What We Learned in Our Decade-Long Support of Cyclica and Why AI Is Different

Our long relationship with Cyclica has provided us with invaluable insights into the transformative power of AI in healthcare. As we look ahead, we are more convinced than ever that AI is different — it is not just another technology, but a catalyst for unprecedented advancements that will reshape the future of healthcare, improving patient outcomes and revolutionizing the way we approach medical research and treatment.

This week, it was announced that Cyclica, which is advancing drug discovery by increasing the speed, scale, and probability of success through its AI-augmented platform, is being acquired by Recursion (NASDAQ: RXRX). In looking back on an almost decade-long relationship with Cyclica — they joined our portfolio in 2014 after closing their seed round — we wanted to share a few observations on the power of partnerships, the changing venture landscape, and the nature of building in AI.

Through our partnership, we have witnessed firsthand the incredible potential of artificial intelligence and its unique ability to revolutionize the ever-evolving landscape of healthcare and technology. Join us as we delve into the invaluable lessons we learned and explore why AI stands apart from other technologies in healthcare innovation.

Key Points

1. Unleashing the Power of AI: Discover how Cyclica harnessed the power of AI to revolutionize drug discovery and development, empowering researchers with cutting-edge tools and insights that were previously unimaginable.
2. From Data to Actionable Insights: Explore the pivotal role of AI in transforming vast amounts of complex healthcare data into actionable insights, providing scientists and healthcare professionals with critical information to make informed decisions and accelerate breakthroughs.
3. The Human-AI Collaboration: Learn how the successful integration of human expertise with AI algorithms can amplify the capabilities of healthcare professionals, enabling them to achieve greater accuracy, efficiency, and precision in diagnosis, treatment, and research.
4. Overcoming Challenges: Delve into the challenges faced during our investment journey and the valuable lessons learned in navigating the complexities of AI integration, data privacy, regulatory compliance, and building trust in AI-driven solutions.
5. Impact on Patient Care: Understand the profound impact of AI in improving patient care, from personalized medicine and early disease detection to optimized treatment plans and enhanced patient outcomes, bringing us closer to a future of proactive and preventive healthcare.
6. Ethical Considerations: Examine the ethical implications of AI in healthcare and the importance of responsible AI development, ensuring privacy, transparency, and fairness in the adoption and deployment of AI-driven solutions.
7. Looking Ahead: Gain insights into the future of AI in healthcare and the transformative potential it holds for disease management, drug discovery, telemedicine, and the overall patient experience, as we continue to explore new frontiers and push the boundaries of what is possible.

In biotech and AI, founders matter more than ever

It’s hard to overestimate Naheed Kurji as a founder and CEO. As a company at the intersection of biotech and AI, it’s important to communicate what you’re doing to a diverse range of stakeholders and audiences. Great ideas and tech rarely see the light of day without someone who can compartmentalize the vision to who it matters for including scientists, investors, marketers, and industry partners. Kurji has the rare ability to understand the scientific intricacies (while not having a PhD) of what the company is building and being able to communicate it to a broad audience. We revisited a conversation with him from 2018 where this skill is on full display. Kurji is a thought powerhouse and we’ve learned from him in our journey. We encourage founders to check out his insights.

Founder resilience is critical in biotech and AI as development cycles are long, investors may not understand what you’re doing, and the failure rate is extremely high. Many of the companies we work with have had false starts and it’s common for founders to lose motivation in this environment and struggle to maintain a transformational mindset. We think Kurji would be the first to tell you that their journey wasn’t a straight line up and to the right and that Cyclica is not an outlier in this regard, but he kept his team focused on a long-term vision. As he shared in a 2021 interview, “Quick wins are not the wins that are going to move the needle in healthcare.” In the early days they had a great story and vision, but it was harder than they expected and led to completely rethinking how they approach their go-to-market strategy and how they work with the major industry players.

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Timing matters more than anyone wants and getting it right is mostly luck

Nearly all meaningful discoveries require standing on the shoulders of giants. Computational drug discovery is not new and has been around since the 1970s. Early pioneers in the space laid a lot of the foundation that allowed Cyclica to build the connective tissue between new AI models and structure-based processes for drug discovery. Only with the more recent advancements in big data, computational power, and rich data sets have these decades-old frameworks been able to be leveraged by companies like Cyclica. The outcome causes hindsight to be obvious, but for the many talented innovators in the space, it’s extremely murky and leads to many failed attempts.

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The power of partnerships and environment

Cyclica is a product of the environment and institutions it surrounded itself with. Coming out of Toronto, Cyclica was in the MaRS incubator, which provided a foundation for early innovation, community, and a physical space for the company. In 2014, they joined StartUp Health which created a soft launch into the US, leveraging our platform, peer community, and network to gain access to key industry partners and investors. Since then, they’ve been among the most active companies in our ecosystem having showcased at several StartUp Health Festivals and events which allowed them to amplify their message to new audiences. In 2017, they joined JLabs which provided access to talent in the scientific community. In 2019, Cyclica and ATAI Life Sciences launched a joint venture to revolutionize drug development for mental health disorders and Naheed spoke about this partnership at the 2020 StartUp Health Festival. Cyclica announced their Series B in June 2020 led by Drive Capital and supported by a major investment from Chiesi Farmaceutici, who they were introduced to by StartUp Health (as Chiesi is an investor of ours). Most recently, Naheed spoke about his role chairing the Alliance for Artificial Intelligence in Health in a conversation with StartUp Health’s Logan Plaster. Being thoughtful in how they approach partnerships has been key to their success.

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SaaS isn’t the be-all and end-all in of drug discovery software revenue

Cyclica came of age in a time where SaaS has dominated the revenue model for software companies. This makes sense for many of the household names in tech, and due to its predictability of cash flows it’s an easy model for investors to understand. For anyone close to biotech and drug discovery, producibility of outcomes is a pipedream and a company building for biotech is not able to simply grow their seats year over year the way a CRM can. In their journey, the Cyclica team came to the realization they need to think more like a venture fund and less like a SaaS company. Through their thoughtful use of partnerships, Cyclica has been able to carve a business model that capitalizes on the right-tail outcomes in drug discovery in a pioneering commercialization strategy.

Right now, AI has the spotlight and it’s in the forefront of many conversations we’re having at StartUp Health with the advent of companies like OpenAI. However you don’t have to go back too far to see a different time. Biotech and true AI was (and still is) written off as too capital intensive, too long to commercialize, and simply “too hard.” Success in these arenas involves throwing a lot of conventional VC wisdom out the window. For comparison, OpenAI took four years to launch a product, their commercialization path is still unclear, and they’ll likely be one of the most capital intensive startups in history.

Cyclica has been on a similar path by completely rethinking how they go to market and questioning many givens for software companies and we’re grateful to have been a small part of their journey.

Congratulations to Naheed Kurji and the whole Cyclica team. We’re excited to support your continued health moonshot mission in this next chapter as part of Recursion.

Passionate about breaking down health barriers? If you’re an entrepreneur or investor, contact us to learn how you can join our Health Equity Moonshot.

Funders: Learn how you can become a Health Moonshot Champion and invest in Health Transformers.

Founders: Don’t make the journey alone. Learn how Health Transformer University fuels your health moonshot.

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Call for T1D Innovation

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What We Learned in Our Decade-Long Support of Cyclica and Why AI Is Different was originally published in StartUp Health on Medium, where people are continuing the conversation by highlighting and responding to this story.

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