Tech-Shy VCs Look to Biotech

Tunick, Britt Erica
June 2003
Investment Dealers' Digest;6/23/2003, Vol. 69 Issue 25, p11
Trade Publication
A number of venture capital (VC) firms, still wary about getting back into technology investing, have instead turned their sights and their funding toward biotechnology and bioscience — a decision some VC executives believe will ultimately prove a mistake. "You're seeing a lot of venture funds make investments in bioscience because they can't find a way to justify investments in technology to their limited partners, and that doesn't make sense," said Jonathan Silver, managing director and founder of Core Capital, a $180 million private equity fund that invests in early stage ventures and mid-size companies. Since a typical 10-year venture fund only has a five-year investment window and a five-year period to harvest returns, that's an obvious reason VC should steer clear of bioscience investments, Silver contended. Indeed, most bioscience projects take longer than 10 years to realize gains, leaving VC without the clear-cut exit opportunity investors want to see. Terry Carlone, president of Davis Bioscience Group, a California-based VC, agrees that bioscience can be risky, but said his fund has found numerous investments in the sector that lend themselves to earlier exit strategies such as mergers and acquisitions. One reason, according to Carlone, that some biotechnological firms can now realize earlier returns is simply advances in technology itself.


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