Boa Constrictors Listen to Your Heart So They Know When You’re Dead

Source: Paul Whitten

For January I decided to blog a paper I heard about on the excellent Nature podcast about a deliciously simple and elegant experiment to test a very simple question: given how much time and effort boa constrictors (like the one on above, photo taken by Paul Whitten) need to kill prey by squeezing them to death, how do they know when to stop squeezing?

Hypothesizing that boa constrictors could sense the heartbeat of their prey, some enterprising researchers from Dickinson College decided to test the hypothesis by fitting dead rats with bulbs connected to water pumps (so that the researchers could simulate a heartbeat) and tracking how long and hard the boas would squeeze for:

  • rats without a “heartbeat” (white)
  • rats with a “heartbeat” for 10 min (gray)
  • rats with a continuous “heartbeat” (black)
Source: Figure 2, Boback. et al

The results are shown in figure 2 (to the right). The different color bars show the different experimental groups (white: no heartbeat, gray: heartbeat for 10 min before stopping, and black: continuous heartbeat). Figure 2a (on top) shows how long the boas squeezed for whereas Figure 2b (on bottom) shows the total “effort” exerted by the boas. As obvious from the chart, the longer the simulated heartbeat went, the longer and harder the boas would squeeze.

Conclusion? I’ll let the paper speak for itself: “snakes use the heartbeat in their prey as a cue to modulate constriction effort and to decide when to release their prey.”

Interestingly, the paper goes a step further for those of us who aren’t ecology experts and notes that being attentive to heartbeat would probably be pretty irrelevant in the wild for small mammals (which, ironically, includes rats) and birds which die pretty quickly after being constricted. Where this type of attentiveness to heartrate is useful is in reptilian prey (crocodiles, lizards, other snakes, etc) which can survive with reduced oxygen for longer. From that observation, the researchers thus concluded that listening for heartrate probably evolved early in evolutionary history at a time when the main prey for snakes were other reptiles and not mammals and birds.

In terms of where I’d go next after this – my main point of curiosity is on whether or not boa constrictors are listening/feeling for any other signs of life (i.e. movement or breathing). Obviously, they’re sensitive to heart rate, but if an animal with simulated breathing or movement – would that change their constricting activity as well? After all, I’m sure the creative guys that made an artificial water-pump-heart can find ways to build an artificial diaphragm and limb muscles… right?

Paper: Boback et al., “Snake modulates constriction in response to prey’s heartbeat.” Biol Letters. 19 Dec 2011. doi: 10.1098/rsbl.2011.1105

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Mosquitoes are Drawn to Your Skin Bacteria

This month’s paper (from open access journal PLoS ONE) is yet again about the impact on our health of the bacteria which have decided to call our bodies home. But, instead of the bacteria living in our gut, this month is about the bacteria which live on our skin.

It’s been known that the bacteria that live on our skin help give us our particular odors. So, the researchers wondered if the mosquitos responsible for passing malaria (Anopheles) were more or less drawn to different individuals based on the scent that our skin-borne bacteria impart upon us (also, for the record, before you freak out about bacteria on your skin, remember that like the bacteria in your gut, the bacteria on your skin are natural and play a key role in maintaining the health of your skin).

Looking at 48 individuals, they noticed a huge variation in terms of attractiveness to Anopheles mosquitos (measured by seeing how much mosquitos prefer to fly towards a chamber with a particular individual’s skin extract versus a control) which they were able to trace to two things. The first is the amount of bacteria on your skin. As shown in Figure 2 below, is that the more bacteria that you have on your skin (the higher your “log bacterial density”), the more attractive you seem to be to mosquitos (the higher your mean relative attractiveness).

Source: Figure 2, Verhulst et al

The second thing they noticed was that the type of bacteria also seemed to be correlated with attractiveness to mosquitos. Using DNA sequencing technology, they were able to get a mini-census of what sort of bacteria were present on the skins of the different patients. Sadly, they didn’t show any pretty figures for the analysis they conducted on two common types of bacteria (Staphylococcus and Pseudomonas), but, to quote from the paper:

The abundance of Staphylococcus spp. was 2.62 times higher in the HA [Highly Attractive to mosquitoes] group than in the PA [Poorly Attractive to mosquitoes] group and the abundance of Pseudomonas spp. 3.11 times higher in the PA group than in the HA group.

