2011

StockholmBusinessRegion DevelopmentAB

Supervisor:YlvaHultmanErlandsson FarhangModaresi,PaerhatiAibibula

[INVESTMENTCRITERIASOFCORPORATE VENTURECAPITALINLIFE SCIENCEINDUSTRY]

Abstract:
Venturecapital(VCs)andCorporateVentureCapitals(CVCs)areamongthemostimportantsourceoffunding ofsmallcompaniesinlifescienceindustries.InthisstudywetrytodeterminetheemployedcriteriaofCVCsfor makinginvestmentdecisionsbyanalyzingtheinvestmentportfolioandalsoconductingphoneinterviewwith some investors from venture firms of big pharmaceuticals. In first study, we evaluated their investment portfoliointermsoffieldofinterest,countries,therapeuticsareas,phaseofinvestment,roleofinvestorsand amountofinvestmentbasedontheirpublisheddatainofficialwebsite.Wedidsemistructuredinterviewswith 6investorsformCorporateVentureCapital(CVCs)andonefromindependentVC.Thedatawerecollectedby visiting the official websites of CVCs and invested companies, displayed that CVCs are more interested in Biotech and Pharmaceutical projects and in preclinical stages. The average amount of investment in each projectvarysignificantlyamongcompanies(Rochewashighestwith65mUS$andMitsubishiwaslowestwith 11.5mUS$).U.ShasmoreinvestmentsthanEUandthereisnoinvestmentinSweden.Productswithgeneral usage, Oncology, neuroscience and infectious diseases are among the highest invested projects. In terms of average amount of investment, drug development platform, infectious diseases and transplantation and immunology could attract more money. It seems that the investment decision of CVCs are influenced by strategicimportanceofprojects/productsforparentscompanies;howeverfactorssuchaslocation,therapeutic areasanddevelopmentstageofproductsalsocaninfluencetheinvestmentdecisionofCVCs.Moreover,factors such as competent management team, preferred therapeutic areas, geographical location and success story areamongthefactorsthatinvestorsusuallytakeintoaccount.Networkingisoneoftherecommendedtools thatsmallcompaniescanutilizetoattractinvestors,asinvestorpayalotofattentiontomeetmanagement team before investment. Interestingly, tax structure and salary are not issue for investors. Conclusion: small companies need to analyze the portfolio of CVCs, know their preferences and limitation and meet investors beforesubmittingtheirproposalinordertoincreasetheirchanceforreceivinginvestmentfromCVCs.

Contents
Introduction.......................................................................................................................... 3 Background ......................................................................................................................... 3 Life-science industry in Sweden ...................................................................................... 3 Venture capitalists and their policies ............................................................................... 4 Corporate Venture Capital (CVC) .................................................................................... 5 Project aim and method ...................................................................................................... 5 Terminology Definition ..................................................................................................... 6 Field of interest ................................................................................................................ 6 Therapeutic area.............................................................................................................. 6 Type of investment .......................................................................................................... 7 Role of investors .............................................................................................................. 7 Result .................................................................................................................................. 7 Discussion ......................................................................................................................... 12 Limitation ........................................................................................................................... 14 Furtherstudies .................................................................................................................... 14 QUALITATIVE RESEARCH IN INVESTMENT CRITERIAS OF CORPORATE VENTURE CAPITAL (CVC) IN LIFE-SCIENCE INDUSTRY .................................................................. 15 Background ....................................................................................................................... 15 Methodology ...................................................................................................................... 15 Type of study ................................................................................................................. 15 Selection of interviewees ............................................................................................... 16 Interview ........................................................................................................................ 16 Aim of interview ............................................................................................................. 16 Structure of interview ..................................................................................................... 16 Result: ............................................................................................................................... 17 Discussion ......................................................................................................................... 18 Recommendation .............................................................................................................. 19 Meet investors as much as you can proactively ............................................................ 19 Improve and document your management skill ............................................................. 19 Presenting your achievement in professional way ......................................................... 19 Conclusion......................................................................................................................... 19 References: ....................................................................................................................... 20 Appendix ........................................................................................................................... 22 Summary of Interviews: ..................................................................................................... 23

 Introduction
Enormousamountofresources,includingcapital,humanandtimeareneededfordevelopmentof anideatoaproduct/serviceinlifescienceindustry.AccordingtothereportofTuftsCenterforthe studyofdrugdevelopment,ittakes15yearsandUS$1billiontodevelopablockbusterdrugthrough toregulatoryapproval(HkanKirkbeyBuchet.al,2011).Unpredictableresponseofhumanbodyto drugs and ever increasing regulatory requirement are among the main factors that lengthen the commercializationprocessoflifescienceproducts.Sobiopharmaceuticalcompaniesneedtofinance theiractivities,usuallyexternally,inordertoreachthemarket. There are several ways for lifescience startups to finance their activities including R&D limited partnership,angleinvestors,privateandpublicVentureCapital,CorporateVentureCapital,mutual funds and public offering. Angel investors and venture capitals(VCs) are among most common methods that startup biotechnology and pharmaceutical utilize for funding their companies (Beth Sliverstein and Carl Osborne, 2002).VCs are usually absorb capital from different sources such as banks, corporation, insurance companies and pension funds and invest in young, high risk companies.Inlieuoftheirinvestment,VCstakeconsiderableequityofcompaniesandexpectahigh return on investment when company goes public or is acquired (Douglas P Lee & Mark D Dibner, 2005). Dryingtheproductpipelineofbigpharmaceuticalcompanies,theyhavebeeninterestedininvesting insmallstartupbiopharmaceuticalcompanieswithinnovativeproducts.Lookingatnewmolecular entities that have been approved by FDA during last 5 years, we can find that more than 25% of themcomefromsmallbiotechcompanies(LTRatcliffe,2011).Asthesesmallcompaniesarehighly dependent in external funds, it is a great opportunities for big pharmaceutical to make more collaborationwiththesestartupsviainvestmentinthesetypesofcompanies. In this report we are going to identify and categorize factors/criteria that affect the investment decisionofbigpharmaceuticalbasedonanalysisofinvestmentportfolioofcorporateventurecapital that are affiliated top 50 pharmaceutical companies. We hope that the result of our study can provideaclearerpictureforminvestmentprocessinlifescienceindustry.

