US  Venture  Capital  -­‐  History  and  recent  investments  

April  9,  2014  Healthcare  2030    

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Importance  of  VC  in  USA  

•  One  of  Private  Equity  Investments  •  Provides  money  to  early-­‐stage,  high-­‐potenHal,  high  risk  growth  startup  companies,  in  exchange  of  equity  in  the  investees.  

•  Biotechnology,  IT  and  soOware  •  11%  of  private  sector  jobs  from  venture-­‐backed  companies  

•  21%  of  US  GDP  from  venture-­‐backed  revenue  

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History  •  Wealthy  individuals  and  families  

–  The  Wallenbergs,  Vanderbilts,  Whitneys,  Rockefellers,  and  Warburgs  •  ARDC  and  J.H.  Whiney  &  Company  (  1946)  •  ARDC(American  Research  and  Development  CorporaHon)  

–  Founded  by  Georges  Doriot,  former  dean  of  Harvard  Business  School  and  founder  of  INSEAD  

–  Investment  of  $70,000  in  Digital  Equipment  CorporaHon  turned  out  $355  million  (1957  à  1968)  with  annualized  IRR  101%.  

–  Invested  in  over  150  companies  unHl  it  merged  with  Textron  in  1972  

•  J.H.  Whitney  &  Company  –  Founded  by  John  Hay  Whitney  and  Benno  Schmidt  –  Invested  Florida  Foods  CorporaHon,  nutriHon  beverage  for  solders  (Minute  

Maid)  –  ConHnued  investments  in  leveraged  buyout    transacHons  unHl  2005  

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Early  Venture  Capital  and  the  Growth  of  Silicon  Valley  

•  1958,  Small  Business  Investment  Act    –  License  private  small  business  investment  companies  (SBICs)  to  help  

financing  and  management  of  small  entrepreneurial  businesses.  –  Electronic,  medical  or  data-­‐processing  technology  –  First  venture-­‐backed  startup:  Fairchild  Semiconductor,  funded  by  1959  

by  Venrock  Associates  –  CompensaHon  structure  :  1.0~1.5%  of  annual  management  fee  +  a  

carried  interest  (  ~20%)  –  Kleiner,  Perkins,  Caufield  &  Byers  (KPCB),  Sequoia  Capital  in  1972  –  NaHonal  Venture  Capital  AssociaHon  (1973)  

•  1974,  Employee  ReHrement  Income  Security  Act  (ERISA)  –  Relaxed  criteria  of  ERISA  allowed  corporate  pension  funds  to  invest  in  

venture  capitals.  –  The  first  major  fundraising  year,  1978  

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Pre-­‐boom  Period(1980s~1995)  

•  Pre-­‐boom  period  –  Early  success:  Digital  Equipment  CorporaHon,  Apple  Inc.,  Genentech  

–  Over  650  VC  firms  by  the  end  of  the  1980s  –  From  $3  billion  to  $31  billion  AUM  (Asset  Under  Management)  

–  IPO  marketed  closed  in  mid  1980s  –  Stock  market  crash  in  1987  –  Many  VC  firms  moved  to  leveraged  buyout    –  Successful  VCs  focused  on  improving  operaHons  at  their  porjolio  companies  

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Boom,  Bubble(1995~2000)  and  Crash  

•  San  Hill  Road  in  Menlo  Park  and  Silicon  Valley  –  Internet  and  biotechnology    –  Human  Genome  Project  &  BioinformaHcs  

•  Celera  versus  Gilead  –  New  Economy  (Pax  Americana)  

•  Market  crash  –  March,  2000  –  Write-­‐off  and  “under-­‐water”  and  secondary  market  –  2003:  50  %  of  2001  in  terms  of  investment  

•  Slow  revival  –  2004~2007  –  Raised  $25.1  B  in  2006  

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Top  VCs  in  Life  Sciences  #   Company   AUM  

