Corporate venture investment arms have become more prominent in recent years, especially the likes of Google Ventures in the realm of health tech. For biotech startups, they represent an investment opportunity which could eventually become an exit opportunity for a natural exit and pharmaceutical company investment arms like Novartis.
A survey of MedCity News readers shows investment partners rank corporate venture investors third in importance behind venture capital firms and angel investors. Yet, they still generate mixed feelings among entrepreneurs for their divided loyalties, according to original research by MedCity News funded by Lake Whillans, a litigation finance firm. The firm had its own interpretation of the survey results earlier today.
Asked about their importance, 247 of 380 responses said corporate venture was “important” or “very important,” making them about even with angel investors. About 287 said venture capital was “important” or “very important”. Only 46 said corporate venture was “irrelevant” compared with 36 for venture capital and 56 for angels. Respondents deemed grants, private equity and venture philanthropy lower priority.
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Johnson & Johnson Development Corporation and Novartis Venture Fund each scored in the top five in response to two questions: “Who are the most trustworthy corporate investors?” and “Which organizations provided the best experience for entrepreneurs?” They have also been among the most active. Amgen, SR One and Pfizer were among those that provided the best experience for entrepreneurs, according to the survey.
Even so, some garnered a significant number of mixed feelings. Although 82 respondents scored J&J as most trustworthy, 43 said they had mixed reviews. Google Ventures had a similar score.
The shift in the stage of investment and where the perceived opportunities in biotech are have had a significant impact. Pharma corporate venture investors have broadened their interest from late stage to earlier stages of investment. Priorities have also shifted from the next blockbuster drug to more personalized treatments.
One of the consistent criticisms of corporate investors is the imperfect balance between strengthening the core business and the investment target.
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At a medtech investment conference earlier this year, Renee Ryan, vice president of venture investments at Johnson & Johnson Development Corporation acknowledged that it’s tough to strike a balance between timelines and priorities of young life science companies and strategic investors. Startups’ timelines frequently outlast corporate priorities and strategies and the people who may have championed certain companies leave the organization.
Photo: Flickr user CarbonNYC
