Chicken Little is History, Now It’s Time for Old School VC
“Biotech is Broken!” “Pharmaceuticals Out of Balance!” “Venture Capital abandoning Biotech Sector!”
Lately articles on the state of biotech scream out like spinning headlines on the MovieTone News Reels from seventy years ago: “Millions out of work!” or “War in the Pacific!” Since I’m penning my article on Pearl Harbor Day, the dramatic headlines pop and sizzle. Extra, extra, read all about it! The newsboy cry of bad news that always sells: “The Sky is Falling!”
All problems. Few solutions.
Closer examination of the body of reports regarding the state of VC investing in biotech, and the state of biotech companies themselves, does reveal a sector in turmoil. Reduced number and amount of investments and increased numbers of imploding companies. But no more turmoil than I read about in other parts of the bigger economic picture.
Therein lies the rub. I was “born” in this turmoil, getting started in the industry nine months ago. The “Miami Vice” days of VC and the Biotechnology Boom of the 90s are only legend to me.
It’s not as dramatic as the Merrill Lynch Bull, who really is lying hoofs up on Wall Street, but the VC community that I’ve recently joined will certainly get smaller. VC firms and their companies will be lost, and pain will be felt on a personal level as friends fall on hard times. But hard times are relative. While my view is no doubt naïve and I have no wish to be flip about the loss of jobs, I am concerned about the power of the Confirmation Bias. If enough believe that biotech is broken, then perhaps it will be. The idea may intercalate into the fabric of our thinking and even our deals.
Wading knee-deep through the numbers concerning the retrospective analytics of return on invested VC capital in relation to biotechnology innovation makes one thing clear: this is certainly not the end of innovation as we know it. Graphs of annual trends always portray innovation as an ever steady line of growth. The investing in and around innovation – now that oscillates like a sine wave. This isn’t the first time capital around innovation will dip, nor is it the last. But it does underline that now is the time to redouble our efforts to find the next great biotechnology ideas. We will need those great ideas to survive as only the best ideas will continue to be funded. Access to that “proprietary” deal flow of excellent ideas will be the differentiator on who survives the contraction.
Indeed, it is a bear market for capital, but not for ideas. Given there are plenty of good ideas, what is the best way to invest in them now? Beyond the obviousness … Next Page »