($B)   West   East   Europe   Asia   Israel  

1   New  Enterprise  Associates   13.0   1977   ✔   ✔   ✔(China,  India)  

2   Kleiner  Perkins  Caufield  &  Byers   7.0   1972   ✔   ✔(China)  

3   OrbiMed  Advisors   8.0   1989   ✔   ✔   ✔(China,  India)   ✔  

4   Bessemer  Venture  Partners   4.0   1911   ✔   ✔   ✔(India)   ✔  

5   Polaris  Venture  Partners   3.5   1996   ✔   ✔   ✔(Dublin)  

7   Canaan  Partners   3.4   1987   ✔   ✔(India)   ✔  

8   Idex  Ventures   3.25   1996   ✔   ✔(Geneva,London)  

9   Altas  Venture   3.0   1986   ✔  

11   Domain  Associates   2.7   1985   ✔   ✔  

12   MPM  Capital   2.6   1996   ✔   ✔   ✔(Munich)  

15   Venrock   2.2   1969   ✔   ✔  

16   Frasier  Healthcare   2.0   1991   ✔  

19   Alta  Partners   2.0   1996   ✔  

25   Burrill  &  Co   1.5   1994   ✔  

26   ARCH  Venture  Partners   1.5   1986   ✔   ✔   ✔(Dublin)  

27   Third  Rock  Ventures   1.3   2007   ✔   ✔  

AUM:  Asset  Under  Management   7  

Structure  of  VC  Funds  

Limited  Partners  (Investors)  (Public  pension  funds,  corporate  pension  funds,  insurance  

companies,  high  net-­‐worth  individuals,  family  offices,  endowments,  foundaHons,  fund-­‐of-­‐funds,  sovereign  wealth  funds)  

Venture  Capital  Fund  (Limited  Partnership)  

Investment  

Venture  Capital  Firm  (General  Partner)  

Investment   Investment  

Ownership  of  the  Fund  

Fund/Investment  Management  -­‐  Management  fee  -­‐  Carried  interest  

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Roles  in  VC  Firms  

•  Venture  capitalist  or  general  partner  (managing  director)  

•  Venture  partner  •  Principal:  mid-­‐level  investment  officer  •  Associate:  junior  apprenHce  posiHon  •  Entrepreneur-­‐in-­‐residence  (EIR):  non-­‐binding,  temporary  relaHonship  for  6~18  months  

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Trends  

•  Asset-­‐centric  &  virtual  operaHon  

•  Investors  as  co-­‐founders  

•  M&A  as  preferred  exit  

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Key  Features  

•  AcHve  investors  •  IniHal  investment  and  composiHon  of  BOD  •  Milestone-­‐based  follow-­‐on  investment  •  VC’s  iniHaHves  in  BOD  and  management  •  Pride  as  company-­‐building  experts  

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Epizyme  •  Dr.  Kasumi  Shiosaki,  ex-­‐Millennium  PharmaceuHcals  

–  Started  working  at  MPM  Capital  as  EIR  in  2001  –  Co-­‐founded  and  served  as  CEO  posiHon  unHl  March  2010  

•  ScienHfic  founders:  Dr.  Li  Zhang  (UNC  Chapel  Hill)    and  H.  Robert  Horvitz  in  2008  

•  MPM  Capital  and  Kleiner  Perkins  Caufield  &  Byers  invested.  •  R&D  on  epigeneHc  enzymes  (histone  methyltransferase  etc)  

–  EPZ-­‐5676  (DOT1L  inihibitor)  in  Phase  I  in  collaboraHon  with  Celgene  –  EPZ-­‐6438  (EZH2  inhibitor)  for  NHL  in  Phase  1/2  in  collaboraHon  with  

Eisai  •  Went  public  on  May,  2013    (Market  cap.  $760m)  

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"My  skill  is  that  I  can  convince  people  to  walk  off  the  cliff.”            -­‐  Dr.  Kasumi  Shiosaki  

