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Dick Svrluga, Boston Angel Investor, Sees Funding Climate Improving

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At A Glance

  • Dick Svrluga
  • MBA — 1978, Boston University
  • MS — 1973, Education, Indiana University
  • BA — 1971, Mathematics and History, University of Dubuque, Iowa.

Dick Svrluga is certified investor, which means he has met US Securities and Exchange Commission standards and can make equity investments in privately-held companies. That doesn’t, however, mean he will automatically make money on his investments. That takes work.

The Wellesley Hills, Mass., resident today is an executive, advisor and investor in four companies, ranging from GeneXP Biosciences in Woburn, Mass., an early-stage company creating a high-throughput gene-expression profiling service, to Zentox of Poquoson, Va., a company that offers technology-based industrial water services.

He is the second individual investor in GeneXP Biosciences who has agreed to speak to BioArray News about investing in the genomics sector. Previously, BioArray News interviewed fellow GeneXP investor John Hatsopoulos, co-founder of Thermo Electron [BioArray News 7/9/2003].

Svrluga started his professional career as an administrator at Boston University and became involved in the university’s venture investments, which led to executive positions helping BU-invested firms develop. From 1985 until 1990, Svrluga was executive vice president and director of Summit Technology, a Waltham, Mass.-based business that developed and commercialized laser vision correction systems. At the same time, he also served as president, CEO, and director for Seragen, which was later acquired by Ligand Pharmaceuticals in 1998 for $30 million.

Svrluga will tell you Summit was a home run, and Seragen was a “good solid hit” as far as tech-based enterprises go. He talked to BioArray News about his investment philosophy today and how it applies in the genomics sector.

You have met SEC requirements as an accredited investor. What does that mean?

There are a couple of hurdles to meet; you have to have a net worth at a certain level, and have a certain annual income over the last several years. I think that the concept is, from a regulatory point of view, that these are high-risk investments, and private companies are not liquid. If you are not prepared to suffer the loss, you shouldn’t be doing it.

Are you prepared to lose everything in an investment?

You understand when you get into something that could happen, you don’t think about that too much at the front. It happens a percentage of the time.

How do you participate in the companies that you invest in?

I’m a little more of a hands-on personality. I get involved in some way, in an advisory role. I like to be involved. What I bring is some good decent management skills, and some pretty good strategic thinking on complex problems.

I’m an entrepreneur, a manager. I’ve run very complex things. At Summit Technology, we created laser vision-correction, taking a product from concept to very rigorous approval. At Seragen, we took a drug into Phase III clinical trials.

How do you make investment decisions?

There is always the classic line: you invest in people, and hang around with smart people. In Boston, there are lots of good places to do that: it’s part of what Boston is all about. It’s really a small town, with so many different things going on around there, and lots of ideas percolating up.

It really gets back to the people you are involved with. You wouldn’t do this unless it was fun. It’s about good people, doing good stuff. If you think about it, the output is, you can speed drug development and drugs and medications can reach people in a shorter period of time.

When do you get out of an investment?

As an individual investor, you have a longer time horizon than the professional guys. I don’t focus on when I’m going to get out. What I think about is this: Is this a viable strong business? Timing is such a huge thing, it has to be the right time for the market, so the market sees the need.

How did you get started in investing?

At Boston University, I was involved in investing in a lot of different capacities, and, in a way, that started my early involvement as an entrepreneur. I was assistant dean of arts and sciences and I had to think about creative ways of raising money to fund research. We started looking at R&D limited partnerships, non-governmental ways of funding research. That’s where Summit Technology came from. It was based on research from faculty members at Boston University. We decided to start a separate company, and got some seed money to start it up.

Boston University was not a big venture capital player. It did some smaller-seed stage, and early-stage investments similar to Summit. With Seragen, BU put a lot of money into it in the ‘80s and ‘90s. I took over at Seragen [in 1988] and ran it for six years after BU had made an initial investment.

What are you seeing in the investment climate today?

It has been a difficult and challenging time the last couple of years. Personally, I sense a loosening in the last few months. The companies I’ve been involved in have closed [on], or have come close to closing on financing, all within the last three months. I’m sensing a little bit of a shift. Some of the money I see coming in is from [individual] investors, not the blue-chip investor funds. Valuations today are quite good — and if you have the resources in hand, now is a good time to invest.

Do you mean “a good time” for investors, or for entrepreneurs?

These times are not bad for entrepreneurs. Things are a little bit where they were before [the bubble economy]. It got silly for a few years there. Valuations now are more reasonable — not horrible, but not exceedingly high.

What about the terms being offered today for investments? Are they onerous?

When things go bad, and that happens a decent percentage of time, there are ways that investors seek to protect the money that they have put in. When a business takes someone’s money, and performs, most of the terms don’t apply.

What you will find is, there is a difference between individual investors and the bigger firms. With individual investors, the terms are not as onerous as if you were dealing with a big firm. Individual investors are discerning. It’s clearly a different world from the VC world. The individual is there early on in the process: They step up to the plate and take the early risks.

In investing in GeneXP, you are really investing in a services company, rather than one creating a product.

At a company like a GeneXP, and also one of the other companies I’ve invested in, GreenPages, which is in the information technology field, the business model is more of a service model, a solution-provider model, where a company is working closely with the customer to understand what the problems are in some defined area, and bringing solutions to meet those problems. A service model mitigates risks. Some investors don’t like services, they like building a silver bullet. It can be great. But one of the challenges [in services] is really understanding ‘what does the customer really want?’, ‘where is the customer feeling pain?’ In a services model, you can find out where a customer is really suffering and you can help. I like companies that spend a lot of time listening to customers: I like the folks at GeneXP and their whole approach of getting the confidence of the customer so that they will talk to you and tell you where the problems are.

The thing that I would be leery of is someone coming up with the magic bullet. The “I have an answer for the whole process.”

What is the exit strategy for GeneXP?

It is a kind of business that could grow into a substantial market. It could be a public offering, or an acquisition candidate for another company that wanted to move into that area. Right now, they need to focus on building the business and building relationships.

You know, when this is published, some folks might want to send you a business plan to review.

Send the business plan.

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