(Of course there are other challenges faced by startups that interact with customers in the physical world, like regulation, protectionism and so forth.)
I sort of agree. Of course if the TAM isn't very large that's a red flag. But usually TAM makes a lot of assumptions about addressability and ends up with metrics like "I just need to capture 1% of the Chinese market."
TAM is also very much dependent of price points. I'm part of the potential market for lots of things if they're cheap enough--which often means a price point below what it costs to deliver the product or service.
In magnitude, total venture capital invested last year in the US was $84 Bn. Just the top two PE firms combined exceed this number. It's not a 1:1 match but gives you order of magnitude. And that's just PE (since VC is a tiny subset of PE): in the broader financial world, even considering the US alone, these numbers are almost invisible. I have friends who started an investment firm about 10 years ago with an AUM almost as large as the sum of the VC funds (not merely amount invested) -- and I don't even know anybody at the huge players.
In definition? Above is simply investment, what about revenues or headcount? In revenues, merely the top 103 of the F500 add up to almost a trillion USD in revenues last year. By contrast Uber's revenue was 37B and AirBNB was only 2.6 (and neither really count as startups). 37B will get on you the F100, but not high. 2.6 does not.
In terms of headcount it's not even close.
It does look exciting from our perspective, since the giants of industry were each startups at one point in time. But they all took years to really move the needle, by which time they didn't look anything like startups.
Last week Novartis placed a $8.7B bid on AveXis. ($218 per share, an 88% premium). Manufacturer of a miracle MS therapy for young children. A move that could increase the price to over $2.5M per treatment.
When curing a disease with gene therapy is bad business
Amazingly, as outlined in Goldman's note, that lifetime cash flow a pharma developer relies on could be cut short. By "cured" patients no longer requiring long term pharmaceutical therapy!
It makes the space very interesting to watch right now. Particularly as much of the regulation centers upon health or geopolitical concerns. And not on markets or affordability.
My guess is we will see the rise of behemoth-sized global vertically integrated players. Controlling every step of the process. From Research to therapy development. Through patient acquisition. And including the clinical administration of one-shot "cures" in a futuristic branded setting.
Very much resembling something akin to Weyland Industries or Tyrell Corporation. From hollywood sci-fi dreams.
No one knows whether the gene therapies will actually be one shot cures. we know they'll be one shot, because the immune system will reject the viral vectors after the first dose. We just don't know if they'll be curative. If not, then the investments in gene therapy platforms will look quite different