Rahul Dhanda is the co-founder and CEO of Sherlock Biosciences which is an engineering biology company offering unparalleled breadth and versatility for diagnostic solutions. The company has raised over $50 million from investors such as Baidu Ventures, Northpond Ventures, and Open Philanthropy Project.
In this episode you will learn:
- Developing the entrepreneurial mindset and ownership
- How Sherlock quickly pivoted their whole organization to create COVID-19 tests and get them approved
- Sherlock’s hybrid strategy for taking on an industry with big incumbent competitors
- Rahul’s top advice for other entrepreneurs who are starting new ventures
For a winning deck, take a look at the pitch deck template created by Silicon Valley legend, Peter Thiel (see it here) that I recently covered. Thiel was the first angel investor in Facebook with a $500K check that turned into more than $1 billion in cash.
The Ultimate Guide To Pitch Decks
Moreover, I also provided a commentary on a pitch deck from an Uber competitor that has raised over $400 million (see it here).
Remember to unlock for free the pitch deck template that is being used by founders around the world to raise millions below.
About Rahul Dhanda:
Connect with Rahul Dhanda:
* * *
FULL TRANSCRIPTION OF THE INTERVIEW:
Alejandro: Alrighty. Hello everyone, and welcome to the DealMakers show. Today we’re going to be speaking with a founder that I think is going to teach us a lot about building and scaling. Then, also, we’re going to be learning about biotech and also about the exciting things that they’re doing with COVID-19. So, without further ado, let me welcome our guest today. Rahul Dhanda, welcome to the show.
Rahul Dhanda: Thank you so much, Alejandro. It’s a pleasure to be here.
Alejandro: So, born and raised in New Jersey. How was life growing up there?
Rahul Dhanda: You know, it was a fairly good experience. I grew up with my parents, who had immigrated from India, and an older and younger brother. We did fairly typical things, but there was always an entrepreneurial spirit in the family. My father and mother owned a gas station and ran that business at the same time that my dad was an engineer at Bell Labs. So, I learned how to work fairly young when I was six years old, and my dad would come back from Bell and pick me up, and take me to the gas station and relieve my mom so that she could go back home and watch my brothers, and he and I would pump gas after he got back from being an engineer over at Bell Labs. Then, I’d spend the weekends there learning how to fix cars and things like that. So, we grew up playing sports and doing the competitive stuff that kids do, and at the same time, got a little bit of the bug to go out on our own and start businesses, which my older brother has done a number of times, as well. So, it’s in the family.
Alejandro: That’s amazing. Obviously, here, you were exposed, your parents were immigrants and came from India. Now, here they are building their own businesses, so I’m sure that you got perhaps the entrepreneurial bug, as you were alluding that your brother also has it. What did you learn in this instance from your parents about that entrepreneurial mindset or way of thinking?
Rahul Dhanda: I think the piece that really came through was ownership of the venture that everything begins and ends with you, and no matter who you hire and no matter who is responsible for whatever task, if the task and the responsibility aren’t being satisfied, all of it falls on your shoulders. It behooves you not only to be aware of all the things that are going on but also to be proactive and understanding things so that those are avoided. The key isn’t to respond; the key is to prevent. So there’s a lot of planning and thoughtfulness that goes into it. I think that’s probably the piece that I took all the way through from the beginning until now.
Alejandro: I’m wondering. What do you think took you so long to go at it as an entrepreneur?
Rahul Dhanda: I think that for me, I wanted to make sure that I had the foundation to appropriately understand all the aspects of the business. So, for me, my career was always focused on learning the pieces that would be necessary to be successful at it. That revelation came a little bit later to me when I was out of college and really focused on doing research at the bench, and I had this intention that I was going to go to medical school. But as I was in a very entrepreneurial lab at Harvard Med, people were starting businesses left and right, including my investigator. As I saw this going on, I realized, “This is something I’d like to do, but I’m not quite sure how.” So, a lot of people jump into it by just jumping into it and saying, “I’m going to do this. I’m going to start that way.” I think that’s the right way for some people. For me, it was, “I want to be able to wrap my hands around all the aspects of it.” I really took that lesson to heart about planning appropriately and then understanding all of the components of the business, and so I went on a trajectory to understand the signs, and then understand the markets, and then understand the infrastructure and the operations until I got to a point where I had seen it put into place, but I had the confidence that I could do it as well or better than others I had seen do it. That was the time for me to step along. Then, it also required the opportunity to come my way, which isn’t always there. But I was going to be prepared for it when it came, and when it did come, I was very happy to make the leap.
