New England is indeed a fertile ground for new technologies in healthcare and the life sciences, but the number of VCs doing the early and risky stuff is dwindling. We will probably see the number of start-ups in our space dive this year. Keeping to ol’ Darwin’s creed of adaptation, we simply have to find new and creative ways to keep early-stage VC alive, and to redefine roles and responsibilities among the inhabitants of the healthcare ecotope, or we will all perish together.
Yes, big biotech and Pharma have moved into earlier-stage deals to access breakthrough technologies—‘they sneak a peek,’ so to speak. But on the other hand, they spend tremendous amounts of cash to buy each other, or to purchase their own outstanding shares to prop up share prices, and I am skeptical that they will have the persistence and vision, the personal engagement, and the relationships to budding or serial entrepreneurs required to drive innovation in the long run. ‘Great ideas often start in small garages,’ and the big guys simply aren’t equipped to play in this space. Both mid-cap biotech and large Pharma rely on folks like us to take the earliest and highest risk in the innovation game. We work diligently, and more often than not fruitlessly, to search out what’s really innovative, a bit crazy, and differentiated.
It has been said in these challenging times that there are too many VCs, but whatever one’s opinion is, they are undoubtedly an essential part of the life sciences ecosystem. At the end of April, the National Venture Capital Association’s annual meeting here in Boston and Xconomy’s Biotech Forum offered glimpses into the function of the life sciences VC as a major driver of innovation-but we were preaching to the choir. VCs have to make a credible and high-profile case to the public and to Washington, for that matter: we are not the same as revenue-stage private equity, hedge funds, and leveraged buy-out! In fact, we are being hurt tremendously by being put into the same bucket as proposed in the current debate on taxes and financial industry regulation. Doing so simply takes the risk incentives out of innovation opportunities and will force the ecotope to grind to a halt.
In short, I believe life sciences investors must take an oath to adhere to the following principles:
While not an all encompassing solution to the challenging times ahead, the innovation industry as a whole stands to gain when venture capital not only stays the course, but pushes to become a more integral and vocal part of the entire life sciences ecotope.