Stromedix  

•  Dr.  Mike  Gilman,  ex-­‐Biogen-­‐Idec  execuHve  •  Atlas  Ventures’  EIR  on  January  2006  •  Searching  investment  opportuniHes  in  fibrosis  area  with  Atlas  Ventures  

•  Founding  Stromedix  by  in-­‐licensing  Biogen-­‐Idec’s  anH-­‐integrin  αvβ6  mAb(STX-­‐100)  at  its  preclinical  stage  

•  Atlas  led  the  investment  of  $30  m  in  early  2007  •  Biogen-­‐Idec  acquired  Stromedix  at  $487.5m  aOer  the  iniHaHon  of  Phase  2    clinical  trial    for  IPF  on  Feb.,  2012  

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Stromedix

•  Entrepreneurs’  and  investors’  perspecHve  –  Avoiding  NIH(not-­‐invented-­‐here)  syndrome  

–  Chance  to  review  opportuniHes  comprehensively  –  In-­‐licensing  assets  de-­‐prioriHzed  by  original  developers  –  Capital-­‐efficient  development  (  total  headcount  6,  all  studies  contracted  to  CRO)  

•  Biogen-­‐Idec’s  perspecHve  –  Avoiding    non-­‐performing  aging  of  de-­‐prioriHzed  assets  –  OpHon  to  license  (or  M&A)  

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•  EIR  &  VC  firms  •  Asset-­‐centric  •  Virtual  operaHon  •  M&A  

Zafgen  •  Incubator  (Altas  Ventures)  and  co-­‐lead(Third  Rock  Ventures)  •  Fat-­‐burning  drug(ZGN-­‐433)  in  P2  for  severely  obese  paHents  •  Drug  target:  methionine  aminopepHdase  2(MetAP2)  •  2008  in-­‐licensed  from  CKD  Pharma  and  fundraising  of  $14m  •  P1  MAD  with  obese  volunteers  (31  F,  Dec,  2009  ~  Oct,  2010)  

–  Data  announced  on  Jan  5,  2011  •  P1  MAD  with  extremely  obese  volunteers  (25  F,  Jun,  2011  ~  Nov,  2011)  

–  $33  m  raised  

•  P2  with  extremely  obese  paHents  (160,  M/F,  Aug  2012  ~May  2013)  –  Data  announced  on  Nov,  15  2013  and  $45m  raised  on  Dec,  4,  2013  

•  P2  with  Prader-­‐Willi  Syndrome  paHents(17,  M/F,  Jun  2013~  Nov  2013)  –  Data  announced  on  Jan  15,  2014  

•  Tom  Hughes  (former  head  of  metabolic  research,  NovarHs)  joined  in  Sep,  2008  

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Juno  TherapeuHcs  •  CAR  Technology  (Chimeric  AnHgen  Receptor  Technology)  •  Combined  forces  of  Fred  Hutchinson  and  Memorial  Sloan-­‐Kevering  

Cancer  Center)  •  Series  A  $120m  from  ARCH  Venture  Partners  and  others)  on  Dec.  4,  

2013  •  Founding  investor:  ARCH  Venture  Partners  and  Alakska  Permanent  

Fund  •  ScienHfic  founder  •  CEO:  Hans  Bishiop  (former  COO  of  Dendreon)  •  CFO  and  Head  of  corporate  development:  Steve  Harr    (M.D.  former  

Managing  Director  and  Head  of  Biotechnology  Investment  Banking  at  Morgan  Stanley)  

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Editas  Medicine.  

•  Editasmedicine.com  •  $43  in  series  A  •  Founding  investors:  Third  Rock  Ventures,  Polaris  Venture  partners,  and  Flagship  Ventures  

•  ScienHfic  founders  •  CRISPR/Cas9  Gene  ediHng  technology  •  Rare  geneHc  disease  

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