Members and friends of Virginia Bio,
It was a family fund that fifteen years ago provided my startup specialty pharma company with its first capital. The scion of a wealthy East Coast family some years prior had received an experimental drug in a clinical trial that halted the progression of a deadly disease after approved therapeutics had not. From then on a percent of the fund’s investments were directed to bioscience startups with a compelling business plan to provide new treatments and cures. The investment had a financial objective, to be sure. But the investor was focused on the clinical outcome as well, and his board designee was patient and helpful in many ways as we ran the crooked road of drug discovery, development and commercialization.
Today, family funds – sometimes called “family offices”, or “home offices”, or “high net worth (HNW) individuals” worldwide are increasingly a significant direct source of funding for startups, emerging and mature bioscience companies, bypassing traditional private equity funds and snapping up opportunities left by the great VC migration. The number of funds and the dollars at their disposal are staggering.
Last Thursday we brought together experts deeply engaged in the family fund sector at our monthly Virginia Bioscience Commercialization Panel Series. If you missed this eye-opening discussion, remember we livestream these events and archive the video for Virginia Bio members to watch at their convenience at the News and Events, Video Library section of our website.
Our three panelists occupy very different vantage points. Peter Harris is a Vice President & Managing Director at Axel Johnson, the investment fund of a prominent European family. He is involved with cultivating and evaluating new investment opportunities and providing strategic and operational support to existing portfolio companies. While the family is European, the Fund has a significant investment in a Virginia medical device company and Peter and colleagues operate the funds’ investments in the US out of NYC and Charlottesville. Tom McKenzie is Senior Vice President, Membership, of Cavendish Global, as well as a principal with Capital Partners LLC, a private equity advisory firm. Cavendish Global is an innovative and relatively new organization - a community of global family funds intent on making impact investments in new and emerging biomedical companies. Tom scouts the country for companies to bring to the attention of the community. Paul Romness is Senior Advisor to McKenna & Associates in the Life Sciences and issue advocacy campaigns. McKenna is a versatile DC strategic consulting firm specializing in management and fundraising, and assists family funds with investment opportunities.
Some key points from the panel. Family funds have more flexibility than institutional private equity and VCs because they answer to themselves, not to recruited investors. This allows them greater freedom from strict investment criteria like asset grade, deal structure, sector or geography. They tend to have a longer time horizon, looking to build capital not harvest a rapid return. They may accept greater risk, in terms of sector, stage of investment and even deal structure, to accomplish other goals. And other goals they do have: perhaps a sweet spot based on family history and values, such as interest in funding solutions to a particular disease. The result – family funds operate in many different ways. Still, it’s an investment, not a philanthropic gift. The bioscience company has to evidence a strong business case to reach returns, as well as impact. And while the role of family funds making direct investments is relatively new, it’s unlikely to be a mere fad. No matter how many years pass, wealth will be accumulated, the wealthy will seek investments, families’ happiness will be bound to sickness and health of their members, the urge to impact the spread of medicine and human health will continue to call good souls, and the potential returns of innovation in the biomedical sector will draw good looks from savvy investors.
No discussion of capital formation can end without reminding you of JP Morgan Health Care Conference Week in San Francisco on January 10 - 15, 2016. There’s an exciting new development this year, and one could say it has to do with “Families”. This year we are greatly expanding our Sunday evening reception. The Virginia Reception, co-hosted with University of Virginia Darden School of Business, will be held at 5:00pm on January 10 in the Velvet Room of the Clift Hotel.
Just two weeks ago Darden was rated by The Economist as the #2 MBA school in the world. Darden is inviting its extensive family of alumni in the biotech and health care industry, and Virginia Bio is inviting the leaders of our member companies who are seeking capital and strategic deals. In San Francisco in January, these Type A Virginians act more like family, sharing connections and talking one another up to help one another succeed on the tough but important journey they walk along together.
We’re also expanding the number of slots we will make available free to Virginia Bio members in our hotel room overlooking Union Square for private and semi-private meetings. See you there!
If your organization is not a member of Virginia Bio yet, give us a call.