Alejandro: It’s amazing. When you also take a look at your trajectory, after Harvard and being on the research lab there, you went on it by working in a biotech company, and as you were saying, really learning the ins and outs. After this, there’s an event that happened in the family and got you to move to New Jersey. What happened there?
Rahul Dhanda: Yes. We had lost my father, and so my brothers and I were going through fairly intense moments in our lives, but my mother was going through a tougher time. So, we all conferred and decided that I would leave Boston, where I was living at the time, and go back to New Jersey for a couple of months and help my mother get through the process. But the time that I spent there – I’m not particularly good at being idle. So, I took humanities training that I had gained out of college and scientific training that I gained through vocation, and I wrote a book called, Guiding Icarus: Merging Bioethics with Corporate Interests, which focused on how ethics and policy can come together in a way to make responsible organizations more successful. It was a way for me to take a lot of ideas that were brewing around entrepreneurship as much as they were around the responsible delivery of biotechnology and put that into something that I thought would be meaningful. What was nice about it was, it was the first book geared toward business to capture bioethics and ethical issues as they relate to biotechnology.
Alejandro: This is amazing because I find that building and scaling companies, it’s really all about, as well, blending storytelling with process and mastering both. It seems that you were doing that by working at these other companies, and now you were getting this exposure to storytelling by writing a book. So, really, really cool. Then, you went back at it. You worked at a small biotech developing diagnostics, and then you decided to do your MBA. Why did you think it was the right time to do the MBA?
Rahul Dhanda: At that point, I had felt like I had been appropriately exposed to enough systems and responsibilities that I had a little bit a lay of the land. But what I didn’t feel I fully had was the depth and structure to move as fast as I wanted to within my career and within biotech. I felt that with the right program, I could get those legs underneath me and accelerate the path and make better decisions. The more information you have, the better decision-making you’ll also have. Thinking about the various avenues to go through and the mentors I had until then, most of them had gone and gotten their MBA or some higher degree. And to be very focused on the business side, I thought this was the appropriate time because I had foundation but not all of the tools. And you never have all of the tools, but I wanted to get more of them faster. So, I went to MIT at the Sloan Management program and had a remarkable experience there that I think I credit a lot of my progress to what I wanted there. It was a great experience with a great cohort of students, many of whom have been incredibly successful entrepreneurs. It was a very fertile ground for ideas and for building an infrastructure for my future.
Alejandro: Yeah. It’s interesting here because, just as we were discussing, when you were working at the Harvard lab, you were seeing all these people starting their own businesses, obviously in the MBA, even more companies are started, and here you are still resisting. It took you 12 more years till you were going at it as an entrepreneur. I guess those 12 years after the MBA, you really got to understand how you can scale the revenues of a company, and then also, what it looks like from being the tenth employee to taking the company public. So, tell us what you learned with those 12 years.