Using further genetic analyses, they were also able to show a number of other types of bacteria that were correlated with one or the other.

So, what did I think? While I think there’s a lot of interesting data here, I think the story could’ve been tighter. First and foremost, for obvious reasons, correlation does not mean causation. This was not a true controlled experiment – we don’t know for a fact if more/specific types of bacteria cause mosquitos to be drawn to them or if there’s something else that explains both the amount/type of bacteria and the attractiveness of an individual’s skin scent to a mosquito. Secondly, Figure 2 leaves much to be desired in terms of establishing a strong trendline. Yes, if I  squint (and ignore their very leading trendline) I can see a positive correlation – but truth be told, the scatterplot looks like a giant mess, especially if you include the red squares that go with “Not HA or PA”. For a future study, I think it’d be great if they could get around this to show stronger causation with direct experimentation (i.e. extracting the odorants from Staphylococcus and/or Pseudomonas and adding them to a “clean” skin sample, etc)

With that said, I have to applaud the researchers for tackling a fascinating topic by taking a very different angle. Coverage of malaria is usually focused on how to directly kill or impede the parasite (Plasmodium falciparums). This is the first treatment of the “ecology” of malaria – specifically the ecology of the bacteria on your skin! While the authors don’t promise a “cure for malaria”, you can tell they are excited about what they’ve found and the potential to find ways other than killing parasites/mosquitos to help deal with malaria, and I look forward to seeing the other ways that our skin bacteria impact our lives.

Paper: Verhulst et al. “Composition of Human Skin Microbiota Affects Attractiveness to Malaria Mosquitoes.” PLoS ONE 6(12). 17 Nov 2011. doi:10.1371/journal.pone.0028991

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Fat Flora

Source: Healthy Soul

November’s paper was published in Nature in 2006, and covers a topic I’ve become increasingly interested in: the impact of the bacteria that have colonized our bodies on our health (something I’ve blogged about here and here).

The idea that our bodies are, in some ways, more bacteria than human (there are 10x more gut bacteria – or flora — than human cells on our bodies) and that those bacteria can play a key role on our health is not only mind-blowing, it opens up another potential area for medical/life sciences research and future medicines/treatments.

In the paper, a genetics team from Washington University in St. Louis explored a very basic question: are the gut bacteria from obese individuals different from those from non-obese individuals? To study the question, they performed two types of analyses on a set of mice with a genetic defect leading to an inability of the mice to “feel full” (and hence likely to become obese) and genetically similar mice lacking that defect (the s0-called “wild type” control).

The first was a series of genetic experiments comparing the bacteria found within the gut of obese mice with those from the gut of “wild-type” mice (this sort of comparison is something the field calls metagenomics). In doing so, the researchers noticed a number of key differences in the “genetic fingerprint” of the two sets of gut bacteria, especially in the genes involved in metabolism.

Source: Figure 3, Turnbaugh et al.

But, what did that mean to the overall health of the animal? To answer that question, the researchers did a number of experiments, two of which I will talk about below. First, they did a very simple chemical analysis (see figure 3b to the left) comparing the “leftover energy” in the waste (aka poop) of the obese mice to the waste of wild-type mice (and, yes, all of this was controlled for the amount of waste/poop). Lo and behold, the obese mice (the white bar) seemed to have gut bacteria which were significantly better at pulling calories out of the food, leaving less “leftover energy”.

Source: Figure 3, Turnbaugh et al.

While an interesting result, especially when thinking about some of the causes and effects of obesity, a skeptic might look at that data and say that its inconclusive about the role of gut bacteria in obesity – after all, obese mice could have all sorts of other changes which make them more efficient at pulling energy out of food. To address that, the researchers did a very elegant experiment involving fecal transplant: that’s right, colonize one mouse with the bacteria from another mouse (by transferring poop). The figure to the right (figure 3c) shows the results of the experiment. After two weeks, despite starting out at about the same weight and eating similar amounts of the same food, wild type mice that received bacteria from other wild type mice showed an increase in body fat of about 27%, whereas the wild type mice that received bacteria from the obese mice showed an increase of about 47%! Clearly, gut bacteria in obese mice are playing a key role in calorie uptake!

