The phrase “the VC model is broken” has become cliché over the past few years. Many theories on why this is the case have been posed, including Sequoia Capital’s Douglas Leone, who told a VC conference at MIT last month, “Big is completely the enemy of great.” I agree with Leone; in fact, I have been employing what I call a “small ball” style of investing at City Hill Ventures, a fund I started in San Diego in 2010 to invest in biotechnology, molecular diagnostics, medical devices, and health IT. City Hill is a small, focused fund making a limited number of investments, chiefly because I’m deeply involved, taking a hands-on, operational, or advisory role with each portfolio company.
Recall that in baseball, the goal of the “small ball” offensive strategy is to maximize your team’s on base percentage and advance the runners to score more runs, instead of relying on home runs to win the game. Small ball investing in life sciences means employing capital efficiency (bunt) to drive focused value (advance the runners) that can be creatively monetized (score) to generate attractive returns (win the game) with a higher probability of success for investors.
We are blessed to operate in an industry in which winning is ultimately measured by the impact of our innovative products on patients’ lives. But making money for our shareholders is also a critical part of winning. Eclipse Therapeutics, a Biogen Idec (NASDAQ: BIIB) cancer stem cell spinout that I co-founded with Peter Chu and Chris Reyes in 2011, serves as an interesting example of a small ball investment win for City Hill. Here’s how I scored it:
Bunt: Employ Capital Efficiency
City Hill led a $2 million investment round with a group of individual investors to acquire a late discovery/preclinical cancer stem cell program from Biogen Idec when it closed its San Diego facility, and to start Eclipse Therapeutics. This seed funding was the company’s only financing round. We kept … Next Page »
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