It was nice to hear one healthcare executive and investor after another respond to the question, “what are your key priorities when evaluating a deal?” with the answer, “really compelling science.”
I’ve often heard VCs and angel investors cite the importance of large addressable markets and talented executive teams as key considerations to a deal, along with compelling technology. But the different dynamics among different investors really came to the surface at today’s Life Science Nation’s Redefining Early-Stage Investments conference in Boston, which focused on alternative sources of funding.
First it was a group of corporate venture capitalists from the pharmaceutical industry who were asked how they evaluated investment deals. Executives from Boehringer Ingelheim Venture Fund, Sanofi-Genzyme BioVentures, MP Healthcare Venture Management and GlaxoSmithKline’s venture arm, SR One, responded unanimously that they cared most about the science.
“The biggest challenge for the pharmaceutical company is actually coming up with a product that works,” said Jeffrey Moore, managing partner of Healthcare Venture Management. So other factors like a startup’s executive team become less important to the pharmaceutical company eying a strategic investment.
And since the industry is moving into an era of more targeted and personalized medicines, compelling business opportunities aren’t necessarily what they used to be. “I don’t need to see the big blockbuster potential,” said Martin Heidecker, managing partner at Boehringer Ingelheim Venture Fund.
Next it was a group of foundation leaders who underscored the importance of groundbreaking science in their projects and companies they fund. Then a group of CROs echoed the same priorities. Then another group of Big Pharma representatives.
As healthcare VCs have focused further downstream, and federal research funds have dried up, these organizations and companies are increasingly jumping in to bridge the preclinical funding gap for life science companies.
But there could be a silver lining. Many of these corporate VCs, venture philanthropies and collaborative R&D programs can provide much more than funding. Some have the expertise and resources to select and actually help advance promising scientific discoveries in their respective areas. Dr. Ross Tonkens called the American Heart Association’s science and technology accelerator, which he leads, not a venture philanthropy but a venture catalyst. If these kind of funders can help vet scientific discoveries and help move the best ones along in development, they could be giving way to more capital efficient late-stage funding.
Preclinical funding is no doubt still a challenge, but I left the conference feeling that early-stage innovation is in pretty capable hands.
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