COLUMBUS, Ohio — Life-science entrepreneurs seem more concerned about the impact of health-care reform on the medical industry than the companies that will invest in them do.
Eight venture capitalists gathered Thursday evening at TechColumbus to discuss bioscience innovation in the state. The audience included a mix of start ups, portfolio companies and research institutions trying to navigate their way into the panelists’ pockets.
The investors, all of which operate in Ohio, do worry about the impact of state reforms than federal. There is already concern about the fate of Ohio’s Third Frontier program (Opens in a new window), for example, which is scheduled to end in mid-2012. David Scholl (Opens in a new window), a partner in Athenian Ventures (Opens in a new window) and president of Diagnostic HYBRIDS (Opens in a new window), thinks an end to the program at that point would undercut its success in funding research and nascent businesses in the state.
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A question from the audience provoked less concern: What will happen to the value and potential of life-science startups if there’s a national health-care program? The questioner thought it would depress values.
“The deals we’ll look at may potentially change” based on changes in reimbursements, said Portal Capital’s (Opens in a new window) Bill Stuart (Opens in a new window). But other panelists considered federal reform more of a wild card. One thought: A national health-insurance program may encourage entrepreneurs to go out on their own since they wouldn’t have to factor their own health care as much as they do now.
But the non-existent IPO market, potential tax changes for venture funds (Opens in a new window), and longer time between investments and a return have a bigger impact for investors, they said.
“If (reform) attacks litigation and overmedication… then the market might get smaller and there may be some impact in that regard,” said Mark Richey (Opens in a new window) of Draper Triangle Ventures (Opens in a new window). “But a solution and technology that creates better health outcomes — that creates opportunity.”
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The investors had other thoughts, which you can read and hear below:
Richey (audio) (Opens in a new window), on entrepreneurs who focus too much on finding investors who will take small equity stakes.
Scholl (audio) (Opens in a new window), on why Ohio should consider a “commercialization czar.”
Peter Kleinhenz (Opens in a new window), of CID Capital Partners (Opens in a new window), on SBIR reform (Opens in a new window) that could give venture-backed firms more federal dollars (Opens in a new window): “Legislative people have to get over the bogeyman — we’re not the bogeyman. We don’t do R & D. SBIR does R & D. We do commercialization. We’ve created a lot of jobs.”
John Rice, of Triathlon Medical Ventures (Opens in a new window), on having 63 life-science focused firms in Ohio: “There’s enough venture capital here now that companies can get started, stay here and not move away.”
Dan Fleming (Opens in a new window), of River Cities Capital Funds (Opens in a new window), on founder equity. “There’s never been a company that is so capital efficient that the founder is able to keep a larger founder’s share of the company. Usually it’s 80 percent to the investor and 20 percent to founders.”
Kleinhenz, on what investors are looking for: “It’s hard in the Midwest to be picky about the space because you have to be ready for anything that comes by.”