Funding Gap? Ha!

6/14/08

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invested in every single deal in which we wanted to make an investment. There was not an eighth deal that we sit around at Friday Happy Hours cursing ourselves about not being able to finance.

Rather than bemoaning the Funding Gap, we have been spending our Happy Hours discussing how full our pipeline is with incredibly interesting new technologies in which to invest.

The companies in which we have invested, and those we are currently contemplating, have been truly groundbreaking emerging biotechnologies. In a number of cases they have consisted of only minimal laboratory data and a plan drawn on a white board in our office by a passionate entrepreneur. There has been no shortage of potentially fantastic ideas (if they work) that could both meet a significant unmet medical need and make our investors, scientific founders, and entrepreneurs a boat load of money.

Of our seven previous Accelerator investments, three have already “graduated” collectively raising $114 million in follow-on financings. And there is more good news to come.

Accelerator is just one piece of a vibrant early-stage biotech investment community in Seattle. Three of our investors at Accelerator are local venture partnerships: OVP Venture Partners, ARCH Venture Partners, and WRF Capital. Between them, since 2003, there have been at least a dozen additional Series A investments in emerging biotech companies (outside of Accelerator). By my count, therefore, between Accelerator and its investors, we have made no less than nineteen investments in emerging biotech companies in Seattle in the last five years. In addition to these deals, other funds are also investing in emerging biotech in Seattle (although, since they are not Accelerator investors, for the life of me I cannot recall any of their names or any of the deals they have done…).

Funding Gap? Ha! Does not exist. Instead, there is an Expectation Gap. And both sides need to move towards the middle to solve it.

If you are an academic and you cannot get someone to back your idea, do three things: take a hard look at your technology (or even ask someone else to do so); take a hard look at your expectations; and, take a hard look in the mirror. Honest assessment in these three efforts will tell you why.

If you are a VC crying crocodile tears over all of the impediments between your partnership and early-stage biotechnology investment, quit it. You make us all look like complete asses. Pull up your britches, wipe your nose, and admit it—“I am no longer a VC. I am now a private equity investor with an exceedingly small fund.” (Feelings of inadequacy to follow…time to buy a Ferrari.)

Carl Weissman serves as Chairman and CEO of Accelerator, a joint investment vehicle backed by a syndicate of venture capital firms, and as a Managing Director at OVP Venture Partners. Follow @

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  • http://www.angelsden.co.uk Lee @ Angels Den

    “Academic investigators need to face facts. If you have a great technology, with reasonable and lucid proof-of-concept, addressing a significant unmet need, and that can be protected as proprietary; and, if—and this is the big IF—you have reasonable expectations in terms of valuation and risk-sharing, then you will be able to attract venture funding. Plenty of it. Even in Seattle.”

    I couldn’t agree more! The only issue is that this concept is focused on the “one in a million” situation where all these factors exist in the same business. If an angel investor or venture capitalist would invest in this business then you would expect many hundred per cent ROI. However, I believe most angel investors and venture capitalists would have a far lower minimum expected ROI.

    The list you give is the ideal, however, most venture capitalists and angel investors would follow the Fleetwood Mac model – “two out of three ain’t bad” and then take their interest further.

    The thing is most entrepreneurs seriously let themselves down, not in terms of the financials or the concept, but approach and presentation. I believe that generally entrepreneurs could greatly improve their chances by getting their pitch right in the first place.

    Regards,

    Lee

  • Johnny Stine

    That would be the “Meat Loaf” model of “two out of three…”

    More to come later……EXCELLENT article CW.
    Cheers,
    Johnny

  • http://www.startup-book.com herve lebret

    Just look at what Robert Noyce, the founder of Intel, says: “Look around who the heroes are. They aren’t lawyers, nor are they even so much the financiers. They’re the guys who start companies.” So we should not put too much emphasis on innovation support including VCs, TTOs, and so on.

    Silicon Valley developed mostly because of Noyce, Jobs and then Yang and Filo, Page and Brin. So we need people who take risks. They should not assess the level of risk too much because then they will probably not do anything. The nature of the business is indeed risky and uncertain.

    I agree with you that there has been plenty of money. Europe has faced the same advantages (oups constraint): too much (easy) money…

  • Pingback: Early-stage investor says funding gap does not exist, only "expectation gap" | Technology Transfer Tactics

  • Md. Mujahidur Rahman

    Dear Sir
    With reference to above subject I would like to request you to provide me information regarding funding on Crocodile Firm.
    Being a future enterpenur form Bangladesh in this sector I have abundant recourses related to this project.
    At presence, I’m in need of a Financier & Guide to make my dream comes true.

    In Bangladesh, we have a great opportunities and bright future in this project.

    Awaiting for your early response.

    with Thanks

    Md. Mujahidur Rahman
    Dhaka, Bangladesh
    Cell: 8801817-031662.