In one of his recent blogs at Life Sci VC, Atlas Venture’s Bruce Booth makes the optimists’ case for venture capital investments in the life sciences. Booth’s message is that life sciences venture capital is healthy but misunderstood, but he misses the forest for the trees in important ways.
Based on my 27 years in the venture industry, I would argue that another ten years like the last decade would put life sciences venture capital in serious jeopardy. I’ve seen estimates from the National Venture Capital Association (NVCA) that predict the number of U.S. venture firms will be one-third of the pre-2007 level by the time the post-meltdown shakeout has run its course—and the number of VC partners will be a quarter of what it was. My guess is that life sciences as a subset will fare even worse.
Bruce reviews statistics from a number of sources to make several points, foremost of which is that “Healthcare venture capital actually out-performed all other venture sectors in the past decade. …This outperformance exists at the median, top quartile, and even top decile return thresholds for the last decade.”
Based on his analysis, Bruce concludes that the industry’s primary problem is one of public relations—a Rodney Dangerfield image—rather than performance. If Bruce is right and life-sciences venture is alive and well, but just under-appreciated, then business-as-usual should suffice to see the industry back to health, if we are not already there. But if venture has serious systemic problems, then characterizing them as “cosmetic” is a misdiagnosis that leaves venture and pharma at risk of a deeper, life-threatening situation.
So, if statistics show that biotech is best-of-breed in the venture world, why is it under-appreciated? Pension fund managers generally know little about curing cancer (In reality who does?), but they do know how to count. It seems strange that for ten years they would overlook a good investment when their jobs depend on showing … Next Page »
Standish Fleming is a 29-year veteran of early stage, life sciences investing. He has helped raise and manage six venture funds totaling more than $500 million and served on the boards of 19 venture-backed companies, including Nereus Pharmaceuticals, Ambit Biosciences, Triangle Pharmaceuticals (acquired by Gilead Sciences) and Actigen/Corixa (now part of GSK).
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