In terms of areas of improvement, my main complaint about this study is just that it doesn’t go far enough. The paper never gets too deep on what exactly were the bacteria in each sample and we didn’t really get a sense of the real variation: how much do bacteria vary from mouse to mouse? Is it the completely different bacteria? Is it the same bacteria but different numbers? Is it the same bacteria but they’re each functioning differently? Do two obese mice have the same bacteria? What about a mouse that isn’t quite obese but not quite wild-type either? Furthermore, the paper doesn’t show us what happens if an obese mouse has its bacteria replaced with the bacteria from a wild-type mouse. These are all interesting questions that would really help researchers and doctors understand what is happening.

But, despite all of that, this was a very interesting finding and has major implications for doctors and researchers in thinking about how our complicated flora impact and are impacted by our health.

Paper: Turnbaugh et al., “An obesity-associated gut microbiome with increased capacity for energy harvest.” Nature (444). 21/28 Dec 2006. doi:10.1038/nature05414

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Antibody-omics

I’m pretty late for paper of the month, so here we go

“Omics” is the hot buzz-suffix in the life sciences for anything which uses the new sequencing/array technologies we now have available. You don’t study genes anymore, you study genomics. You don’t study proteins anymore – that’s so last century, you study proteomics now. And, who studies metabolism? Its all about metabolomics. There’s even a blog covering this with the semi-irreverent name “Omics! Omics!”.

This month’s paper from Science is from researchers at the NIH because it was the first time I ever encountered the term “antibodyome”. As some of you know, antibodies are the “smart missiles” of your immune system – they are built to recognize and attack only one specific target (i.e. a particular protein on a bacteria/virus). This ability is so remarkable that, rather than rely on human-generated constructs, researchers and biotech companies oftentimes choose to use antibodies to make research tools (i.e. using fluorescent antibodies to label specific things) and therapies (i.e. using antibodies to proteins associated with cancer as anti-cancer drugs).

How the immune system does this is a fascinating story in and of itself. In a process called V(D)J recombination – the basic idea is that your immune system’s B-cells mix, match, and scramble certain pieces of your genetic code to try to produce a wide range of antibodies to hit potentially every structure they could conceivably see. And, once they see something which “kind of sticks”, they undergo a process called affinity maturation to introduce all sorts of mutations in the hopes that you create an even better antibody.

Which brings us to the paper I picked – the researchers analyzed a couple of particularly effective antibodies targeted at HIV, the virus which causes AIDS. What they found was that these antibodies all bound the same part of the HIV virus, but when they took a closer look at the 3D structures/the B-cell genetic code which made them, they found that the antibodies were quite different from one another (see Figure 3C below)

Source: Figure 3C, Wu et al.

What’s more, not only were they fairly distinct from one another, they each showed *significant* affinity maturation – while a typical antibody has 5-15% of their underlying genetic code modified, these antibodies had 20-50%! To get to the bottom of this, the researchers looked at all the antibodies they could pull from the patient – their “antibodyome” (in the same way that a patient’s genome would be all of their genes) — and along with data from other patients, they were able to construct a genetic “family tree” for these antibodies (see Figure 6C below)

Source: Figure 6, Wu et al.

The analysis shows that many of the antibodies were derived from the same initial genetic VDJ “mix-and-match” but that afterwards, there were quite a number of changes made to that code to get the situation where a diverse set of structures/genetic codes could attack the same spot on the HIV virus.

While I wish the paper probed deeper into actual experimentation to take this analysis further (i.e. artificially using this method to create other antibodies with similar behavior), this paper goes a long way into establishing an early picture of what “antibodyomics” is. Rather than study the total impact of an immune response or just the immune capabilities of one particular B-cell/antibody, this sort of genetic approach lets researchers get a very detailed, albeit comprehensive look at where the body’s antibodies are coming from. Hopefully, longer term this also turns into a way for researchers to make better vaccines.

