Silicon Valley VCs Quietly Hiring Biotech Experts

Silicon Valley VCs Quietly Hiring Biotech Experts May 24, 2017
By Alex Keown, BioSpace.com Breaking News Staff

SAN FRANCISCO – There may be a new sign that Silicon Valley-based venture capital companies will be taking a serious interest in the future funding of biotech companies. CNBC reported the VCs are looking to tap investors with strong backgrounds in the medical field to provide some expertise before investing

Ambar Bhattacharyya, a health investor with Maverick Ventures, told CNBC he heard that the VCs were looking for “PhDs and MDs, folks with health care backgrounds and computational biologists,” to give them the sought-after expertise. In its report, CNBC noted that several VC companies, such as Menlo Ventures and CRV, are quietly advertising for those types of role-players.

Citing a note from venture fund Rock Health, CNBC said that in 2016 venture capitalists provided $4.2 billion in funding invested in the biotech industry, slightly down from 2015. The VCs favored genetics, analytics and wearable devices when deciding where to place their money.

One of the reasons the VC firms may be tapping the experts is to avoid errors in judgement when investing. One company, Theranos, garnered a lot of early love from Silicon Valley investors, only to have that investment dashed due to a myriad of problems with the research and leadership at the beleaguered company. Once worth an estimated $9 billion primarily due to the lack of due diligence by the VC companies, Theranos is now worth only a few hundred million—and could stand to lose a large chunk of that due to the number of lawsuits facing the company. Earlier this month, Theranos settled two lawsuits with Partner Fund Management LP, a hedge fund that invested $96.1 million into the company in 2014. The terms of the settlement were confidential. In the lawsuit, Partner claimed that Theranos and its founder and Chief Executive Officer Elizabeth Holmes lied about the performance of its blood-testing equipment in order to raise funds. Allegations made in the lawsuit also said that Holmes and Theranos threatened to file bankruptcy if investors like Partner did not give up their threats to sue and instead invest more money in the beleaguered biotech. According to the now-unsealed court documents, Partner said Theranos designed its bankruptcy threat so that “investment funds would not obtain any recovery in a bankruptcy filing.”

Having an understanding of the space in which VCs are investing is important. Alexis Borisy, a biotech-focused partner with Third Rock Ventures, also told CNBC that VC backers need to understand that “patients’ lives are at stake.” Borisy is known for founding a number of life science companies including Foundation Medicine and Blueprint Medicines . In March, he was named president and chairman of the board for startup Tango Therapeutics, a new company launched by Third Rock. Third Rock is of course noted for its numerous funds used to invest in biotechs. In October 2016, Third Rock raised $616 million in an oversubscribed fund designed to continue its strategy of “creating innovative healthcare companies to make a meaningful difference in the lives of patients and their families.”

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