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TRENDSPOTTER: Corporate Venture Capital May Rival Traditional VC Firms in -omic Funding

Today in Europe there is a growing trend toward establishing venture-capital funds that are sourced exclusively by a major corporation. 

Some big pharmaceutical firms have recognized the potential rewards for nurturing small start-up firms—namely, novel IP—and have begun putting together modest funds of their own to pursue them. 

But the going so far is low. Although complete data are not yet available, anecdotal information has shown that the aggregate financial commitment to date has generally been limited, and the volume of these funds has yet to break the double-digit million-dollar barrier. 

To be sure, this has been a learning phase for these corporations as they slowly begin investigating and creating funds, and the corporate culture is slowly coming around to them.

Playing the Game

So how do you, an entrepreneur in the -omics sector, take advantage of this new trend in financing? First of all, in order to gain access to these resources, you must have an idea of the kinds of objectives these new fund managers are nursing.

Unlike traditional VC funds, which seek relatively quick financial returns from their investments, corporate funds are generally in it for the long haul. Financial returns in this game are expected more in the long run than in the short term since venture capital is regarded as just one tool—together with classic in-house R&D and direct partnerships or acquisitions—in general business development. 

Furthermore, corporate VC funds, which traditionally are managed independently of the corporation, enable large companies to capture more opportunities and diversify the risks associated with new-business development. Many corporations also acutely understand that in-house VC funds can help them gain early access to the new ideas, services, and technologies that may be incubating in your lab, which they know can grant them a head start with potentially profitable IP.

These characteristics also will likely change the overall VC environment, and well-established traditional players will have to compete vigorously with the corporate funds.

Corporate funds have some direct inherent advantages over traditional VC funds: they don’t have to spend time raising funds; they can lean on in-house expertise and existing networks between the corporation and the academic world when it comes to due-diligence; and corporate funds' portfolio companies may have better access to collaborations with the funding corporation. Finally, the structure of the new corporate funds—specifically, their independence from the overall company—ensures greater room within which the portfolio company can operate.

Still, it remains to be seen if these corporate funds will eventually engender lower or higher financial returns than traditional VC funds.

Gunnar Weikert is the CEO of Inventage, a venture capital fund based in Dusseldorf, Germany. Until recently he was global head of physiomics at Bayer, where he negotiated deals with Millennium, Lion Bioscience, and CuraGen. You can e-mail him at [email protected] .  

TrendSpotter  is a weekly column that focuses on how trends in politics, patent law, and the US and European markets affect the genomics industry. The column appears every Friday. Next week, Rochelle K. Seide and Michelle LeCointe, from the law firm Baker Botts, will write about current trends in biotechnology patents and licensing.

To access previous columns just enter the word "Trendspotter" in the archive search window on the homepage.     

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