Paper:  Wu et al., “Focused Evolution of HIV-1 Neutralizing Antibodies Revealed by Structures and Deep Sequencing.” Science (333). 16 Sep 2011. doi: 10.1126/science.1207532

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The Marketing Glory of NVIDIA’s Codenames

While code names are not rare in the corporate world, more often than not, the names tend to be unimaginative. NVIDIA’s code names, however, are pure marketing glory.

Take NVIDIA’s high performance computing product roadmap (below) – these are products that use the graphics processing capabilities of NVIDIA’s high-end GPUs and turn them into smaller, cheaper, and more power-efficient supercomputing engines which scientists and researchers can use to crunch numbers. How does NVIDIA describe its future roadmap? It uses the names of famous scientists to describe its technology roadmap: Tesla (the great American electrical engineer who helped bring us AC power), Fermi (“the father of the Atomic Bomb”), Kepler (one of the first astronomers to apply physics to astronomy), and Maxwell (the physicist who helped show that electrical, magnetic, and optical phenomena were all linked).

Source: Rage3D

Who wouldn’t want to do some “high power” research (pun intended) with Maxwell? 

But, what really takes the cake for me are the codenames NVIDIA uses for its smartphone/tablet chips: its Tegra line of products. Instead of scientists, he uses, well, comic book characters. For release at the end of this year? Kal-El, or for the uninitiated, that’s the alien name for Superman. After that? Wayne, as in the alter ego for Batman. Then, Loganas in the name for the X-men Wolverine. And then Starkas in the alter ego for Iron Man.

Source: NVIDIA

Everybody wants a little Iron Man in their tablet.

Web vs Native

When Steve Jobs first launched the iPhone in 2007, Apple’s perception of where the smartphone application market would move was in the direction of web applications. The reasons for this are obvious: people are familiar with how to build web pages and applications, and it simplifies application delivery.

Yet in under a year, Apple changed course, shifting the focus of iPhone development from web applications to building native applications custom-built (by definition) for the iPhone’s operating system and hardware. While I suspect part of the reason this was done was to lock-in developers, the main reason was certainly the inadequacy of available browser/web technology. While we can debate the former, the latter is just plain obvious. In 2007, the state of web development was relatively primitive relative to today. There was no credible HTML5 support. Javascript performance was paltry. There was no real way for web applications to access local resources/hardware capabilities. Simply put, it was probably too difficult for Apple to kludge together an application development platform based solely on open web technologies which would get the sort of performance and functionality Apple wanted.

But, that was four years ago, and web technology has come a long way. Combine that with the tech commentator-sphere’s obsession with hyping up a rivalry between “native vs HTML5 app development”, and it begs the question: will the future of application development be HTML5 applications or native?

There are a lot of “moving parts” in a question like this, but I believe the question itself is a red herring. Enhancements to browser performance and the new capabilities that HTML5 will bring like offline storage, a canvas for direct graphic manipulation, and tools to access the file system, mean, at least to this tech blogger, that “HTML5 applications” are not distinct from native applications at all, they are simply native applications that you access through the internet. Its not a different technology vector – it’s just a different form of delivery.

Critics of this idea may cite that the performance and interface capabilities of browser-based applications lag far behind those of “traditional” native applications, and thus they will always be distinct. And, as of today, they are correct. However, this discounts a few things:

