Venture capitalists from high-profile shops like SR One, the venture arm of drug giant GlaxoSmithKline, aren’t known for scouting companies in the Pacific Northwest. If the Washington Biotechnology & Biomedical Association gets its way, a few more of those well-connected firms will start looking, and then maybe investing, in Northwest startups.
SR One recently sent a couple partners to Seattle for a full day of meetings with 12 Northwest startups, who had 30 minutes each to make a private presentation at a downtown law firm, says Chris Rivera, WBBA’s president. No checks have arrived yet, and venture investors have tended to be risk-averse during the downturn, but at a minimum, Rivera says he’s hopeful this will lay the foundation for more awareness among national VC firms of what’s going on in the region. It’s possible the WBBA will be able to make these private-pitch days into a quarterly event series, he says.
“Seattle is not really a normal stop for [SR One] but they said it was definitely worthwhile,” Rivera says. “We hope that we can replicate this on an ongoing basis.”
Bringing more national VCs into the Northwest is one of the key initiatives Rivera has been working on since he took over as WBBA president in January. It’s part of a larger push to increase access to capital for local entrepreneurs. A couple other ideas circulating are for the WBBA to foster a life sciences angel network to lead deals in collaboration with other local angel groups like Zino Society, Keiretsu Forum and Alliance of Angels. WBBA is also looking into a fund for filling what is sometimes called the “funding gap” or “valley of death.” Tom Ranken, a former WBBA president receiving help from Rivera, is trying to do this through a federally-funded vehicle he’s trying to establish, called Bionager.
Rivera knows more than most people in trade associations about raising money, because he has been successful doing it himself, as a co-founder of San Francisco-based Hyperion Therapeutics. That company made headlines last month by raising $60 million in a Series C venture financing. Hyperion did it by following the specialty pharma model, in which it licensed and is developing a drug for rare, urea cycle disorders that can lead to brain damage and death. The main reason it got the cash? It has an attractive opportunity in a niche market, with little risk, because its drug is derived to work like an already-approved product, but with fewer side effects, Rivera says.
The lesson to be passed on from that experience is for biotech entrepreneurs to think about commercialization from the beginning, when a lot of companies are more focused on the technology. Hyperion stood out for investors because it offered upside potential, a relatively short development timeline, and low risk of failure, Rivera says.
“The venture capitalists’ tolerance for risk is just a lot lower than it once was,” Rivera says. “The entrepreneurs need to think through the endgame, much earlier. You need to look at the market, the relative risk of development of a product, much earlier than you once did.”