Rahul Dhanda: There are a couple of things, going from large organizations to small organizations. Right out of my MBA, I went to a Fortune 100 company and was responsible for marketing and product management for products that were, by the time I left, over 100 million dollars revenue – pretty good growth. There’s a lot to be gained from being in a larger company. Many think that “Oh, you’re restricted, and it’s bureaucratic, and there’s too much process.” What I learned there was that those things are true, but that’s only true if you look at it that way. If you look at it as a means of gaining experience of seeing how things work when they go right, there’s a lot to be gained from it. These massive organizations that people think are cumbersome were at one time one or two people, and eventually got to be 30,000 people and billions of dollars. So, to get there, they had to do things right. At the larger company I was in, I learned a lot about the value of process and a lot about the value of what do processes contribute to building a company? The thing that I took away that I hold onto to, to this day, is that in the absence of perfect data and information, which is always absent, process helps you get to a better answer faster than if you just try to wing it with what you have. It also empowers people to make decisions that they should be making in their role if they haven’t had the experiences that others have, but you still need them to be empowered to drive forward. The other thing I learn, though, is that entrepreneurism works anywhere. So, even in a very large organization, I had responsibility for products that had existed tens of years. Those decade-long products had plenty of growth that they could be managed right, but those were fairly mature opportunities. At the same time, very large organizations have the need to be nimble in sections and areas, and if appropriately directed, will pursue entrepreneurial activity. One of the things that I also learned there was that if you have all of the resources of a Fortune 100 company, and the mandate to go do something interesting – and I was given a project with a completely new product for a completely new market. Then, you have the opportunity to learn a lot about your ability to do that with a little bit more safety. It wasn’t me alone. I had a mentor there. I had other people involved in the team. We all got together and basically built our own little business with the safety of the large company around us within that large company. You learn a lot about making tradeoffs; you learn a lot about how to fit process into a nimble system if you have to. What it taught me about myself is that I really loved that project more than I loved anything else that I was working on and that if I’m going to keep on the path that is of interest to me and that keeps me happy in the workplace, then I needed to be more of an entrepreneur than being in that large company despite all the warnings. At about that time, a revelation, I had heard about an opportunity at another company that was in the diagnostic space trying to get off the ground with a very small group, and it just got seed-funded and was recruiting a CEO that they had said they were about to hire, and he gave me a call through contacts we had, and we sat down and had breakfast. What was ahead of them was taking a brand-new technology all the way through to commercial and product that began in the lab. It had just been transferred into this company. So, everything that had to happen was taking an idea, and making it real. So, that challenge was so incredibly exciting, and the opportunity to have a piece of each part of the development of that company was the most fertile learning ground that I could probably get myself into without doing it all myself. And, I jumped on board, and this company called T2 Biosystems, a public company today, I came on board as a temp employee. Over the 10½ years, roughly, that I was there, we took that idea, turned it into a product, launched that product, took it public, and then I left right before gearing up for the next product launch. In that process, there are a couple of things that I’ve learned from being there. One is the value of culture in that the culture is going to drive a lot of the behavior. So, if you’re in a small company that’s trying to build something great, you have to be incredibly sensitive to how you do it because the people who are motivated to do it are going to be driven by how they feel being part of that mission. The other thing that really came across while I was there was how little information you’re going to have, and how many decisions you’re going to have to make, and how quickly you need to make those decisions. One thing that I do now is when I have meetings today, I focus them on decisions; I don’t focus them on updates, and I don’t focus them on status. I focus them on what are the things that we have to do to move the ball forward now and watching how people can push back and forth with arguments, concepts, ideas, programs, projects. Those are the things that hold back progress within the organization. One of the key and probably one of the most critical aspects I got out of that was if you can make a decision, make the decision, and make it as soon as possible because you’re unlikely to come to a different conclusion if you wait. And if you wait, you may be too late to be able to execute on that, or if you do have to reverse it, which is going to happen, too, it’s going to be a little bit later in that process as well. Those were the high-level aspects of it. Then there were very practical decisions around how you go through these changes and this evolution within a company starting with, say, science, moving into technology, moving into product, and how incredibly painful the transitions are between those moments for an organization where the skill sets that got the science to be ready to