Background
Life-science industry in Sweden
LifescienceindustryisoneofthemostimportantsectorsforSwedisheconomy.Swedishlifescience industry represents around 20% of net export of Sweden. It is equal to 40 billion SEK net export revenue(Shortfact,Swedishlifescienceindustry,SwedenBiowebsite).Lifescienceindustryisalso

important from the perspective of employment rate. In 2009, 32000 employees were involved in manufacturing,consultancy,productdevelopmentand/orresearchanddevelopment(R&D)inlife science industry (Life science companies in Sweden, Including a comparison with Denmark, VINNOVAreport2011) As the home of the worldclass universities like Karolinska Institute and Uppsala University, StockholmUppsalaregionistheleadinglifescienceclusterinEurope.About60%ofemploymentin life science industry in Sweden, is at companies located in Stockholm, Uppsala and Sdermanland (factandfigureonSwedensnumberonlifescienceregion,StockholmBusinessregionreport) Venture Capitals (VCs) are among the most common sources for financing startups in lifescience industry. Many startups in lifescience industry have used fund from VCs during the past three decades(LTRatcliffe,2011).Inrecentyears,especiallyafterfinancialcrisis,theavailabilityoffundin VCshasbeendiminishedasmanyVCshaveshiftedtheirinvestmentinlaterstagesprojects/products (PeterMitchell,2009).

Venturecapitalistsandtheirpolicies
In recent years, VCs frequently invest in hightech startups companies, since the selected entrepreneursofthesecompanieshaveverygoodtechnicalexpertiseinthefield;anotherpointis that the new technology has high potentials to be a real product in the reasonable term, such as biotech, telecommunications, or any other industry where new developments are creating rapid change and increasing prospects for future growth (Victoria Duff, 2011) Most VC investments are doneinapoolformat,whereseveralinvestorscombinetheirinvestmentsintoonelargefundthat invests in many different startup companies. By investing in the pool format, the investors are spreadingouttheirrisktomanydifferentinvestmentsversustakingthechanceofputtingalloftheir moneyinonestartupfirm. There are some basic criteria that VC will use, after doing exhaustive due diligence, to evaluate whethertoinvestinacompany.(VictoriaDuff,2011) Large Lucrative Market: As we mentioned before, most venture capitalists are only interested in investing in the newest, fastestgrowing industries, such as nanotechnology, telecommunications, biotech or any other industry where new developments are creating rapid change and increasing prospectsforfuturegrowth. Quality of management: VCs look for companies who have assembled a management team with significantworkexperienceintheindustry.Asmanagerofasmallcompanylookingforcapital,heor sheshouldknowhowtoconvinceotherpeopletohelpdevelophiscompanyandhasnotprovided knowledgeable people in key areas such as accounting, manufacturing, marketing and fulfillment, theventurecapitalistprobablywillrejecttheinvestmentbecausethemanageristooinexperienced aleadertobuildasuccessfulcompany.(PeterMitchell,2009) Breakthroughtechnologyofidea:Noordinarybusinessideaisgoingtoachievebigreturns,sothe investmentmustbeinacompanythathascreatedasignificantimprovementorbreakthrough

technologythatwilldramaticallyleaditsindustryorcreateatotallynewindustry.(Garage TechnologyVentures,2010) Competitive advantage: A company also must have a good marketing plan that will launch the product rapidly into leadership in the industry. Every good idea or product will soon have many other companies trying to copy it, so the VC looks for patented technology, trademarks, brand recognition, extensive research and development necessary to duplicate the product or service; controlofunusualknowledgeorresourcesnecessaryforproduction;orgreatexpenseinvolvedfora competitortoduplicatethebusinessmodel.Theseelementscreateahighbarriertoentryforany potentialcompetitor.

CorporateVentureCapital(CVC)
AccordingtoFinancialTimesCorporateVentureCapitals(CVCs)arethespecifictypesofVCsin whichnonfinancialfirmsinvesttargetcompaniessuchasstartupsorbuyouts.Theseinvestments oftenfollownotonlypurelyfinancialinterests,butalsopursuestrategicgoalsindevelopingnewor complementarytechnologiesorbusinessfieldstothoseinwhichthefirmisalreadyactive(Financial TimeLexicon,2011).BigpharmaceuticalsestablishedaVCarmwhichscansstartupsandtrytodeal withinterestingprojectinatearlystages.WhileVCsfocusmoreonROI,CVCsaremoreinterestedin makingdealwithcompanythatcanfulfillthestrategicneedsofthemothercompany(Peter Mitchell,2009). As the continuing financial doldrums temper the appetite of traditional private equity VC for startups,investmentfundssetupbybigpharmacompaniesarebeginningtodominateearlystage financing of pharma and biotech firms (Ian MacMillan et.al, 2006). Some big pharma and biotech firmsuchasPfizer,EliLilyandAmgenhavetheirowninternalventurecapitalunitsorwhollyowned subsidiaries focused on venture capital. This kind of the investment of corporate funds directly in externalstartupcompaniesiscalledcorporateventurecapital(CVC).Strategicandfinancialissues are the main reasons for pursuing CVC. Most pharma/biotech related CVC companies looks for at least be budget neutral to their parent companies; strategic reasons are generally stronger motivatorsthanfinancialones.Onebasicstrategicreasonmanypharma/biotechrelatedCVCscite forinvestingistoseeknewdirectionsanddevelopnewproducts.Anotherstrategicmotivationfor engaging in corporate venture capital activities is to supplement and support the activities of the parent company. While all of the companies which were researched also had R&D divisions and wereactivelypursuingimprovementstotheirproducts,theleadershipofthesefirmsrecognizesthat developmentsreachedbyothercompaniescouldcertainlybehelpfultothem. CVCprogramsarestructuredinvariousforms.SomeCVCsareorganizedasindependentsubsidiary companies, while others operate as a group within the parent company organization. Some CVCs haveadedicatedinvestmentfund,wherethecorporationcommitsagivenamountofcapitalfor investment. Other CVC programs are discretionary, in that investment capital is allocated as investment opportunities arise. Most CVC programs have a corporatewide mission, receive corporatefunding,andreporttothecorporatelevel(IanMacMillanet.al,2006).

Projectaimandmethod

The main aim of our project is to provide an overview of pharmabacked VCs investment criteria. After meeting with project supervisors we decided to limit the scope of project to CVCs affiliated withtop50pharmaceuticalcompanies.DiggingmoreinthewebsiteofCVCsandotherdocuments, weunderstoodthatmostofprovidedinformationbythemaboutinvestmentcriteriaisnonspecific and could not provide objective information for our purpose. So we decided to analyze the investment portfolio of each CVC, as we assumed that investment history can provide more firm dataabouttheinvestmentcriteriawhichareemployedbybigpharmaceuticalventurefunds. TheinformationabouteachCVCwascategorizedintwomaingroups.InVCcharacteristicspart,we mainly gathered the information under the categories of field of interests, phase of investment, amount of investment (in million US$), investment criteria and investment horizon based on information that they announced in official website of specific CVCs. In the part we called InvestmentPortfolio,wecollectedinformationunderthecategoriesofnameofcompanies,field ofinterest,region,therapeuticarea,phaseofinvestment,typeofinvestment,roleofinvestorand amountofinvestment(inmillionUS$).Wefoundthenameofinvestedcompaniesfromtheofficial websiteofCVCsandwegatheredtheinformationabouteachcategoryfromtheofficialwebsiteof investedcompaniesbysearchinginamongpressreleasesandotheravailableinformationinofficial websiteofcompaniesifapplicable.Iftheinformationisnotavailableintheofficialwebsite,wewent tootherbusinessnewswebsitetoprovideasmuchasinformationaboutinvestedcompanies.Allthe informationwasenteredtoasheetinMicrosoftExceltomakefurtheranalysiseasier.Thecollected dataisformedtoaPivottablethatenableusertofiltertheinformationbasedonselectedcriteria. We focus only on the current investment of CVCs, as the information of acquired or merged companyisnotaccessibleintheirwebsite.

