NEW YORK, November 3 – As founder and CEO of venture capital company Inventage, Gunnar Weikert is now using his science and business expertise to locate the most promising start-ups out there.
Weikert, who left Bayer after an auspicious 10-year career with the company, launched Dusseldorf-based Inventage last month. Having raised money from some of Europe’s leading entrepreneurs, he has already made about six investments in fledgling European and American genomics companies and he expects to make several more over the next 12 months.
In Part II of GenomeWeb’s recent interview with Weikert, he discusses his reason for leaving big pharma as well as his ideas about how a venture capital firm should be run.
GW : Why did you decide to leave Bayer and start Inventage, your venture capital fund?
Weikert : At the end of my time with Bayer, I was mainly identifying potential companies, potential concepts, potential business ideas, and designing them in a way or combining them in a way that made sense and created value.
When I first picked Millennium, I think the stock was at about $12 or so. I told people at Bayer the stock will go up. No doubt about it. This company is undervalued and it will be an extremely good investment, simply based on the thoughts I had about how genomics will develop in the future and what Millennium had in the shop.
So, that for me was a clear win, and that's pretty much what I'm doing now in venture capital.
GW : Are venture capital companies currently doing a good job meeting the needs of small genomics companies?
Weikert : No, the way venture capital is organized today does not support the needs of the industry. In terms of having closed funds, they are generally large funds and they have to be invested relatively fast because the funds will be closed after however many years. Then you have to make an exit.
So that tells the fund manager you need to invest the money relatively early on. Let's just say you have a $500 million venture fund, I doubt that you can find in one year enough good start-up companies to invest that much money. No way. The more you head toward closing the fund, to the exit point, the less likely it is that you will get high returns on the invested money because, let’s say, the lifetime of the company before you have to exit is only two years. What can you expect to create in two years?
GW : So, what is your strategy?
Weikert : We have private investors who have an interest beyond a financial interest in investing in the healthcare industry. That gives you a couple of advantages. We are highly flexible with the fund. We only take money from the fund that we can invest in high-quality start-up companies. We have a clear focus. We focus on biotech healthcare, but everything there, IT solutions, web-solutions, patient-record systems — whatever is interesting in health care.
We don’t use a gambling approach, which says, “Okay we don't know whether this is a good or a bad investment, but we simply invest in 10 genomics companies, and one of them will make it.”
I don't believe in that approach. I believe that if you have knowledge, deep knowledge, and industry expertise, you can identify whether a concept makes sense, and will survive, and will be successful.
GW : How much do you plan to invest?
Weikert : We plan to invest in the first 12-18 months about $15 million.
GW : Would you invest in a company that competed with Lion or Millennium?
Weikert : From an investment standpoint I would. But if there is a company that is doing exactly the same stuff Millennium is doing, I probably wouldn't invest in it because what would be the benefit? Why should you try to compete with Millennium? The same would be true for Lion.
Once again, I think companies have to have some kind of protection against competitors in the form of a market platform. It’s easy to compete with single technologies; it's not so easy to really compete with platforms, as we have seen with Microsoft.
GW : What are you looking for when you make an investment in a company?
Weikert : The way they can increase and optimize the process. If a company came to me and said, “Hey we do it better with the following approaches,” even without having a new technology, I would say, “Okay, that's something we could talk about.”
I believe in technologies, of course, but not only in technologies. If one car company has a new engine, maybe they have an advantage of half a year or so. After that half a year or a year, all the other companies have the same kind of new engine or whatever it is. The same is true with everything else regarding technologies. But what you can protect is processes in the company. That's not so easy to copy.