  • Browser performance and browser-based application design are improving at a rapid rate, in no small part because of the combination of competition between different browsers and the fact that much of the code for these browsers is open source. There will probably always be a gap between browser-based apps and native, but I believe this gap will continue to narrow to the point where, for many applications, it simply won’t be a deal-breaker anymore.
  • History shows that cross-platform portability and ease of development can trump performance gaps. Once upon a time, all developers worth their salt coded in low level machine language. But this was a nightmare – it was difficult to do simple things like showing text on a screen, and the code written only worked on specific chips and operating systems and hardware configurations. I learned C which helped to abstract a lot of that away, and, keeping with the trend of moving towards more portability and abstraction, the mobile/web developers of today develop with tools (Python, Objective C, Ruby, Java, Javascript, etc) which make C look pretty low-level and hard to work with. Each level of abstraction adds a performance penalty, but that has hardly stopped developers from embracing them, and I feel the same will be true of “HTML5”.
  • Huge platform economic advantages. There are three huge advantages today to HTML5 development over “traditional native app development”. The first is the ability to have essentially the same application run across any device which supports a browser. Granted, there are performance and user experience issues with this approach, but when you’re a startup or even a corporate project with limited resources, being able to get wide distribution for earlier products is a huge advantage. The second is that HTML5 as a platform lacks the control/economic baggage that iOS and even Android have where distribution is controlled and “taxed” (30% to Apple/Google for an app download, 30% cut of digital goods purchases). I mean, what other reason does Amazon have to move its Kindle application off of the iOS native path and into HTML5 territory? The third is that web applications do not require the latest and greatest hardware to perform amazing feats. Because these apps are fundamentally browser-based, using the internet to connect to a server-based/cloud-based application allows even “dumb devices” to do amazing things by outsourcing some of that work to another system. The combination of these three makes it easier to build new applications and services and make money off of them – which will ultimately lead to more and better applications and services for the “HTML5 ecosystem.”

Given Google’s strategic interest in the web as an open development platform, its no small wonder that they have pushed this concept the furthest. Not only are they working on a project called Native Client to let users achieve “native performance” with the browser, they’ve built an entire operating system centered entirely around the browser, Chrome OS, and were the first to build a major web application store, the Chrome Web Store to help with application discovery.

While it remains to be seen if any of these initiatives will end up successful, this is definitely a compelling view of how the technology ecosystem evolves, and, putting on my forward-thinking cap on, I would not be surprised if:

  1. The major operating systems became more ChromeOS-like over time. Mac OS’s dashboard widgets and Windows 7’s gadgets are already basically HTML5 mini-apps, and Microsoft has publicly stated that Windows 8 will support HTML5-based application development. I think this is a sign of things to come as the web platform evolves and matures.
  2. Continued focus on browser performance may lead to new devices/browsers focused on HTML5 applications. In the 1990s/2000s, there was a ton of attention focused on building Java accelerators in hardware/chips and software platforms who’s main function was to run Java. While Java did not take over the world the way its supporters had thought, I wouldn’t be surprised to see a similar explosion just over the horizon focused on HTML5/Javascript performance – maybe even HTML5 optimized chips/accelerators, additional ChromeOS-like platforms, and potentially browsers optimized to run just HTML5 games or enterprise applications?
  3. Web application discovery will become far more important. The one big weakness as it stands today for HTML5 is application discovery. Its still far easier to discover a native mobile app using the iTunes App Store or the Android Market than it is to find a good HTML5 app. But, as platform matures and the platform economics shift, new application stores/recommendation engines/syndication platforms will become increasingly critical.

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Standards Have No Standards

Many forms of technology requires standards to work. As a result, it is in the best interest of all parties in the technology ecosystem to participate in standards bodies to ensure interoperability.

The two main problem with getting standards working can be summed up, as all good things in technology can be, in the form of webcomics. 

Problem #1, from XKCDpeople/companies/organizations keep creating more standards.

Source: XKCD

The cartoon takes the more benevolent look at how standards proliferate; the more cynical view is that individuals/corporations recognize that control or influence over an industry standard can give them significant power in the technology ecosystem. I think both the benevolent and the cynical view are always at play – but the result is the continual creation of “bigger and badder” standards which are meant to replace but oftentimes fail to completely supplant existing ones. Case in point, as someone who has spent a fair amount of time looking at technologies to enable greater intelligence/network connectivity in new types of devices (think TVs, smart meters, appliances, thermostats, etc.), I’m still puzzled as to why we have so many wireless communication standards and protocols for achieving it (Bluetooth, Zigbee, ZWave, WiFi, DASH7, 6LowPAN, etc)

Problem #2: standards aren’t purely technical undertakings – they’re heavily motivated by the preferences of the bodies and companies which participate in formulating them, and like the US’s “wonderful” legislative process, involves mashing together a large number of preferences, some of which might not necessarily be easily compatible with one another. This can turn quite political and generate standards/working papers which are too difficult to support well (i.e. like DLNA). Or, as Dilbert sums it up, these meetings are full of people who are instructed to do this:

Source: Dilbert

Or this:

Source: Dilbert

Our one hope is that the industry has enough people/companires who are more vested in the future of the technology industry than taking unnecessarily cheap shots at one another… It’s a wonder we have functioning standards at all, isn’t it?