TerminologyDefinition
Asthereisnotgeneralconsensusaboutsomeofemployedterminology,wetrytoprovideaclear definitionsomeoflessdistincttermsweusedindifferentcategories.

Fieldofinterest
Thefieldofinterestiscategoriesunder6itemsincludingBiotech,Pharma,Medicaldevice, Diagnostics,Bioinformaticsandvaccines.Biotechappliestoallcompanieswhichclearlydeclarethat theyarebiotechcompanies,ortheirproducthasaprotein/largemoleculewithmorethan500 kDaltonmolecularweight.Pharmaareallcompaniesthattheirproductshavemolecularweight under500kDalton.MedicalDeviceistheallmedicaltechnologythatisusedfortreatingor rehabilitationofpatients,whileDiagnosticsisapplicabletoallmedicaltechnologieswhichareused indetectionofdiseases.

Therapeuticarea
Most of the employed term is compatible with current clinical practice and definition; however it seemsthatsomeoftermsneedtobeclarified.TermGeneralisappliedtoallproductsthathave morethanone(intended)clinicalusage,whiletermNotspecifiedmeansthatthecompanydoes not provide a specific usage for its product. The term Not Applicable (N/A) refers to product/services that a clinical indication/category is not applicable for them like some of

bioinformatics services. Drug Development Process applies to all technologies that are not specificallyforaspecificclinicalusagewhiletheyareexploitedtodevelopothermedications.

Typeofinvestment
We use the terminology that usually companies used for description of financing round including seedfinancing,roundA,B,C,D,andE.

Roleofinvestors
RoleofinvestorsreferstorolethatinvestoracquiresafterinvestmentincludingBoardmemberor board observer. board member indicates the board member who has voting right, while Board Observerhasnot.

Result

BasedonthedatawehavegatheredinpressreleasesfromVCsandinvestedcompanieswebsite, businessnewsandacademicarticle,wegotaround300investedcompaniesfrom19CVCs.We analyzedthedatausingdifferentperspectives,suchasFieldsofInterest,Region,andAmountof investment,Therapeuticareas,andPhaseofinvestment.Unfortunately,ourdataarenotcompletely sortedinourcategoriesbecauseoflimitedaccessandlackofinformation.Forinstance,someofthe companiesdidntmentionclearphaseofinvestment. BiotechandpharmaisstillthetopinvestingtargetforVCs.Around30%investmentwenttobiotech, theother30%wenttopharmafirms.Below,youcanseetheexactnumberoftheinvestedcompany inthefieldsofinterest.(Fig.1)

Numberofinvestmentdifferentfields
101 97

19 2 Bioinformatics BioTech Diagnostic

22 3 MedDevice Pharma Vaccine

Figure 1

Interestingly,investmentinpreclinicalphasesismuchhigherthanothers,andphaseIIIinvestmentis reallylow,butinvestedcapitalisthehighest.Thereare140companieswereinvestedinpreclinical phase.(Fig.2)

Noandavergeamountofinvestment(mUS$)indifferent developmentstages
140

73,32

41,47

39

46,10 34 22,90 13 8,38 6

PhaseI

PhaseII

PhaseIII

Preclinical
CountofFieldofInterest No. of Investment

N/A

AverageofInvestmentamount(Mil.US$)

Figure 2 Asyoucanseebelow,theaverageinvestmentismainlyrangedbetween20till35millionUS$.We focusedonupfrontinvestment.Inmostofthecases,investmentisinitiatedbyoneortwoVCs,and then more will join in after that. The numbers showed below mostly are the total amount of investment,andVCwementionedinthediagramisjustoneofVCsinthepool.Itisdifficulttofind exactnumberofmoneyfromeachsource.(Fig.3)

Averageamountofinvestment(mUS$)
65,68

39,67 36,44 33,40 30,54 25,44 25,50 26,10 26,17 17,07 16,89 11,50 33,17 30,18 23,33 16,13 24,50

Figure 3

Thefigurebelowistheaverageinvestmentindifferentfields.Again,biotechandpharmafirmsare clearlyhigherthanothers.Vaccineinvestmenthasthehighnumberaswell.(Fig.4)

 Avarageinvestmentfieldofinterest(Million$)
32,24 29,83 23,33

22,85

10,74 7,20

Bioinformatics

BioTech

Diagnostic

MedDevice

Pharma

Vaccine

Figure 4

U.S.istheheavenforVCs.Itiswellknownthatlotsofandfamousbigpharma/biotechcompanies arelocatedinU.S.,innovationsarereallyactive.ItiseasierforVCstofindtheirtarget.Thereare189 companieswereinvestedinU.S.,and11Canadiancompaniestoo.WholeEuropealsohadgood numbersofinvestment,especiallyforU.K.andSwitzerland,butnotinSweden.AsiaandAfricaare extremelypoorinthisbusiness(Fig.5).WealsodidstatisticofinvestmentinEUbyCVCs,UKand Switzerlandstandofalmost50%ofinvestment;Denmark,GermanyandIsraelarethesecond biggestgroupinEU(Fig.6).

