Montage Ventures’ Daphne Che: The Rising Tide for Deep Tech Innovation in Consumer Health, Wellness, and Longevity

ABSTRACT

KEY POINTS FROM DAPHNE CHE’S POV: 

Why is DeepTech for consumers such an important category going forward?  

• A confluence of technology advancements and decreasing costs are democratizing the ability to bring deep-tech innovation to consumer markets. “Advancements in science and technology, including biotechnology, bioengineering, food science and AI, have scaled beyond the walls of academics and incumbent biotech corporations,” says Che. “Early-stage startups are especially nimble in discovering and building the next generation of consumer brands and services that are powered by innovative science.”
• “Consumers are increasingly willing to pay a premium for products that are backed by strong underlying science and technology and contribute to a better and healthier lifestyle,” says Che. “The consumers are more educated than ever and truly care about the underlying ingredients and technologies powering the products and services they are using.”
• The crowded competitive landscape in consumer packaged goods and services are pushing wellness brands to explore novel active ingredients and technologies to strengthen their competitive moats. “Enterprises are under competitive pressure to strengthen their R&D pipeline and defensive moats. We are seeing increasing enterprise interest and activity in this space, through both collaborative projects with startups as well as the formation of corporate venture arms to invest in emerging tech platforms.” Examples include L’Oreal’s BOLD Ventures, Unilever Ventures, Johnson & Johnson Innovation, Merck’s M Ventures, and Nestlé Ventures. 

What are some of the use cases and business models that might be attached to this category? 

• The deep-tech for consumer wellness space encompasses startups leveraging advancements in biotech and AI/ML for innovation across numerous categories:
  • Beauty: “Many startups are leveraging biotech and AI advancements to produce or develop better beauty products that offer real advancements in health efficacy, versus many products in the beauty space that primarily differentiate through branding and marketing.”  An example in this space is Revela (acquired by Oddity, NASDAQ: ODD), a Montage Ventures portfolio company that leverages advanced AI and bioengineering techniques, originally developed for pharmaceutical applications, to discover and develop new molecules aimed at improving health and wellness in the beauty industry. The company also collaborates with leading cosmetic brands to create personalized beauty products, enhancing their effectiveness with precision and targeted applications. Their approach combines rigorous scientific research with consumer insights to bridge the gap between high-tech innovation and market-ready products.
  • Longevity: “Longevity, which started as a biohacking concept for the ultra wealthy, has become more mainstream in recent years as a confluence of advancement in preventative testing and diagnostics, nutritional sciences and consumer education.” One example in this space in Montage’s portfolio is ResetOne (stealth), a longevity clinic using state-of-the-art diagnosis and blood testing to provide a comprehensive view of an individual's health, and tailored recommendations for supplementation based on these insights. “This model is essentially a cross between primary care and wellness. Users are people who are generally healthy, but want to optimize their health for the long term.” Other companies include Viome, a biotechnology company that leverages artificial intelligence and machine learning to analyze users' microbiome health; Tally Health, a consumer biotechnology company focused on improving healthspan through personalized diagnostics, epigenetic testing and supplementation; NewLimit, focused on developing medicines that restore youthful functionality by reprogramming the epigenome; Functional Health, a membership service offering 100+ comprehensive lab tests annually; and Thorne, a wellness company that provides at-home health tests, supplements, and personalized health insights.
  • Pharmaceutical discovery: “Much of the biotech ecosystem for drug development falls outside of our investment focus given the longer timelines and developmental costs that come with the umbrella of FDA oversight. The process for bringing new drugs to market can be as long as 10-15 years and cost north of $2B. That being said, we are following  startups in the ecosystem that are leveraging AI and to develop new processes that can be applied to drug discovery to help bring new drugs to the end consumer or patient faster,” says Che. “Startups that are applying AI to help shorten that timeline, and in turn developing data moats, certainly fall under this thesis as well.” An example in this space is Matice Biosciences, a Montage Ventures portfolio company that is studying the genomes of species with regenerative capabilities such as the Axolotl. “By studying the genomes of the species with amazing abilities for regeneration and healing, Matice is developing novel peptides for human applications, such as healing of scars and fibrosis.” 
• While the ability to have a direct ‘consumer touch’ is a core aspect of this thesis, many startups are leveraging B2B and B2B2C channels to bolster their pipeline and reach. “Direct to consumer has been a popular business model, especially if the product or technology doesn't need to go through intensive FDA approval processes,” says Che.  However, the growing interest in wellness brands to expand their collaboration has also resulted in many successful examples of B2B partnerships between startups in incumbent corporations to collaborate on R&D, as well as B2B2C partnerships that leverage healthcare providers and enterprises as distribution channels. Many deep tech for consumer startups have employed a combination of these modes. For example, Matice BioSciences deploys a dual-pronged GMT approach. “In addition to their direct-to-consumer products, the company maintains a pipeline for biotech targets as well.”

