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Avi Kulkarni

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Avi Kulkarni

VP, Booz & Company

San Francisco

Avi Kulkarni is a member of:

- Expert

Investment Strategy

My investment philosophy is to stay within the expertise area I have, which is at the intersection of biology and medicine. I look for ideas and technologies where there is strong unmet medical need. This idea has to be capable of becoming a product that can bring about measurable, actionable change in physician behavior, for that is what gets reimbursed by Payors and insurance companies. One of my favorite companies XDx was the first company to develop a biomarker based signature algorithm that could predict organ rejection. Imagine that! A small blood based test could replace a complicated, invasive organ biopsy. It was a winning idea and I have been proud to have invested my time and money in XDx.

My Criteria for Investing in Startups

I look first for a medical hook. My mantra is: “unmet medical need followed by actionable product information.” Once we are past this first hurdle, I look for strongly defensible ideas, not just via patents, but also know-how and clinical samples. In some of my companies, the provisioning of longitudinal clinical samples (human patient clinical samples collected over many years) was a sustainable competitive advantage. Lastly I look for a team that knows how to execute and build product value without having to constantly return to the financial markets.

Attributes I Look for in an Entrepreneur

An entrepreneur has to have a strong internal compass, thick skin, ability to filter out a lot of negative criticism, and maniacal focus on executing on the product. I have seen bad ideas succeed in the marketplace because of the drive of the founder-entrepreneur. And I have seen good ideas get sadly bypassed because the founding team was too comfortable with treating their job as a 9 to 5 sinecure.

I have ‘conversations’ with entrepreneurs. I ask them to explain their ideas. I look for holes in their logic. I test their commitment and passion not just to the product idea, but also to save the lives that they will be impacting if the product can be built and brought onto the market quickly and ethically. The best entrepreneurs come back to me with answers to the questions they could not answer the first and second times. They don’t claim they knew it all at every stage, but their relentless passion to engage and to do whatever it will take to improve and execute on their business plan is what sets them apart and makes them ‘investment grade.’

Common Mistakes Startups Make and How to Avoid Them

Start-ups make three kinds of errors in early stages:

They don’t prioritize the essential
They don’t have the right talent to execute
They don’t raise enough capital for fear of being diluted

The first is the hardest point to make. There is so much to do in a start-up: finding a facility, building a team, filing patents, licensing technology, getting access to capital equipment and reagents. It is often easy to forget that there is only one thing that builds value in start-ups: getting to the next strategic inflection point! And to do this, the start-up management has to build a credible set of milestones for taking their company from idea to marketed product, and identify which milestones are measurable and visible to outsiders. Hitting these milestones, be they new patents, or early proof of concept clinical data, or clearing toxicology hurdles should be the focus. Instead, I have seen young CEOs worry about office locations and facility upkeep…not a recipe for success.

The second is easier to understand and execute: building a start-up is a challenge per se, and the best way to prepare for the challenge is to find the best person for the job, attract this person with the right combination of cash and equity, and unleash him/her to tackle the problem. Too many teams are compromises about turf battles in which the right person is not aligned against the job in hand.

And lastly, it is very tempting for entrepreneurs to build cap table models and get worried about how money they will make at the end of the day. Well guess what? If you are constantly worried about raising money, your eyes are not going to be on the ball (in this case, the ball is product development). So my advice to entrepreneurs is, “if you have to err on one side or the other, it is far better to have raised too much money to not having raised enough.”

Most Popular Types of Businesses in India at the Moment

I can speak only to the life sciences industry for that is where I spend the bulk of my time.

Businesses that get to cash-flow-positive in 5 years or less are popular. A large number of drug product start-ups are as many as 10 years from turning the curve and there are so many ideas out there that it is easy to get lost in the noise. Diagnostics companies, assay development technologies, biomarker tools companies and informatics companies are very popular. These sorts of companies meet a number of criteria that are currently in favor: low capital needs, ability to build a product in 2-3 years (or less), knowledge based differentiation versus capital access based differentiation, and very attractive to the larger diagnostics and pharma companies as acquisition targets. And, interestingly, these are the sorts of companies that Indian entrepreneurs could do well at.

Thoughts on Being a First Angel and Offerings to an Angel Investor

I don’t have a point of view on this. I think there are a group of like-minded people who share my belief that we can identify product value from infancy to launch. When we do, we can determine if our talent and capital will make a difference. If it cannot, then we should not invest whether we are the first or the last angel. For the same reason, a board position is critical – we are investing not because we see others investing, but because we see something different. To ensure that we are able to guide the company through its stages of development, the official board member role is a useful device for working with the company to help it get from idea to successful product.