David Berry: Looking for innovations with big potential

David Berry: “My goal was to join a lab.”

Berry fully expected to become an academic after getting his PhD from MIT’s Biological Engineering Division and MD from Harvard Medical School. “My goal was to join a lab working on new technologies that also was skilled in helping commercialise them,” said Berry. He already had experience in such an environment as a student under MIT Professor Robert Langer, whose lab has spawned dozens of biomedical companies.

Berry’s introduction to the venture capital world came when he still was a student and consulted for Flagship to research a new portfolio company called SynBio Corp, a constructive biology, or gene synthesis, device company now called Codon Devices Inc of Cambridge, Massachusetts. Flagship asked if Berry had ever considered venture capital. “I thought about what venture capital really is. I’d work with leading scientists to flesh out highly innovative ideas, develop new technologies and bring them to the world,” he said. “I’d be at the epicentre of technology, technologists and entrepreneurs.”

He liked the ability of venture capitalists to move technology toward commercialisation faster than an academic lab could. And he liked the variety of working in different fields of science and technology as opposed to lab research, where a scientist delves deeply to become expert in a narrow area.

“I like to do a lot of different things,” said Berry, who also is an avid skier, rock climber, cyclist, musician (playing piano and saxophone) and art enthusiast. While he admits he’s learning a lot about finance on the fly, he represents a new breed of venture capitalist: a converted scientist with an interdisciplinary background in engineering and medicine.

Berry’s work already has led to 11 peer-reviewed publications, more than 20 patents and applications, and more than 25 awards and honours, including the Lemelson–MIT Student Prize in 2005 for invention and innovation.

That same year he joined Flagship. “What gets me out of bed in the morning is trying to effect change,” said Berry, who focuses on life sciences and the energy and clean tech sector. “I like to think creatively about all sorts of problems and not limit myself to things I know are possible. [I want to know] what is the big ‘What if?’”

Innovator of the Year

Such a broad horizon recently won Berry the “Innovator of the Year” award by Technology Review magazine, which honours a total of 35 young innovators under age 35. Berry won for his work on renewable petroleum from microbes, which resulted in his co-founding LS9 Inc of San Carlos, CA. LS9 is using synthetic biology – a discipline that uses biological system models and that integrates science and engineering to tackle challenging problems – to make proprietary hydrocarbon biofuels compatible with existing fuel distribution and consumer infrastructure.

Energy has become a hot area for investments lately, especially as oil hovers around $80 per barrel, Berry said. “There’s a lot more buzz in the energy space now. Since 2005 the interest has increased among venture capitalists and companies are growing so fast that we don’t have accurate numbers for them.”

It’s a space that fits Berry’s readiness to take on a challenge and work across broad topics. “A lot has to be taken into account in the energy space, such as the price of energy, distribution chains, feed stocks, the price of oil, government policies and a whole series of things together,” he said.

A recent investment by Flagship was Ze-Gen, an advanced gas developer and integrator of waste gasification technology. The Boston-area company converts construction and demolition waste and municipal solid waste into near zero-emissions synthetic natural gas, or syngas, and electrical energy.

Berry met the CEO of Ze-Gen at a conference in Philadelphia and was impressed by both the technology and the management team, two key aspects of an investment. A similar technology already had been validated in the market, which reduced the investment risk. “They had a very interesting and talented management team, a well thought out execution plan, and the ability to leverage clean energy. They were looking for money,” Berry said. “We led a $4.5 million Series A round. Our intent is to be there for the long haul for future rounds.”

Patience is a virtue

Even in the fast-paced world of emerging technologies, patience is a virtue that pays off in the long run. “Most markets and companies take a certain amount of time to become large and successful,” he said. “If you want to be in the early stage game, you need to understand it takes time to get a company to an exit.”

What Berry looks for in an investment is interesting technologies with powerful potential. Having patents or intellectual property helps, but lacking that, it’s important for a company to know they have a dominant or protectable position. If there are patents, Berry would rather see one killer quality patent than a hundred useless ones. Having a scientific advisory board can help a venture capitalist get more information about a company.

Flagship tends to be hands on in its investments. One venture capitalist in the firm works with every company in Flagship’s portfolio. “It’s important for us to play a role to drive value in a company. It helps the company and us at the end of the day,” he said. That’s one reason Flagship has shied away from investing in overseas companies that may be more difficult to visit or that have different ways of operating than US-based companies. “We are very active investors who like to get involved in companies, and that’s easier to do when you’re close by,” he said.

Still, Flagship does help its portfolio companies expand overseas and manage overseas partner relationships. One example is molecular diagnostics development company BG Medicine, based in Waltham, Massachusetts. BG has major partners in Europe including AstraZeneca and Boehringer Ingelheim, and employees of the company spend a lot of time in Europe. “We are active in figuring out how to manage and develop strategies overseas,” Berry said.

VC in an innovation economy

A strong venture capital infrastructure can play a key role in an innovation economy, but venture capitalists are not the only driving force in America, Berry said. He is concerned about the US possibly falling behind in its competitive edge because the country “does not necessarily have the right policies to maintain top talent domestically. In the absence of a change we may lose top people who we’d like to keep here,” he said.

“And in the absence of people, there’s an absence of innovation.” India and China are producing four times as many engineers as the US. “We are not doing the best we can to keep people here. We don’t allow them to stay easily enough,” he said. One idea he puts forth: staple a green card into the passport of people who graduate from top universities with a PhD.