What are some of the potential roadblocks?

• Bringing new deep tech technologies to the consumer market requires a delicate balance of product, consumer education, and brand marketing alignment. “While developing and commercializing products based on deep scientific research require significant time and investment, companies also need to strike the right balance between scientific rigor and consumer usability in product designs and branding,” says Che. “Consumer education and brand marketing can be especially challenging as it’s not always easy to communicate novel, deep scientific concepts to mainstream consumers.” Without finding this balance, startups run the risk of either confusing or boring the consumer. Branding must align with what the consumer cares about. Plus, as the wellness space garners growing interest, these trends can be ever-shifting. “This understanding is an incredibly important talent for the founding or executive team to have if direct-to-consumer is the primarily go-to-market or distribution strategy.” 

IN THE INVESTOR’S OWN WORDS

Enterprises and consumers are now more prepared to embrace deep tech in consumer technologies. The interest in this field is higher than ever. The emergence of tele-health and digital health tools has further amplified this trend by increasing consumer education and acceptance of novel approaches to improving health and wellness.

Moreover, this interest in quality wellness progress has proven resilient to the pressures of the current macroeconomic environment. Consumers now have higher expectations for the value of every dollar they spend. Wellness brands and companies have to work much harder to stand out. One effective way to do so is by providing real scientific proof of the rigor of the formulation or quality of the products they offer. 

This trend can be viewed as a tailwind in the industry, as consumers become smarter, more educated, and more willing to spend on high-quality products backed by scientific evidence. This increasing consumer interest in science-powered companies and concepts is creating opportunities for innovation and growth.

MORE Q&A

Q: What do other market participants or observers misunderstand about these categories?

A: That this is no longer a niche area serving the 0.01%. The longevity space for example, which started as a biohacking concept for the ultra wealthy, has become more mainstream in recent years as a confluence of advancement in preventative testing and diagnostics, nutritional sciences and consumer education.”

Notably, prominent longevity influencers like Bryan Johnson, Peter Attia, Andrew Huberman, and David Sinclair are experiencing and creating content around longevity-focused protocols and functional fitness, contributing to greater consumer awareness and education. 

This underscores the importance of consumer education and awareness in driving the adoption of deep tech products and concepts. As consumer demand for science-backed products continues to grow, these companies are well-positioned to capitalize on this trend and drive further innovation in the wellness industry.

Q: Where do you see opportunities for venture capital investors to play an increasing role in funding R&D for deep tech innovation that, in the past, was largely reserved to incumbent biotech corporations.   

A: Any innovation in this space is going to require significant R&D costs. That's why there's a growing need for venture investors who take the risk early on. On the other hand, a large portion of the costs for biotech development - which has historically been more limited to drug development - is related to the FDA process. 

The opportunity surface for deep tech consumer products is growing exponentially, and many of these projects fall outside of FDA oversight. The costs of development are therefore far lower, and this is where there is a tremendous opportunity for venture investment to come in and help with the initial costs required to develop these technologies. 

The initial costs of these technologies can range anywhere from $4M -$40M before they are ready to go to market. The framework that we apply at Montage as we evaluate these opportunities on a case-by-case basis is more so related to the timeframe of R&D required before going to market. We want to see that the technology can touch the target customers within 2-5 years. When the timelines for development extend beyond this, those are some of the projects that are better suited for traditional biotech investment. 

WHAT ELSE TO WATCH IN THIS CATEGORY 

Outside of the consumer-centric deep tech landscape, Montage is excited about AI-driven platforms that are leveraging big data and AI advancements to further drive innovations and efficiency in the traditional biotech and pharmaceutical sector. Examples with Montage Ventures portfolio include AppliedXL, a business intelligence platform for pharmacy industry; CardiaTec, a biotech platform applying AI and multi-omic data to identify and develop novel drug targets for cardiovascular diseases, and Somite, AI platform to produce human tissue for cell therapies.

STARTUPS MENTIONED IN THIS BRIEF 

AppliedXL* , CardiaTec*, Functional Health, Matice Biosciences*, NewLimit, ResetOne*, Revela*, Somite, Tally Health, Thorne, Viome

Editor's note: Montage Ventures portfolio companies denoted by (*).

Produced by the Emerging Venture Capitalists Association (EVCA), the 2023 EVC List honors the top 25 rising stars in venture capital.

Terra Nova's Thesis Brief Series showcases each investor's insights and category expertise.