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, for example, which is scheduled to end in mid-2012. David Scholl, a partner in Athenian Ventures and president of Diagnostic HYBRIDS, thinks an end to the program at that point would undercut its success in funding research and nascent businesses in the state.
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 Bill Stuart. 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, 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 of Draper Triangle Ventures. “But a solution and technology that creates better health outcomes — that creates opportunity.”
A Deep-dive Into Specialty Pharma
A specialty drug is a class of prescription medications used to treat complex, chronic or rare medical conditions. Although this classification was originally intended to define the treatment of rare, also termed “orphan” diseases, affecting fewer than 200,000 people in the US, more recently, specialty drugs have emerged as the cornerstone of treatment for chronic and complex diseases such as cancer, autoimmune conditions, diabetes, hepatitis C, and HIV/AIDS.
The investors had other thoughts, which you can read and hear below:
Richey (audio), on entrepreneurs who focus too much on finding investors who will take small equity stakes.
Scholl (audio), on why Ohio should consider a “commercialization czar.”
Peter Kleinhenz, of CID Capital Partners, on SBIR reform that could give venture-backed firms more federal dollars: “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, 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, of River Cities Capital Funds, 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.”