transition into more of a robust, routine, technological platform. Those people aren’t necessarily the right people for the technology part of it, who are not necessarily the right people for the product commercialization part of it. So, layering your organization in a way that allows you to keep and preserve the talent that you have to focus on the projects that are value-add, so that you separate certain tasks and separate certain programs so that the people who are good at science stay on that in the right way, and the people can transition into the technology side of it, more of the development side of it always have projects on their plate. Then the same with the commercial side. Otherwise, you’re turning people over inefficiently. What you want to do is think about every hire with a long-term view so that you see where they play out when the company will be successful because the only option you have is success, so you should focus on that and think about that and ensure that what you’re building is something that is sustainable when you are successful but also can be responsive and nimble when you have challenges that come in before. Those were the things. Then there are the more tactical aspects of what does it mean to build the team when you’re all the sudden going to commercialize a product from scratch. And how hard is it to take a new technology into a fairly mature market with consolidated competitors as a small new entry? There are a lot of challenges there, a lot of research there, a lot that you have to do to focus on how you differentiate. Then, the dream for everybody is how do you get to the exit, when you get to the IPO. How do you plan that appropriately? How do you get ahead of that? We were at a moment where a lot of groups were going IPO, and there was a wave of them, and it was absolutely necessary for us to do it at that time. But, at the same time, it was done very quickly, and so all of us learned how to manage that in setting expectations and how your audience shifts when you’re a public company from not just being customers, but also from analyst, institutional investors. So, your story gets bigger as you evolve your company, and it has to reach more people. Every day, there’s a larger audience group – how it is you get your message across. You have to stay on top of that, as well. Those were lessons that I learned in the process.
Alejandro: Those are great and very profound, so thank you for sharing them, Rahul. What I want to ask you now is, in 2018, you receive a phone call that changes everything. What happened there?
Rahul Dhanda: Yeah, that was absolutely a great moment in my life. When I was at T2 Biosystems, I was very, very much enmeshed in the commercial and clinical side of our products. An interesting thing happened along the way where I had a number of people sending me this paper about this technique called Sherlock. I just didn’t read it because it was in Science, which is an incredible journal, but not the one we generally use when we’re focused on commercial aspects because it’s very scientifically oriented as opposed to clinical. Finally, enough people sent me this paper, and I read it. When I read the paper, I thought, “This is incredible. These new engineering biology tools, CRISPR and Synthetic Biology are going to change the way that healthcare is delivered in diagnostics, which is my area of expertise, is going to be the catalyst for that. Then, I put it away, forgot about it, and thought just before that, some lucky person is going to run this company. About two months later, I got a phone call from David Walt, founder of Illumina, Quanterix, and a number of companies. I had met him a few months earlier in a networking capacity for he and Feng Zhang, who’s lab had published that paper and it’s Pioneer CRISPR. David called and said, “Feng and I were talking with Jim Collins. We’d like to talk to you about an opportunity.” I knew, in the moment, exactly what they were talking about. This advanced technique, this Sherlock technique for molecular diagnostics that was developed by Jim Collins and Feng Zhang together, has all that potential. David said to me, “I really want you to sit down with Jim Collins.” When I sat down with Jim, he explained to me this vision that they had when they had developed the Sherlock technique in this other technology, [22:36], synthetic biology technique for doing home-based DNA and RNA testing. It was the right vision, the right technology, and the right moment, and I couldn’t start fast enough. As soon as we went through a little bit of planning and discussion, and they made the offer to me and gave me the opportunity to be a founder of the company, I jumped and have never looked back and have never been happier.
Alejandro: That’s amazing. Obviously, here, nine co-founders. How do you manage so many founders?
Rahul Dhanda: The founders’ span technology, and clinical, and business. In this capacity, everyone has something to add at different aspects and development moments for the company, so the key for us is to pull in these incredible experts across all these industries at the right time. What’s nice is that if we go back to that model of how one goes from science all the way through to commercial in the phases of the company, there are different people who have different values at different times. One of the ways that also works for me is that two of the founders, Jim Collins and David Walt, on the board of directors. They’re highly engaged, so they know a lot about what’s going on, and their advice comes in frequently, thankfully. I actually consult them on a very regular basis. The key, to me, for founders is, they have areas of great expertise. As you’re thinking about engaging that expertise and well before you engage them is the time to engage the founders in those areas. So, we have basically staggered a lot of the activity around the stage of development of the company.