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The “Strangest Biotech Company of All” Issues Their Annual Report as a Comic Book

This seems almost made for me: I’m into comic books. I do my own “corporate style” annual and quarterly reports to track how my finances and goals are going. And, I follow the biopharma industry.

Source: United Therapeutics 2010 Annual Report

So, when I found out that a biotech company issued its latest annual report in the form of a comic book, I knew I had to talk about it!

The art style is not all that bad, and the bulk of the comic is told from the first person perspective of Martin Auster, head of business development at the company (that’s Doctor Auster to you, pal!). We get an interesting look at Auster’s life, how he was a medical student who didn’t really want to do a residency, and how and why he ultimately joins the company.

Source: United Therapeutics 2010 Annual Report
Source: United Therapeutics 2010 Annual Report
Source: United Therapeutics 2010 Annual Report

And, of course, what annual report wouldn’t be complete without some financial charts – and yes, this particular chart was intended to be read with 3D glasses (which were apparently shipped with paper copies of the report):

Source: United Therapeutics 2010 Annual Report

Interestingly, the company in question – United Therapeutics — is not a tiny company either: its worth roughly $3 billion (as of when this was written) and is also somewhat renowned for its more unusual practices (meetings have occurred in the virtual world Second Life and employees are all called “Unitherians”) as well as its brilliant and eccentric founder, Dr. Martine Rothblatt. Rothblatt is a very accomplished modern-day polymath:

  • She was an early pioneer in communication satellite law
  • She helped launch a number of communication satellite technologies and companies
  • She founded and was CEO of Geostar Corporation, an early GPS satellite company
  • She founded and was CEO of Sirius Satellite Radio
  • She led the International Bar Association’s efforts to draft a Universal Declaration on the Human Genome and Human Rights
  • She is a pre-eminent proponent for xenotransplantation
  • She is also one of the most vocal advocates of transgenderism and transgender rights, having been born as Martin Rothblatt (Howard Stern even referred to her as the “Martine Luther Queen” of the movement)
  • She is a major proponent of the interesting philosophy that one might achieve technological immortality by digitizing oneself (having created an interesting robot version of her wife, Bina).
  • She started United Therapeutics because her daughter was diagnosed with Pulmonary Arterial Hypertension, a fatal condition which, at the time of diagnosis, there was no effective treatment for

You got to have a lot of love and respect for a company that not only seems to have delivered an impressive financial outcome ($600 million in sales a year and $3 billion in market cap is not bad!) and can still maintain what looks like a very fun and unique culture (in no small part, I’m sure, because of their CEO).

The Goal is Not Profitability

I’ve blogged before about how the economics of the venture industry affect how venture capitalists evaluate potential investments, the main conclusion of which is that VCs are really only interested in companies that could potentially IPO or sell for at least several hundred million dollars.

One variation on that line of logic which I think startups/entrepreneurs oftentimes fail to grasp is that profitability is not the number one goal.

Now, don’t get me wrong. The reason for any business to exist is to ultimately make profit. And, all things being equal, investors certainly prefer more profitable companies to less/unprofitable ones. But, the truth of the matter is that things are rarely all equal and, at the end of the day, your venture capital investors aren’t necessarily looking for profit, they are looking for a large outcome.

Before I get accused of being supportive of bubble companies (I’m not), let me explain what this seemingly crazy concept means in practice. First of all, short-term profitability can conflict with rapid growth. This will sound counter-intuitive, but its the very premise for venture capital investment. Think about it: Facebook could’ve tried much harder to make a profit in its early years by cutting salaries and not investing in R&D, but that would’ve killed Facebook’s ability to grow quickly. Instead, they raised venture capital and ignored short-term profitability to build out the product and aggressively market. This might seem simplistic, but I oftentimes receive pitches/plans from entrepreneurs who boast that they can achieve profitability quickly or that they don’t need to raise another round of investment because they will be making a profit soon, never giving any thought to what might happen with their growth rate if they ignored profitability for another quarter or year.