No.ofinvestmentindifferentcountries
Austria;3;1% AsiaPacific;8;3% Belgium;2;1%

Canada;11;4% Denmark;6;2% Germany;6;2% Ireland;2;1% Israel;6;2% Italy;3;1% Netherland;3;1%

Spain;2;1%

Switzerland;15;5% US;189;67% UK;20;7%

Figure 5

NoofinvestmentinEUcountries
Austria 5% Belgium 3%

Denmark 9%

UK 32%

Finland 1% France 2%

Germany 9%

Ireland 3% Italy 5% Switzerland 23% Spain 3% Netherland 5%

Figure 6 Therapeuticareaistheotherangletoanalyzedata.Wecanseethat27%ofinvestmentwentto generalproducts/projectsofthesmallcompanies.Oncologywith16%,infectiondisease11%and neuroscience11%arethepopularareastoinvest.Transplantation/Immunology6%,drug developmentplatform5%andcardiovascular/metabolism5%alsogotthequitegoodinvestmentas well.(Fig.7) No.&percentageofInvestmentbasedonTherapeuticareas

Transplantation,Immunology, 16,6% Respiratory;5;2% Ophtalmology;4;1% Cardiovascular,Metabolism;21; 8% Drugdevelopmentplatform;14; 5% Endocrinology;6;2%

Oncology;45;16%

Notspecified;4;1%

General;74;27%

Neuroscience;30;11%

N/A;10;4% GeneticDisease;4;1%

Inflammation;12;4% Infectiousdisease;27;10%

Hematology;2;1%

Figure 7

Average amount of investment in different therapeutic areas can provide valuable information abouttheinvestmentstrategiesofCVCs(Fig.8).Drugdevelopmentplatformcouldabsorbabout56 mUS$ineachproject,whileinfectiousdiseaseandtransplantationprojectscouldreceive48and41 mUS$ respectively. These numbers can represent the value of each therapeutics fields for big pharmaceuticals; however, the value can be affected by many factors such as success rate and noveltyofcompounds. AverageamountofInvestmentintherapeuticareas(mUS$)
Transplantation,Immunology Respiratory Ophtalmology Oncology Notspecified Neuroscience N/A Inflammation Infectiousdisease Hematology GeneticDisease General Endocrinology Drugdevelopmentplatform Cardiovascular,Metabolism Burns 19,50 20,00 17,50 56,50 16,00 28,50 30,49 4,00 22,43 48,20 18,45 25,30 15,50 27,56 22,60 41,38

Figure 8

During the study we realized that neuroscience, inflammation and oncology are the popular therapeutic area to invest. The figure below shows the number and amount of investment from companies(Fig.9).
No&averageamountofinvestmentinNeuroscience,Inflamationand Oncology
AverageofInvestmentamount(Mil.US$) 44,7 32,0 35,0 32,3 31,8 26,3 20,0 8 1 4 4 3 9,3 3 8,4 1 12 5 8 16,8 16,5 16,0 10 4 9 4
No. of Investment CountofFieldofInterest

31,3 23,3

30,4

31,3

Figure 9

 Itwillbeinterestingtoseethat,whatdifferenttherapeuticareaswereinvestedbypharmaand biotechnologyfields.Seebelow.Theexactnumberofinvestedcompaniesindifferenttherapeutic areascanbeseeninappendix.(SeeAppendix,Table1)

Discussion

Venture capitals play an important role in developing lifescience industry by providing enough capital that enable small innovative companies to run their researches. Venture Capitals have providedtheenoughfundsfordevelopingmanyhightechindustriesduringthelastthreedecades (LTRatcliffe,2011).Sotheircriteriaforselectionoftheirinvestmenthaveanimmenseimportance forbusinessdeveloperinlifescienceindustry;however,itseemsthatemployedinvestmentcriteria byVCsarequitediverseandnotallVCsemploysolidcriteriaforselectionoftheirprojects.Kuckertz and Kollmann divided the employed investment criteria by VCs to five main categories including personality of entrepreneurs, experience of entrepreneurs, product or services, market characteristics and financial characteristics. These five categories also divided to fifteen subcategoriesthatareemphasizedbyotherresearchersinthisfieldaswell(KuckertzandKollmann, 2010).TheyalsorealizedwhileVenturecapitalistshaveaclearunderstandingaboutfactorssuchas innovativenessandthecompatibilityofprojectswithVCinvestmentstrategyfromthebeginningof their investment, there are some other factors such as personality of entrepreneurs (leadership capabilitiesorcommitment)stillremainuncertaineventillthestagethatVCswanttostructuretheir deal. In response to different environment of lifescience industry including high regulated market and highriskoffailureespeciallyinclinicalphase,VCsusuallyexploitdifferentcriteriaforassessingtheir investments. Meyerson and Agge studied eight criteria that VCs used for evaluation of their investmentinbiotechnologyfieldsandtheycategorizedthesecriteriainthreemaingroupsnamed idea,includingconcept,scienceandintellectualproperty;businessincluding,market,competition, valuation and geography; and finally people including management. They understood that companies mostly matched with two of the main groups that are management and concept (MeyersonandAgge,2008).RatcliffeconsideredsevencriteriathatVCsusuallytakeintoaccountfor assessment of productbased companies including compelling science, high quality asset, strong intellectual property position with clear freedom to operate, unmet medical need, defined regulatorypath,strongteam,indicationthatmanybigpharmaareinterested,capitalrequirement, timelinesstoexitandfuturefinancingrisks(LTRatcliffe,2011). Whileindependentventurecapitalsfocusmoreonthereturnoftheirinvestment,corporateventure capitals(CVCs)considerthestrategicopportunityfortheirparentcompanies.GenerallyCVCshave thestrategicmissiontoprovidetheopportunitiesforparentcompaniestogrowtheirbusinessby access to novel innovative technologies, development of new products, enter new market or enhanceexistingbusiness(IanMacMillanet.al,2006). In our study we tried to investigate the pattern of investment of CVCs associated with top 50 pharmaceutical companies by evaluation of their investment portfolio. The higher number of

investmentinpharmaandbiotechcanbejustifiedbythehighernumberofavailableprojectinthese two main fields and also higher needs of small biotech and pharmaceutical for capital for running their research projects in comparison with medical device and diagnostics. In the case of CVCs, it seems that higher level of strategic importance of pharma/biotech for growing the business of parent companies is another reason that attracts CVCs towards interesting projects in small companies. WhilethereisconsensusamongallarticlethatindependentVCsarerecentlyaremoreriskaverse and tend to invest in latestage projects, our data represents that most of CVCs investment were doneinpreclinicalprojects.ThisphenomenonalsocanbejustifiedbystrategicmissionofCVCs fortopbigpharmaceuticals;howeverthescarcityofinterestingprojectinlatedevelopmentalstage shouldnotbeunderestimated. The average amount of investment per projects is generally compatible with the rank and size of companies;however,lowamountofinvestmentbyPfizerandabsenceofSanofiAventis,assecond bigcompaniesinourlist,isnoticeable.Itseemsthatsmallcompanieslookingforinvestmentneedto estimate the amount of needed capital before approaching CVCs, as the variance of investment amount among CVCs is quite big. Moreover for small companies that need a lower amount of investment,collaborationwithCVCsoflowerrankcompaniesisamorerationaloptionduetolower levelofcompetitionforreceivingoffunds. The huge differences between the number of investment in US and other countries, even region suchasEU,cannotberevealedexplicitlybyourstudy,sinceourstudycouldnotconsiderallfactors that a Venture Fund take into account for selecting an specific location. This statement can be proved when the distribution of investment is analyzed among European countries. Finding understandable and clear factors that justify the distribution of investment among European countries is not possible based on our study. It seems that other studies with focus on the main driversofCVCsforinvestmentdecisionsuchgeography,legislationetc,canexplainthemainreason forthisdifferences. Projects with general clinical usage, which means products/services with more than one specific clinical use, Oncology and antiinfective, are among the most invested types of projects by CVCs. OtherstudiesindicatethatindependentVCsarereallyinterestedinspecialtyproductse.g.orphan products,whichneedsrelativelylowmarketinginvestmentwithhighsales.Incontrary,ourresults show that CVCs are really interested in projects which can be used in more than one clinical indication.Itmaybeexplainedbythefactthatmostofbigpharmausuallyownsalreadyestablished sales and marketing team and expanded network among clinicians, then these kinds of product is moreproperforparentcompanies.Additionally,theneededcapitalformarketingofthesetypesof products is higher and small enterprises have to collaborate with big pharma in promotion of Generalproducts.Fromtheperspectiveofbigpharma,GeneralProductshavethehighersales potential in case of excellent marketing campaign where the core competencies of big pharma lies. It seems that the other two most invested clinical areas, Oncology and Antiinfective is quite compatible with other core competencies of big pharma and is quite matched with their development strategies. Marketing authorization of Antiinfective usually depends on clinical trials

