VCs versus the rest

A few weeks ago now I was able to attend the Washington Biotechnology and Biomedical Association’s (WBBA) annual Life Science Innovation Northwest (LSINW) event. The highlight for me was the final session, “Blood from a Stone ‐ Who is Left in Life Science Investing Today?,” moderated by Luke Timmerman from Xconomy. Panelists included both traditional VCs, such as Charlotte Hubbert from H.I.G. BioVentures, and less traditional investors, such as Gregory Simon from Poliwogg. Luke started the session with a “warning” not to let it turn into a VC bashing session but due to the fact that VCs were on his right and non-traditional investors were on his left it didn’t take long for the panelists to pick sides. As the session went on it was interesting to hear from both sides of the investment industry.

The panelists began by talking about whether or not to invest in “bleeding edge” companies and what characteristics put a company in that class. The VCs firmly agreed that they would not invest in such a company as they were not willing to take other people’s money to invest in something they were not comfortable with. The non-traditional investors, on the other hand, felt that these types of companies could be the next best thing and people shouldn’t avoid an investment just because a company isn’t quite ready to go yet. They argued that no company should fail due to lack of money and should only fail based on a bad idea. As the session went on the VCs argued that their method brought smart capital to companies whereas crowdfunding models simply bring the capital. While I do agree that a VC can offer more than money, in the end what I took away is that nontraditional methods are essential for getting companies off the ground and VCs play a vital role later on. I don’t think the biotech industry can survive without both methods of funding. However, at this point it seems that the VCs are closing their doors to the majority of biotech in favor of straight tech, leaving the industry with little option but to seek out nontraditional funding.

A question from the audience sparked the notion that crowdfunding allows for the democratization of funding and could potentially save the VC industry. In the end it lead to the idea that crowdfunding is “stocking the pond” for VCs to come in once a company has grown a bit more and is a little tastier. I think they can and should work together so biotech can continue to grow.

Quote of the day: 

“If you want to lose money, invest in a nobel laurete’s company”
– Gregory Simon