Secondly, the promise of growth and future profitability can drive large outcomesPandora, Groupon, Enphase, TeslaA123, and Solazyme are among some of the hottest venture-backed IPOs in recent memory and do you know what they all also happen to share? They are very unprofitable and, to the best of my knowledge, have not yet had a single profitable year. However, the investment community has strong faith in the ability of these businesses to continue to grow rapidly and, eventually, deliver profitability. Whether or not that faith is well-placed is another question (and I have my doubts on some of the companies on that list), but as these examples illustrate, you don’t necessarily need to be profitable to be able to get a large venture-sized outcome.

Of course, it’d be a mistake to take this logic and assume that you never need to achieve or think about profitability. After all, a company that is bleeding cash unnecessarily is not a good company by any definition, regardless of whether or not the person evaluating it is in venture capital. Furthermore, while the public market may forgive Pandora and Groupon’s money-losing, there’s also no guarantee that they will be so forgiving of another company’s or even of Pandora/Groupons a few months from now.

But what I am saying is that entrepreneurs need to be more thoughtful when approaching a venture investor with a plan to achieve profitability/stop raising money more quickly, because the goal of that investor is not necessarily short-term profits.

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Our Job is Not to Make Money

Let’s say you pitch a VC and you’ve got a coherent business plan and some thoughtful perspectives on how your business scales. Does that mean you get the venture capital investment that you so desire?

Not necessarily. There could be many reasons for a rejection, but one that crops up a great deal is not anything intrinsically wrong with a particular idea or team, but something which is an intrinsic issue with the venture capital model.

One of our partners put it best when he pointed out, “Our job is not to make money, it’s to make a lot of money.”

What that means is that venture capitalists are not just looking for a business that can make money. They are really looking for businesses which have the potential to sell for or go public (sell stock on NYSE/NASDAQ/etc) and yield hundreds of millions, if not billions of dollars.

Why? It has to do with the way that venture capital funds work.

  • Venture capitalists raise large $100M+ funds. This is a lot of money to work with, but its also a burden in that the venture capital firm also has to deliver a large return on that large initial amount. If you start with a $100M fund, its not unheard of for investors in that fund to expect $300-400M back – and you just can’t get to those kinds of returns unless you bet on companies that sell for/list on a public market for a lot of money.
  • Although most investments fail, big outcomes can be *really* big. For every Facebook, there are dozens of wannabe copycats that fall flat – so there is a very high risk that a venture investment will not pan out as one hopes. But, the flip side to this is that Facebook will likely be an outcome dozens upon dozens of times larger than its copycats. The combination of the very high risk but very high reward drive venture capitalists to chase only those which have a shot at becoming a *really* big outcome – doing anything else basically guarantees that the firm will not be able to deliver a large enough return to its investors.
  • Partners are busy people. A typical venture capital fund is a partnership, consisting of a number of general partners who operate the fund. A typical general partner will, in addition to look for new deals, be responsible for/advise several companies at once. This is a fair amount of work for each company as it involves helping companies recruit, develop their strategy, connect with key customers/partners/influencers, deal with operational/legal issues, and raise money. As a result, while the amount of work can vary quite a bit, this basically limits the number of companies that a partner can commit to (and, hence, invest in). This limit encourages partners to favor companies which could end up with a larger outcome than a smaller, because below a certain size, the firm’s return profile and the limits on a partner’s time just don’t justify having a partner get too involved.

The result? Venture capitalists have to turn down many pitches, not because they don’t like the idea or the team and not even necessarily because they don’t think the company will make money in a reasonably short time, but because they didn’t think the idea had a good shot at being something as big and game-changing as Google, Genentech, and VMWare were. And, in fact, the not often heard truth is that a lot of the endings which entrepreneurs think of as great and which are frequently featured on tech blogs like VentureBeat and TechCrunch (i.e. selling your company to Google for $10M) are actually quite small (and possibly even a failure) when it comes to how a large venture capital firm views it.

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