that involve high number of patients (Arthur Klausner, 2005). Running of these big clinical trials needsalotofcapitalandextendednetworkamonghospitals,clinicians,regulatoryauthorities,etc, that usually big pharma has. Successful Commercialization of oncology products is dependent on worldclass marketing campaign, attending in expensive oncology seminars, sponsoring several studiesaboutthesafety, efficacyand recentlyhealtheconomic aspectsof medicationthatusually pharmaceutical companies with capable R&D and medical department can handle these issues. According to survey of Swedish drug development pipeline which was published in May 2009, NeuroscienceandOncologywereamongthedominantareasinSwedishlifescienceindustry,sothis compatibilitybetweenthestrategicneedsofpharmaceuticalindustryandstrengthsofSwedishlife sciencecanbeanopportunityformorecollaborationwithindustryleadersforSwedishstartups. Itseemsthatvaluationplaysanimportantroleindeterminingtheaverageamountofinvestmentin differenttherapeuticareas.Theaverageamountofinvestmentindifferenttherapeuticareascanbe justifiedbythesuccessrateofprojectsintherapeuticareas.KolaandLandisstudiedtheportfolioof biggestpharmaceuticalcompaniesbetween19912000andconcludedthataveragesuccessrateof projectis11%,whilefoeinstancethesuccessrateforprojectsininfectiousdiseasesare17%and5% foroncologyproducts(IsmailKola&JohnLandis,2004)(Table.2Appendix).Soitseemssuccessrate isoneofthefactorsthatinfluencethefinalvalueofproducts/projectsontopofmarketneedsand potentialprofitabilityfromperspectiveofCVCs.

Limitation

Finding official and complete information about the investment portfolio of CVCs of different pharmaceuticalcompaniesisonethemainbarriersthatwefacedduringthedatagatheringprocess. Availabilityofpreciseinformationwentworthwhenonetheinvestedcompanieshasbeenacquired by other ones, as official website and all related information such as press release became unreachable. Lack of accepted and employed categorization of therapeutic area was other problem we have during the designing of study. We employed the system that mainly focus on clinical usage of product/services in daily practice, while matching all of these products/services were not always possiblewithourcategories.

Furtherstudies:
The main aim of our studies was determining the main considered criteria for selection of investment;however,wecouldnotreallydetermineallthefactorsthatCVCstakeintoaccount.We alsorealizedthatthereisnoinvestmentbyCVCsinSweden,soitseemsthatconductingasurveyin ordertofindingthemainreasonthatwhyCVCshavenotbeeninvestedinSwedenyet,canbevery helpful and also can reveal more criteria that CVCs take into account for investment. Our study mentionedthatstrategicmissionisoneoftheimportantdriversfordecisionmakersinCVCs,soit makessenseifportfolioofbigpharmaceuticalanalyzedandtheirstrategicneedsarerevealed.This analysisenablessmallcompaniestopredictnextmoveofbigpharmaceuticalsandattractcapitalfor theiractivitiesmoreeffectively.

QUALITATIVE RESEARCH IN INVESTMENT CRITERIAS OF CORPORATE VENTURE CAPITAL (CVC) IN LIFE-SCIENCE INDUSTRY

Background
Inourfirststudy,weanalyzedmorethan300investedbiotech/pharmacompaniesfrom19corporate venture capitals (CVCs) in last ten years; however, it seems that analysis of investment portfolio cannot explore all the important criteria of decisionmaking process. For having firsthand knowledge about the decisionmaking criteria of CVCs, we decided to use qualitative research methodologytogetmorecluesaboutthewayCVCsselectaproject.

Methodology
Type of study
Wechoosethequalitativeresearchforourproject.Werealizedthatthistypeofstudycanassist ustoexplorethemindofourinformantandexploretheiremployedcriteriatoselectaprojectfor investment. Qualitative research also helps us to provide a comprehensive list of factors that can affectdecisionmakingprocessofCVCs.

 Wehavetochoosephoneinterviewasthemainmethodfordoingqualitativeresearch,sinceother methodssuchasfocusgroupdiscussionandobservationisnotsuitabletoourproject.

Selection of interviewees
CVCs of top 50 pharma/biotech companies are the target group for conducting interviews. These CVCsaredividedbetweenprojectteammembersandweprovidealistthatindicateswhocontact whichcompaniesforfurtherinvestigation.

Interview
There are different types of interview such as informal conversation, thematically structured or standardized structured interview. According to experience of other researchers, we preferred to have a standardized structured interview. The main advantage of structured interview is the harmonyinconductingtheflowofinterviewregardlessofinterviewerandcompatibilityofgathered informationofdifferentinterviews.Thiscompatibilitymakesthebetteranalysispossible.

Aim of interview
Wedeterminetwomainaimsforourinterviews: 1.ThemainobjectiveofourinterviewsistoextractthemainfactorsthatCVCstakeintoaccountif they decide to invest in Stockholm region and possible barriers that influence them to come to Stockholm. For the purpose of getting valuable and correct information, we avoid to ask direct questions, such as Why dont you invest in Stockholm, that would kill interviewees motive and trust,instead,weaskedquestionsabouttheallfactorsthatwethinkCVCsevaluatebeforemaking investment decision. After finishing interview, all the provided information by interviewees was reviewedandfinalconclusionwasmade. 2.Second part of interview is devoted to short presentation about investment opportunities in Stockholmregion.Weprovideacustomizedpitchbasedoninformationthatintervieweeprovidesin first section. Moreover, we will review the portfolio analysis of each CVCs before initiation of interview. This prestudy helped us to have efficient customized pitch based on strategies and historyofeachCVCs.

