forth over a long period of time was just better and better they were able to talk to us and discuss the design of the implant and incorporate thoughts we have and no poster segment objection, something we have a lot of a lot of experience in Plus, they have other advisors who have massive amount of experience. And just to clear, standout. So we ultimately invested with them. And we led their financing round and James put together great syndicate around the financing. We have all three venture companies in ophthalmology that we work with at this point, we have InFocus, we have Visionary, and others and it’s great, it’s incredibly satisfying. And things are moving forward well with the company. And just really one of our great investments.

Firas Rahhal: It is one of those unique examples and unique again, we invest in a small percentage of the companies we’ve been pitched as James has mentioned that the denominator is huge. One of the unique places where we thought that the scientist was beyond the home run, and the CEO was at beyond the home run. The rest of the management team was beyond a home run. So you know, when you talk about team, this is really an all star team of people who apparently also work very well together, which is critical.

James Murray: And they do so just just they do so you know, across many, many miles, right? The companies in Northern Ireland, the innovation and the science takes place in Northern Ireland. And Michael and Mike are in Florida and North Carolina respectively. And they make that work and and you can absolutely do that as we do with technology. Right. And that’s not a not a lot.

Firas Rahhal: It’s a great point. Of course Michael work is the Michael and Mike is Mike Nash is to give proper credit there. Mike has been a great addition to that company and is helping tremendously. Yeah, you know, we’ll have to when the pandemic eventually lets us, road trip to Northern Ireland, I think is appropriate for the ExSight partners. What do you think?

James Murray: I’m waiting for that pint of Guinness.

Firas Rahhal: So what we wanted to I think give you a chance James to go over another company that we’re very excited about DTX. What can you tell us about DTX Pharma in background or in what their their activities are right now?

James Murray: Yeah, let me so where to start with this one, right, because the technology is so cool. And it is science so far beyond my my layperson ability to clearly articulate but I’ll do my best just because it’s it’s something that we’re so excited about. And it fits into our thesis. So Michael described one way of that we invest, which is to say, what space do we want do we think is ripe for innovation and, and there was sustained release technology. And yet, but another way is to filter different opportunities do through our thesis and to be opportunistic, right. And this was one, we think that the eye is such an attractive area for for innovation and investment, because it is Firas, what is your term?

Firas Rahhal: Anatomically sequestered?

James Murray: Yes, unique anatomic sequence.

Firas Rahhal: Exactly.

James Murray: And it’s easy to access. And there’s a quick feedback loop, a relatively quick feedback loop. And so it becomes a good proving ground for a lot of emerging technologies. So whether that’s gene therapy or stem cell therapy, and with DTX they have, it is an RNA based therapeutics, which, as a general class have a tremendous amount of product promise. But the challenge there isn’t that this class of medication, faces two problems. One is that there’s an inefficient cellular uptake and then there’s rapid clearance from circulation. So obviously the eye doesn’t deal with that area. But it becomes a good proving ground for this type of technology. And so one of their early indications and I think it’s they’re further along is in retinitis pigmentosa which we came to, which is how it came to our attention. And that, you know, I think it hits on a lot of things we’ve already talked about, and how that was sourced and our thesis and the team there. Right. So Jeff Friedman, one of the other investors who eventually joined the team, as an early clo, was a co investor with us in RetroSense. That’s how we, we came to know him. And he reached out to us and said he met, he learned about this great technology and had this great CEO, brilliant CEO. And so we looked at it, and we looked at it 18 months or so before we invested in again, super early. Want to pause, did I do it? How do I do explaining that technology? Should I should I

Firas Rahhal: really it’s a complicated technology, actually, it’s it’s hard to put into like a minute. So you did a great job.

James Murray: Good. Well, that’s, you know, that’s the it’s as articulate as I can be, without doing it a disservice. So good. Efficiency works well with that. Yeah. So Jeff has been great. And it’s really kind of talking about the team requirement that we look for, right? rd, does not have 30 years of experience, he doesn’t have many exits under his belt. But he’s a brilliant scientist and innovator. And he really managed to bring this along to a stage and he met Jeff, and he had, you know, he was able to bring him on not just as an investment. But as I mentioned, a COO to kind of round out that type of expertise that he needed, and didn’t think he could do it all himself. Right. And I think that’s so critically important for anybody, whether it’s scientific work on this, on the management side, is just to as we’ve done, kind of compliment our own skill set and surround yourself with good people. And I think, you know, just just talking a bit about our process, and through those 18 months, and getting to know the companies through different meetings, and I mean, I think we met with them at five or so different meetings independently and together. And we’d actually passed on the series A initially it just was was, I think, at the time, you know, for where we were in our fund lifecycle and the amount we had to invest, we weren’t comfortable with the risk profile, because even though we’re really you know, we’re still, we only have so many investments we can make out of each fund, and we even look for some de risking, but then they were able to raise a much larger series Eva, and we initially thought they brought on Lily, as an investor, who’s been great and being able to move this around. But and they also did something that’s so critically important to any investment. And, you know, I mentioned that they’re one of their lead indications is in retinitis pigmentosa to kind of prove out the technology, but they also have potential indications in Charcot-Marie-Tooth, I hope I pronounced that properly and Alzheimer’s and muscular dystrophy. And they’ve been extremely capital efficient by being able to bring in grant funding through those types of nonprofit organizations to advance the science. And then one of the last points I just want to touch on not not just our process, but in our efforts that we contribute, after the finance, right and the things that we bring to the table as investors and you know, I was I haven’t even shared this with you guys yet. It was earlier this week, I caught up with my national Ravana. And we were talking through some of the some of the the progress there. And Mike said, and I thought this was a great compliment, not just to us, but to our friends at Visionary Ventures and InFocus is that because of the expertise that each of this team brings, he has not ever seen the depth of expertise brought to such an early asset. I think that’s key and moving these things forward. Right. And it’s so important. And then you Firas have have done a bit of that also with DTx, right your involvement there has been has helped facilitate progress and conversation around the around the SAB, is that correct?

Firas Rahhal: Yeah, we had a, we had a meeting that I helped with and, you know, Jeff, and RD don’t need that much help because around back to the original points were making about management. They’re both terrific communicators, beyond being brilliant and understanding the science that can be tough to understand for most of us. They’re really great communicators, both in person over the phone and in writing. Their emails are clear. That means everything. It keeps people engaged and it gets people interested because they feel like they are in understanding the story. These things can get pretty complicated the science part of it and even the financial part of it can get complicated It’s easy to lose people and have them be disengaged. They and as well as Michael O’Rourke and Mike Nash, great examples of people that communicate very well, with their investors with the scientific community with the scientific advisory board. So yeah, I enjoy working with them. And I was glad to participate in that conference. And we’ll try to keep doing more. Those are both terrific examples of very well run companies. We have others we don’t we have limited time. So I alluded you guys to one each. I’m thrilled that we had a chance to talk about those more importantly, thrilled to have given you guys a chance to talk about ExSight, which I’m proud to be a part of. And I’ll share with the audience that you can’t work with two nicer, more skilled people than Mike Nissen, and James Murray. They’re too humble to say something like that. So I’ll, I’ll say it for them. And thank you for coming on. And thanks for giving the history of our great little company.

James Murray: Thanks for likewise about you, man. Thanks, this was great. Thank you.

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