Alejandro: For the folks that are listening, what ended up being the business model of Sherlock?
Rahul Dhanda: It’s a great question. Sherlock is a platform company with multiple platforms for molecular diagnostics. The other lessons I’ve learned very specifically to the diagnostic space is that there are a couple of areas of intense risk and that those ought to be managed in an early-stage company. In particular, developing instrumentation takes a very long time and a lot of capital. The other is that building sales channels to challenge existing brands is also complicated in areas where there’s a lot of enmeshed players. So, the things that we’re doing differently are: 1) We’re working with multiple platforms. They were not single-threaded, and how it is we address the problems of molecular diagnostics, so we can deploy a synthetic biology platform at home if we need to or we can deploy a CRISPR technology platform in the pharmacy if we need to. That gives us a lot of versatility that doesn’t lock us into any specific markets. The way that we’ve done this is that we are using one of those platforms to be heavily reliant on partnerships so that it can get to market faster, and that’s what we do with our Sherlock CRISPR platform. The other is a brand-new way of doing diagnostics, so we hold onto that more closely, and that will be more of a B2B direct relationship with retail and other retail facing and similar channels for those. There is a hybrid of direct development in out-licensing that is dependent on application and platform.
Alejandro: For the company, how much capital have you guys raised?
Rahul Dhanda: We’ve raised a little over 50 million dollars; 32 of it was in equity led by Northpond Ventures and Baidu. Twenty of it was nondilutive through a couple of Philanthropic, including Open Philanthropy, Gates Foundation, and Government, including Defense Threat Reduction Agency.
Alejandro: It happens in companies where there’s that moment where you need to adjust to the market, and I know that in this case for you guys, there was something super interesting in the journey, and that was pivoting to developing a COVID-19 test. Tell us about this.
Rahul Dhanda: Yeah. As a company, we’re planning to launch products some time at the end of 2022 to the beginning of 2023. Just because of all of the infrastructure, you have to build a regulatory structure, the commercial channels, the manufacturing, the partnerships – all those things that we were relying on to get these products out. Then, around the November to December timeframe, we started to hear about the coronavirus that was being spread, potentially a pandemic through Wuhan, China. We had teammates who have family there. We have close connections through other avenues in China, and so we early on had it on our radar screen, but with our model and our expectation thought we, as an organization, weren’t necessarily going to be ready to go and launch any kind of test in the short-term. As the months progressed, we did keep our finger on that pulse. Eventually, in February realized that this is going to be a real problem and a pandemic, and we need to make a decision whether we are really going to address it, or we’re going to stay on the sidelines. The company’s mission is very clear: to improve global health by delivering tests where they are needed. So, what I had decided in mid-February was that we need to develop a coronavirus test. I called my board of directors, and obviously, I couldn’t get them all at once, but it was all in a 24-hour span. I spoke to each of them, and I said, I think that we need to at least allocate resources to dedicate them to develop coronavirus tests. Every one of them was on board. It was best summarized by David Walt, who said, “This is becoming a real problem. We have to address it. It’s our mission. We’ll figure out whether it’s economically helpful for the company, but for now, it’s our responsibility. That was exactly how I felt; that was exactly the sale that I was making to the board of directors, and I had zero resistance. So the next thing I had to do was go to the company and tell everybody in the company that if you’re working on the platform that is most advanced, our Sherlock CRISPR platform, I need you to focus very specifically on the coronavirus, here and now, and that’s it. I spoke to our Chief Technology Officer, Will Blake, and I said, “I want to repurpose the team this way.” He was fully in line with that. I walked out into the middle of the bullpen, where almost all the staff sits and said, “I need everyone’s attention.” Everyone turns their chairs and faces me, and I said, “I need everybody working on Sherlock to now build a plan to get a coronavirus test in place, and we’re going to figure out how we’re going to get this out. I didn’t know what to expect. I really didn’t, but the response was a unanimous nod. Then everyone turned around, and you could just see choreographed, the chairs just turned back to their screens, and they all started working on a plan and planning to develop this assay. But in the back of my mind, I was plagued by this other problem, which is, the technology is a piece of it, but to actually scale and commercialize the technology is completely different