Proximal Ventures raises $27.5 million for AI drug development

By Grace Kim

Proximal Ventures has raised $27.5 million for its debut fund. Sahir Raoof leads the firm in his first solo venture-capital effort. The capital will back startups applying artificial intelligence across drug-development services.

Proximal plans to invest at the pre-seed and seed stages. It will write checks from $500,000 to $1.5 million. The $1.5 million maximum is three times the $500,000 minimum. The fund has already backed six startups.

Why drug development?

The fund targets tools, infrastructure and services supporting drug development. Pharmaceutical companies have long outsourced parts of drug development to specialized providers, including synthesizing thousands of molecular compounds, determining how to manufacture drugs at scale and analyzing clinical-trial data.

Raoof said: “For a long time, the assumption was that pharma is not a great buyer of software, but a really good buyer of services.”

Raoof expects AI to automate much of that service work. He says startups could deliver those services at lower cost and in significantly less time. He believes startups could capture billions of dollars in pharmaceutical-industry spending.

He cites law and finance as service sectors with some of AI’s most valuable applications to date. He sees comparable openings in pharmaceutical services.

Which companies have received backing?

ChronicleBio is one of six startups Proximal has backed. Co-founded by former OpenAI executive Fidji Simo, it uses AI to analyze biological and medical data to better understand chronic diseases and identify potential treatments for those diseases.

Proximal has invested alongside some of the better-known, much larger funds, according to investor Amy Abernethy. She links that record to Raoof’s commercial judgment and healthcare relationships.

Who is funding Proximal?

The fund’s backers include VC firms SignalFire and Kleiner Perkins. Bertelsmann Healthcare Investments also backs the fund. Individual investors Nan Li and Zavain Dar, co-founders of Dimension Capital, are among the supporters.

Abernethy has invested as well. She co-founded Highlander Health and formerly served as principal deputy commissioner of the FDA. She first worked with Raoof at Flatiron Health, where she served as chief medical officer.

Abernethy said his ability to build relationships and identify industry bottlenecks made a lasting impression. She expects his commercial skills and understanding of healthcare needs to make him a successful investor. Those qualities, combined with Abernethy’s backing, have helped Proximal compete for investment opportunities alongside larger, well-known funds in a difficult fundraising market for venture capital.

What experience does Raoof bring?

Raoof spent two years as a principal at SignalFire. Before that, he led business development at Iterative Health, a clinical-trial recruitment startup. He previously oversaw partnerships at Flatiron Health, an oncology data company.

Roche acquired Flatiron Health for $1.9 billion in 2018. That acquisition gave him experience inside a large oncology-data business before he began investing. His sales experience, healthcare knowledge and industry relationships gave limited partners confidence in his ability to spot strong startups and help them land customers.

Starting a life-sciences sale is difficult. Raoof said: “If you’re building a company that’s selling into the life sciences, one of the hardest things to do is starting that initial commercial flywheel.”

What will determine success?

The raise comes as first-time fund managers face one of the toughest fundraising environments in years. Established venture firms continue to attract capital.

The next test will come through commercial contracts showing that AI can lower the cost and shorten the delivery of drug-development services, allowing startup providers to capture billions of dollars in pharmaceutical-industry spending. Pricing and customer wins will show whether the $27.5 million fund can build a durable portfolio.