Structure of interview
ThestructureofourinterviewisshowninFigure1(Seeappendixalso).Wetrytogatherinformation about all factors that affect final investment decision. For this purpose, we plan to divide our interviewtimetotwomainparts.Inthefirstpartwetrytogatherinformationaboutthefactorsthat usually investors evaluate before making decisions. These factors are categorized in two main categories including product related and environmental factors. For each area some sample questionsaredesignedinadvancethatcanhelpinterviewertotracktheinterviewmoreeffectively.

In the second part, we try to have a short pitch about the available investment opportunities in Stockholmregionandcorrectmisperceptionifapplicable.Wealsocustomizeourpitchbasedonthe informationthatwegatheredinthefirstpartofinterview.

Result:
Aswementionedabove,inourquantitativeresearchwegotthedatafrommorethan300invested companies by 19 CVCs, and in this qualitative study we reached seven CVCs by phone interviews. Ingeneral,managementcompetencyandhumanresourcesarethemostimportantfactorsforCVCs, whentheyevaluateacompany.AsoneofthemmentionedifIhaveacompetentmanager,Ican handle everything. But who is the competent manager? The competent manager should be experiencedinthefieldoflifescienceindustryespeciallyin product developmentprocess.Oneof themdefinescompetentmanagerasamanagerwhohasdonetheprocessofproductdevelopment coupleoftimes.Itseemsthatfindingaqualifiedhumanresources,especiallyinmanagementarea, isthemostcrucialfactorforthem. The second important factor for CVCs is the clinical field of company/project. Most of CVCs have alreadyaninternalanalysisandpreferredareasforinvestment. Theseareas aredefined basedon the strategic needs of Mother Company. Proposals about the project/product which are excluded fromthesepredeterminedareasareusuallyrejected.Inmostcases,itisunlikelythatCVCsinvestin projectsoutofstrategicneedsoftheirMothercompanies.Sodeterminationoftheseclinicalfields before submission of a proposal is crucial for startups. The other important factors is innovation of project, as many CVCs explicitly announced that they onlyinvestinreallynovelcompoundratherthaninmetoodrugs.Thenstrongandreproducible science is one of the factors that CVCs consider to invest in company project. ThreeCVCsthinksphysicaldistanceisoneofthefactorsthattheyconsiderwhenmakingadecision aboutinvestment.Themainreasonistheshortageofhumanresourcestoattendinboardmeeting ofinvestedcompanies.Theyusuallyprefertoinvestincompanieswhichcanflyeasilytothem.For biggercorporationwhichhasrepresentativeindifferentregions,ithaslessimportance. Taxation system of host country is not important for investor at all. They did not even ask any question about the detail of taxation in Sweden from us. A one of them mentioned We look at Sweden as a standard financial market, so we are not concerned about taxation in Sweden. Itseemsthatlabormarketandlegislationcanbeaconcernforsomeinvestors.Oneofinterviewee askedabouttheliabilitiesofinvestorsincaseofshuttingdownofacompany/projectinSweden.He describedthathiscompanyhadtopaytwoyearstoitsemployeeafterfailureofoneofprojectin Netherlands. Then it can be one of the areas that small companies should gather enough and preciseinformationaboutit.

Discussion
Bigpharmaceuticalsandtheirventurearms(CVCs)canplayanimportantroleincommercialization of project in lifescience industry due to their experiences in product development process, organizational competencies, extensive marketing capabilities and enough financial resources. As driversofthesecorporationscanbedifferentfromotherinvestorsinlifescienceindustry,knowing their priority and decisionmaking process can be extremely important for startups in lifescience whoarelookingforcooperationwithCVCs.However,itshouldbeconsideredthatthereisnotone sizefitsallapproachforallCVCs,soitisrecommendedtodoanextensiveandsufficientresearchin eachCVCsbeforesubmittinganyrequest(CVCseekinginnovationandgrowth,2008) Management competencies and expertise, especially in senior management team, is the most important parameter for CVCs. Usually investors feel strongly that the management competencies are the key factor for success of company. So many experts recommend that achievement of managementinrelevantbusinessfieldsshouldbepresentedforinvestors(SilverseteinandOsborne, 2002) AsthemissionofCVCsisfindingstrategicallyfitprojectfortheirparentcompany,CVCsrarelygoout oftheareasthataredefinedbyparentcompaniesaspreferredareas.Itiscrucialforcompanies who look for investment to know these areas and prepare a presentation based on the strategic needsandinterestsofCVCs.ConsideringthisstrategicneedsalsosendssignalforCVCsthatsmall enterprisehasalreadystudiedCVCinvestmentportfolioandreflecttheprofessionalismofproposal. The importance of strategic and financial objective may vary from CVC to CVC and even among different strategic areas within one single CVC. CVCs try to bring the innovation to their parent companybydealingwithdifferentsmallercompany,however,someofCVCswouldliketoreturna reasonableprofittotheirparentcompany,whileinotherCVCstheyonlywanttobeapartofmarket and view the deal flow of specific technology. Consequently, in some cases, CVCs are not interested in taking equity from the company (CVC looking for innovation and growth, 2008). ConsideringdifferentdriversofCVCscanleadsmallstartupstohavemoreprofitabledeal. Noveltyofproduct/servicesisoneoftheareasthathavehighvalueforCVCs.Companieswholook forinvestmentshouldconsiderthisaspectandtrytoreflectitintheirpresentation.Itseemsthatit isquiteimportantforinvestorstoseethewaythatyourproduct/servicecanbedifferentiatedfrom existing solution and how your product/service can add value for prospective customers. It is advisablethatthispartwritesinnontechnicallanguageandtriestouseotherdescriptivetools,such graphsandbars,toconvincetheinvestors.Ontopofstrengthsofproduct,theweaknessofproduct alsoshouldbepresentedtocreateareasonableexpectationforinvestors(SilversteinandOsborne, 2002) VCs and CVCs usually control their invested companies by assigning representative in board of directors. Consequently, the distance between their headquarter and location of companies is importantforthem.Itisclearlymentionedinsomeofourinterviewthattheylimittheirinvestment inspecificgeographicallocation. Swedish taxation structure is not an issue for investors at all. Tax was considered as one of the barrier for investor, before initiation of interviews; however, during conducting interviews,

researchersrealizedthatnoneofintervieweesareconcernedabouttaxation.Weeventriedtoask specificquestionaboutpossibletaxissue,whileallofintervieweestoldusconfidentlythatitwillnot beanissueforusincaseofmakinginvestment.

