Venture Capital – Anything Happening?

If you’ve been following this blog (and, if you haven’t, you’re welcome to check out our archives) then you know how Larry and I feel about Big Pharma. We believe that they’re in more trouble than they or their supporters are letting on and will eventually follow many other large American companies that were once beacons to the free world of what capitalism could be and are now embarrassments. General Motors (GM), Citibank (C), General Electric (GE), and Merrill Lynch are just a few examples.

OK, that’s the bad news. But, what happens next. I’ve never felt that we’d all end up back in the caves fighting over the scraps of past glories in some sort of a post-apocalyptic future. (Apologies to Winston Churchill.) And, yes, I know this is how Larry sometimes describes consulting before he retired. But, stay with me here people, I’m talking on a grander scale. If Big Pharma tanks then where do our drugs come from? Who will the generics knock off from? Get the picture?

This is where the venture capitalists come in. Earlier, I had predicted that private capital would be a major player in the healthcare industry. Then, 2008 happened and I began to wonder about that. What with Cerberus tied up with Chrysler and everything else, I was wondering what next?

I came across an article in BusinessWeek’s June 1, 2009 edition, These Angels Go Where Others Fear to Tread, about the current state of venture capital written by Spencer E. Ante. The article focuses on venture capital (VC) and the technology industry but since bio-tech is a component of the technology sector and has always been close to the VC gang I thought that it would give me some guidance about what we may see in the bio-tech sector.

Ante’s premise is that the traditional, larger VC firms such as Sequoia Capital and Kleiners Perkins Caufield & Byers are caught in their earlier investments and are forced to curtail new investments. He cites VC investment as being off by 61% in the first quarter of this year with only a small portion of that being for first stage seed money.

The author sees a return to the early roots of VC investing with a focus on truly small startups that are getting lost in the shuffle of the bigger firms. He cites firms such as First Round, Baseline Ventures, Maples Investments, and Felicis Ventures as examples of this new trend, or, is it part of the retro fad currently underway?

Now, again, I want to caution everyone because I’m making a stretch here that these companies will be looking at bio-tech and other healthcare startups. Over the next few months, I’ll be reaching out to see what’s happening here and is this a trend for the healthcare sector as well.

As always, we welcome your feedback. Please contact us at larryrothmansblog@gmail.com. We look forward to hearing from you.

Contributed by Guy de Lastin