Why Biogen Idec Got Out of the Corporate VC Business

1/27/12Follow @xconomy

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through conversations like that, and they won’t be strengthened by going a step further and co-investing, Holtzman says. “I was just in a meeting in this room with [Venrock's] Tony Evnin, one of the grandfathers of this industry. Tony invested in my first company in 1987, he invested in Millennium, and he invested in Infinity. I walked in here and we hugged. We hugged. That’s what it’s like with meeting most of them.”

3. “As a corporate VC, you can get a preferred seat at the table when it’s time to buy the new technology.” This is essentially a myth, or at least it should be, Holtzman says. “As someone who was a CEO of one of those startup companies, and had Novartis Venture Fund as an investor, you owe it to the shareholders, and you owe it to yourself, if you have something interesting, to go get the best deal that’s right for your company. Therefore, there are no preferred seats at the table.”

4. “There’s a need to support the life science innovation ecosystem now that traditional VC is declining.” This is a more recent argument in favor of corporate venture investing, Holtzman says. But there are other ways to support the innovation community than by making venture investments, he says. Specifically, Biogen looks to support the ecosystem by sponsoring what he calls “strategically important research at universities” and by entering into alliances with young biotech companies.

And even though Biogen isn’t technically making venture investments, Holtzman notes that it can always make equity investments in small companies when it forms a development partnership. Biogen can still add an equity component to the usual upfront, milestone, and royalty payment structures that companies use to share the risk and rewards of drug development, he says.

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  • http://About.me/ZenVen Zen Chu

    Great article, Luke. Having worked in corporate venture capital in Silicon Valley, I totally agree with Steve’s assessment — for the focused management teams that have those VC relationships and pattern recognition. The history of corporate venture funds are littered with high turnover teams and investments which neither perform well or end up serving the original investment thesis.

    However, for many companies with large portfolios and separate business silos, the corporate venture groups provide an important role in identifying common problems to be solved across product lines and navigating startups to partnerships earlier. This navigation and pollination role is often more important than the investing role.

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