Recommendation
Meet investors as much as you can proactively

Almost all of investors emphasize that they need to meet the management team of company. It seemsthatontopofmanagementcompetencies,investorsalsoneedtoevaluatecharacteristicsand personality of key mangers, as they need to work together for a long time. Meeting investors can alsoworkasindividualizedmarketingactivityforcompanies.Soitishighlyrecommendedtoplanto visitandknockthedoorofyourprospectiveinvestors.EventssuchBiopartneringeventscanbea good start. Moreover, utilizing the network and expertise of other people/organization such as StockholmBusinessRegionDevelopmentcanbeveryhelpful.

Improve and document your management skill

Mentionedabove,amanagementcompetencyis oneofthemostimportantfactorsthatinvestors lookfor.Asastartupyouneedtorepresentareasonablelevelofmanagerialcompetencies.Youcan acquire these competencies or bring it to your organization by hiring by hiring experienced managers. In both ways, recording and documentation of your achievement is very important, as beingontrackformtimeandfinancialperspectivecanmakeyourpositioninstrongerforfuture deals.

Presenting your achievement in professional way

The importance of presentation of result and achievement should not be undermined, as it can affect the perception of investors from your presentation skill significantly. A professional presentationdoesnotnecessarilymeanthepositivepointsandstrengthsofproduct.Insomecases presentingnegativeresultsinverysmoothwaycansendthesignalforinvestorsthatyouareableto handle even negative consequences of your project. Always remember that fantastic achievement cannotguaranteethatyougetthedeal,sodonotforgettomeetinvestors.

Conclusion
OuranalysesreflectthatCVCscreatefirmvaluemostlywhenpursuedstrategicreasons.Despiteof independentVentureCapitals,CVCsarehighlyinterestedininvestinginearlystagesprojects,asit seemsthattheywanttoprovideenoughstrategicsupportfortheirMothercompanies.CVCsalso investmoreindrugdevelopmentplatform,infectiousdisease,Neuroscienceandoncology,asthese therapeuticareasarequitematchwiththestrategicneedsofparentcompanies.AsmostofCVCs basedonUS,theymostlyinterestedinNorthAmericasfirm.Aqualitativeresearchisneededto revealCVCscriteriainmorecomprehensiveway.

Weinterviewedsevenbiotech/pharmaCVCsglobally.OurstudyshowedthatCVCsinvestmentmore reliesonstrategicdevelopmentoftheirmothercompany.Therearesomeimportantfactorsthat CVCswillconsiderwhentheyevaluatethetargetcompany.Theymorefocusonmanagementskills andcompetencies,scientificbackground,theirstrategicneeds,communicationanddistancesof companies.Wealsoobtainedsomeinformationwhichwehypothesizedforlackofinvestmentin Sweden.Financialstructuresuchastaxisnottheproblem.Thereshouldbesomesuccessstoryin SwedenasagoodbeginningforattractingCVCsintohere.

References:
DrivingthepathtoasuccessfulEuropeanexit,HkanKirkebyBuch,AnnaCGustafsson,ViktorDrovota&Carl JohanSundberg,NatureofBiotechnology,2011 Strategiesforattractinghealthcareventurecapital,BethSilversteinandCarlOsborne,JournalofCommercial Biotechnology(2002)Vol.8,4,315319 TheriseofventurecapitalandbiotechnologyintheUSandEurope,DouglasPLee&MarkDDibner,Nature Biotechnology,June2005,Vol.23,No.6, AVentureCapitalViewofChallenges,Opportunities,andInnovationinBiomedicalResearch,LTRatcliffe, NatureofBiotechnology(Feb.2011),VOL.89,No.2 FinancialTimesLexicon,http://lexicon.ft.com/Term?term=corporateventurecapital Evaluationofuncertaintyofventurecapitalistsinvestmentcriteria,TobiasKollmann,AndersKuckertz,Journal ofBusinessresearch,63(2010)741747 GeoffMeyersonandAmeyaAgge,BiotechVentureCapital:theinvestmentdecisionprocess,thejournalof privateequity,summer2008 CorporateVentureCapital(CVCs)seekinginnovationandstrategicgrowth,IanMacMillan,EdwardRoberts,Val livada,AndrewWang,NationalInstituteofStandardsandTechnology,U.S.DepartmentofCommerce,2006 Corporateventurefundschaseearlystagedeals,PeterMitchell,NatureofBiotechnology,Vol.27,Number5, May2009 CriticalFactorsforObtainingVentureFunding,GarageTechnologyVentures,2010

Biotechventurecapitalitsnottoolatetobeearly,ArthurKlausner,NatureBiotechnology,Vol.23,No.4,April 2005 Canthepharmaceuticalindustryreducetheattritionrates?IsmailKolaandJohnLandis,Naturereviews,Drug Discovery,Vol3,P.711,August2004 TheSwedishDrugDevelopmentPipelineproducedfivenewproductsduring2008May,2009,thesurvey conductedbySwedenBio,InvestinSwedenandVinnova http://www.swedenbio.se/en/AboutLifeScience/SwedishLifeScience/ShortfactsonSwedishlifescience/

Appendix

Table 1


Table 2: Success rate of project in different therapeutic areas in clinical stages
Source:Canthepharmaceuticalindustryreducetheattritionrates?IsmailKolaandJohnLandis,Naturereviews,DrugDiscovery,Vol3,P.711,August2004

RoleofInvestors

85;44% 108;56%

0 BoardObserver BoardMember

Table 3: The distribution of Board member and board observers in invested companies

Summary of Interviews:
Interviewee A is the Head of Venture Investment one of the biggest pharmaceutical industry.

Summary of interview with A:

Aanalysisanddefinesitsneedsperiodicallyandtheprojectsareselectedbasedonthis internalprioritization ManagementisthemostimportantfactorsforA.ifAcanfindcompetentmanagers,it decidestoinvestincompany Asahugecompanywithdifferentdepartment,theyevaluatemostofprojectthatdifferent areas;however,theyalsoconsidertheirinternalprioritization Theyconsiderstrategicfitnessofprojectwithneedsofmothercompany,sotheyareflexible aboutROI Theyarenotsoconcernedaboutthefinancialmarketandregulationindifferentcountries, astheyseethesimilarframeworksindifferentcountries TheyhaveconcernsabouttheliabilitiesofinvestorsinEUcountries. Theyprefertohavealocalpartnersthatcanprovidelocalinformationandalsohelpthemto findlocaltalents IncontrarytothemostofAmericanCVCs,theyhavelocalagentsindifferentareaswhocan watchdifferentprojects.TheirlocalagentsforEUisbasedonBelgium(halfofhistime)and Israel. ThewaythatAdefinesandprioritizesitsneedsisquiteunique.Theyhavetwodifferent areas: o ThestrategicneedsofcurrentbusinessofA o ThestrategicneedsforfuturegoalsofA.Forinstance,theyrealizedthatAshouldbe activeinNeurostimulationfieldinnearfuture,sotheylookforprojectsthatcan helpthemtoaddressthisneed. OneofthemostinterestingpointsthatrepresentativeofACVCmentionedwasthatthey firstlookforcompetentmangerandiftheycanfindhim/her,theycanhandleeverything; otherwisetheyaresohesitanttoinvest.Socompetencyandqualityofmanagementisthe mainandfirstfactorthattheyconsider Hehasaseriousconcernaboutthelabormarketandliabilityofinvestorinacompanyin frontofemployee.AhadatoughexperiencefromaninvestmentinNetherlandsandashe saidtheywereliabletilltwoyearsabouttheiremployeeaftertheirinvestment,whilethe companyisnotsolongactive. AisinterestedininvestmentinSweden;however,hereferredmetohiscolleaguewhois responsibleforEU.

