An AI-made drug that changes a disease would unleash investment
Investor Sarah Guo doubted software could make money in drug research, until scientists started adopting AI tools themselves.
Invest Like the Best with Patrick O'Shaughnessy · Sarah Guo - Funding the Frontier - [Invest Like the Best, EP.489]Sarah Guo, founder of the AI-focused venture firm Conviction, did not start out convinced that software investors could make money in biology. For more than five years, she said, she had heard the same rule: the only way to profit around drugmakers was to make a drug yourself, take the scientific risk, and hope for a payout deal.
What changed her view was a bet she made before the answer was clear. Her firm wrote the first check into Chai Discovery, a startup Guo described as "working with a number of top 10 pharma companies in really significant ways to accelerate some part of the R&D process."
The conventional view at the time, Guo said, was that "you can't make money selling software to pharma or build platform businesses at pharma." She quoted that dismissive view bluntly, calling it the idea that dumb software investors could not succeed selling to the industry.
Guo argues that AI models could change that outcome. The early evidence she pointed to was practical: a $10 million contract, and conversations with the scientists who use the tool or lead teams that do. She also pointed to tools that scientists adopt themselves, what software investors call product-led growth. To use an everyday comparison she did not make, it is like workplace software that spreads because employees choose it. Her point was simpler: the customer knows whether the tool is valuable.
She is clear about the limits. Regulatory questions remain, biology still moves slowly, and safety demands care. She still expects a massive acceleration in cures.
The proof she predicts is specific. She said the industry light bulb moment will come when there is a new drug or a new use for a drug, clearly created with AI, that changes the course of a disease. That result, Guo argues, means "We should see a huge wave of investment, and rightfully so."
She described the early bet in modest terms. “There’s no genius here,” she said. It looked possible and worth trying, she said, pointing to the $10 million contract as the kind of signal that mattered.
Questions people ask
What is a “new indication” for a drug?
A new indication means doctors discover that a drug approved for one disease also works for another. It matters because it can bring a treatment to patients faster and more cheaply than developing a completely new molecule, since much of the safety testing is already done.
Why would AI-designed drugs still take so long to reach patients?
Drug development is slow because biology must be tested in the real world. Even if AI suggests a promising molecule in hours, researchers must still make it, test it in cells and animals, run staged human trials, and win regulatory approval, a process that often takes a decade.
What does Chai Discovery do?
Chai Discovery is a biology AI startup backed by Conviction. It builds AI models for molecular design and works with large pharmaceutical companies to accelerate parts of drug research and development.