The venture capital firm Index Ventures is having trouble finding enough premier quality assets in which to invest the €150 million in its first dedicated life sciences fund, unveiled in March in 2012. Part of the problem believes Kevin Johnson, a Partner at Index, is that academics are simply scared to step into the unknown world of the start-up.
“Too many people are thinking of security rather than opportunity. They seem more afraid of life than death,” Johnson says.
This reluctance to turn entrepreneur matters because the insights and knowledge of scientists are required to drive the initial translation of academic research into new drugs and devices. “Any asset that is suitable for commercialisation has reached that stage in the context of deep understanding of the underlying biology, so you need the scientist concerned to be involved,” Johnson told Science|Business. “The people that are important in the early stages of commercialisation are those that know the science, not those that know how to run a business,” Johnson believes.
Asset-centric investments
Nor is it practicable to retain an academic post and be an entrepreneur. “Companies do absorb a huge amount of time and energy; it’s simply not possible to do both at the same time.” Johnson is concerned that this reluctance to turn entrepreneur could undermine the “asset centric” model for life sciences that Index is seeking to apply with the €150 million fund, in which the firm is focusing on investing in start-ups with just one or two first-in-class or best-in-class projects, rather than multiple programmes.
The intention is to reduce the amount of money that goes into corporate infrastructure and put the effort into finding out if drug compounds work or not.
Index is prepared to invest US$10 - $20 million to take projects from late-stage academic research/early pre-clinical development to clinical proof of concept. The firm is making a commitment up front to put in the full amount of funding, as long as development milestones are met along the way.
Think of it as a post doc
Johnson suggests scientists contemplating putting their toes in the start-up waters could think of such asset-lite companies as the equivalent of being awarded a research grant. “It’s 2 – 3 years money. If it goes bang, I can’t see it’s any different on balance from doing a post doc – after all, a researcher might not get the next grant.”
The coolest thing
Johnson is currently looking to invest in early-stage biotech companies, but Index as a firm invests across physical sciences and life sciences. And here’s a fascinating fact: life science entrepreneurs tend to be older than their counterparts in information and communications technology (ICT). “For technology [people] it’s deeply cool; it’s the coolest thing you can do to become an entrepreneur,” said Johnson.
That’s not the case in life sciences, and whilst it’s obviously more difficult for a biologist to set up a wet lab in the garage or bedroom than it is for someone interested in ICT to hack code at home, the reason for this coolness divide aren’t clear.
It’s true that ICT does not have the same capital requirements at the beginning, though funding needs ramp up rapidly as products advance towards market. But Johnson suggests the main factor is that ICT products get to market in much shorter order than drugs. “That’s why we are putting the focus on the first 3 – 4 years in our investments and trying to kill things quickly if they aren’t going to go all the way, reducing the cycle time,” he says.
The lifestyle questions
And now, Index is trying to do its part to change attitudes and inspire a new generation of biotech entrepreneurs, by bringing them fact-to-face with people who have successfully made the transition. “While of course we do get asked about the technicalities of forming a start-up, we’ve been overwhelmed by lifestyle questions,” Johnson says.
Five seasoned biotech entrepreneurs will be giving insights into their lives and lifestyles at Index Ventures ‘Playground’ event in London next Thursday (October 18). “They will talk about what drove them, what makes them tick, how life has changed, how they’ve coped with the ups and downs, and crucially, how they’ve managed to have a life outside the start-up cauldron,” says Johnson.
It is hoped this will encourage more academics to think about becoming entrepreneurs. As Johnson says, “This is not just in the interest of Index Ventures, it’s about improving the ecosystem. We want to see more dynamism - to get the same level of dynamism in biotech as in [ICT].”
Kevin Johnson is a partner at Index Ventures’ London office.
The Playground event is free for academics, registration is required. Please register here and send any enquiries to [email protected].
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