because you have to build a very different organization than the one we had. The R&D team came up with their plan, but the business, which didn’t consist of really anybody on the business side, but one or two people and I had to come up with its plan, both to develop an operation that could create an infrastructure to get regulatory approval. We need to identify business partners that can represent the scale that we needed to develop a product and release a product. And we had to do this all fast enough to make a difference. At the same time, this was all happening two years faster than I was planning to scale the organization to do it. So, I had now just gotten commitment from my R&D team to make this pivot, but I owed them the solution to close the gap on the business side. We had a lot of variables that we had no idea how to answer, but every confidence said if we planned right, we could. What we did is, we solicited as many partnerships that we thought could drive to this solution and actually close the partnership that we thought would be the right solution to this, but it turned out that group had already gone forward with their own solution to COVID-19, and that given resource constraints for all of us, you only had room to do one. So as we were searching for the right partner, we had fairly advanced discussions with many of them; another shift happened, which was in the middle of March. The FDA had released its guidance on what the regulatory infrastructure would be to allow for a product to be authorized. My regulatory consultant, who was [32:35] proactive, sent me an email saying, “I think we can do this ourselves now if you can find someone who can manufacture and has the right quality system.” The next thing I did is, I went back to that same bullpen, called everybody in, and said, “I need another shift. I think we can build this and do it ourselves. Trust me that the team on the business side is going to find the manufacturer, but now what I need is not just people working on the CRISPR platform to work on this, I need everybody in the company to work on this. However, I also need people who are not R&D to go home because we’re in the middle of a pandemic, and we have to shelter in place if you’re a non-essential.” So, we have the company – 20 people turned into 10, and the 10 people who are in the company had to basically get through all the clinical analysis necessary to get FDA approval, and then some of those people at home had to work to go and find the right partner to scale the manufacturing. What happened, which was just a remarkable thing is, the most amazing team I’ve ever worked with had everything fall into place, pushed everything forward, and by early May had gotten EUA approval for our product, which we launched about 1½ weeks ago, and is now available for sale. What we, in a very short period of time did was close the gap between where we were then, and where we anticipated to be in two years by creating a network of the supporting structures we needed, both with consultants and partners that were built on the strong work they were all doing. This is a team that faced adversity; this is a team that had challenges pop up, data that was uninterpretable, data that wasn’t going the way it should have, and with every challenge they faced, they never faltered; they never gave in to adversity, and the only question they ever asked was, “How do I get this done?” Instead of telling me, “This is why we can’t do it.” And I think that what this team did was historic because at the end of the day when we were all done with this, not only did we develop a COVID-19 test, but we also took to the FDA the first authorized use of a CRISPR product in history. So it was a historic moment in the company, but also a historic moment for biotech overall.
Alejandro: That’s amazing! One of the questions that I want to ask you here is one that I typically ask the guests that come on the show. If you had the opportunity to go back in time, Rahul, and give that younger Rahul one piece of business advice before launching a business, what would that be, and why knowing what you know now?
Rahul Dhanda: The one piece of advice I would give myself is, build a team and a culture that you know you can empower and trust to do the right thing, whether it comes to how they treat their team or how it is they address challenges that they’re facing. I think that what makes great companies are the people, and great people will make any technology succeed. If ever that lesson were proved, it was this example.
Alejandro: Wow! That’s very profound. For the folks that are listening, Rahul, what is the best way for them to reach out and say hi?
Alejandro: Amazing, Rahul. Thank you so much for being on the DealMakers show today.
Rahul Dhanda: Thank you so much, Alejandro. It’s a real pleasure.
* * *
If you like the show, make sure that you hit that subscribe button. If you can leave a review as well, that would be fantastic. And if you got any value either from this episode or from the show itself, share it with a friend. Perhaps they will also appreciate it. Also, remember, if you need any help, whether it is with your fundraising efforts or with selling your business, you can reach me at [email protected].