Summary of interview B:

IntervieweeBismanagingdirectorofoneofthebiggestBiotechnologyfirm. Bpreferstoinvestonreallynovelcompoundsnotmetooproduct Strongscienceisneededthatmeansreproduciblescienceindifferentsetup Theylookforexperiencedmanagementteamswhohasbeenworkedinbiotechorbig pharmaceuticalinrelevantdepartment;howeveritdependsonnatureofcompanies Theyinvestonlyinspecifictherapeuticareas.Theyevenignoretheinterestingprojectthatis notinspecifictherapeuticareas.Thefutureofspecifictherapeuticareaissoimportantfor B. Theyprefertonotenterintohighlycompetitivemarketwithlotsofcompetitorsasitisthe placeofsmallercompanies.theyprefertoworkonnovelclinicalareas

StrategicaspectsaremoreimportantthanROIforB,butitdependsoncompaniesas Novartis,Roche,EliLillyaremorerestrictabouttheROI.BalsolikestohaveagoodROI,but strategicvalueismoreimportant. Bprefersplaceswithstrongbiotechnologyindustryandgooduniversities. Taxationisnotanissueatall. Busuallyinvestsinprojectincooperationwithotherinvestors.Soexistingcompetentlocal investorsiskeyforB. BusuallyinvestsinNorthAmericainordertoshortageofpeople.Janisknowsthatalotof interestingprojectisavailableoutofNorthAmerica,butshecurrentlycannotaffordto investinthem. ThetypicalprojectthatBisinterestedininvestingisstrategicallyimportantprojectin preclinicalstage.Theprojectshouldhaveenoughdatabehindite.ganimaldataand scientificallysounds,sotheyprefertoinvestinproductswhicharenotinleadgeneration phase.ProjectshouldhavestrongscienceandBprefertopartnerwithotherinvestors.

Summary of interview with C:

IntervieweeCisthevicepresidentofoneofthebiggestindustrialcompanythathaspharmaceutical divisionaswellanditisbasedonBostonMA. Theyonlyinvestinreallyinnovativeproject Whenthecompanyisbasedonlicenseintechnology,theydonotexpecttoomuchfrom managementtohavescientificbackground,buttheyexpecttohavemanagerialcompetence inrunningcompanies Honestandtransparent,nothidenegativethings,carefullyspendingmoney,andgood network Theyprioritizethetherapeuticareasinternallyandonlyinvestinselectedfields.Iftheyface veryinterestingprojectoutoftheseselectedtherapeuticareastheyignore Itdependsonhowcompetitionisdefined.Theyenteramarketwithreallyhighnumberof productswhichdonotwork,buttheyavoidtoenterthemarketwithmanyoutstanding products ForCstrategicimportancealwaysranksfirst,sotheydonotcaretoomuchaboutvaluation andROIbutduetopartnershipwithotherVCs,theycannotinvestinaprojectwith unreasonablyhighvalue. Itisthemacroeconomicfactorsthatoutofourcontrol,sotheydonotcareaboutit Theyconsidermostofthecitiesasthestandardmarketthathavethequitesamesituation. Excepttheverylimitingruletheydonotcareaboutit Theyprefertocollaboratewithlocalpartnersandtheyexpecttheirlocalpartnerstoassist theminunderstandingmarketsituation,accesstobetternetworkforhiringmanagers CmakesaninternalprioritizationthatusuallyistiedwithstrategicvalueofMother Company.UnlikeVCs,thisCVCishighlyfocusedonstrategicimportanceofproject.
Summary of interview with D:

InterviewDisoneofmanagingpartnerinSanFranciscowhohashadworkexperienceasventure capitalistsinSweden

Swedenneedsmoresuccessstoryinlifescienceindustry.Thesesuccessstoriescanattract moreinvestors theresearchareperfect,butdevelopmentprocessshouldbeimproved PeopleinBayAreaareveryhardworkeranddisciplined. Theyfocusonlyontasksthattheyaregoodat. PeopleinSFhavemorefreedomtochoosetheirworkingstyle(TeachingVs.research) TransferbetweenacademiaandindustryismucheasierthanKI GenentechplaytheroleofanenginefordevelopmentandinnovationinbiotechinBay Area.ItseemsthatStockholmsuffersfromlackofthesamething. LotsofbigpharmafoundedresearchcentersaroundUCSFcampus. ThenumberofstartupsinBayAreaisenormous.Manypersonshaveexampleamong friendsandrelativesthatfoundacompany.Thisatmosphereencouragesotherstobuildhis orhercompany. Thecompetentmanagerforinvestorsisapersonwhohasalreadydonetheprocessof productdevelopmentforcoupleoftimes.

Survey from company E

EhadsomecontactsbeforewithInvestinSkneandInvestSweden.Unfortunately,they couldntsupportsuitableprojecttocompany. ThereisnodifferenceinEsevaluationsystemamongcountiesintheseareas. EareverystrategicinvestorforEpharma.Theinvestmentisnotforfinancialreturn,butfor thereturninginthefuturesuchasresearchcollaboration,licensingoracquisitionofthe companybyE.EarelookingforthecompanywhichisfittingtotheEstrategy. EdontneedinvolveinmanagementofVentureCompany,theyjusttakeboardobserver rolefortrackingthecompanyprogress,notboardseat. Scienceandtechnologyarethemostfactors.ThescienceshouldbeevaluatedbyE researchersoroutsideexperts.ii)Qualityofmanagement.Thecompanyexperienceand humanityareimportant.iii)Venturecapitalsyndicate.SeewhatkindofVCsisinvolvedin theinvestment.iv)Businessofmodelofventurecompany,likeisthereanycleargoal,exact plan,thetimingofthegoaletc. Financialstructure(eg.tax)isnotaproblematall.EisboardofobserverinDenmark Companybefore;theydontfeelanyproblemthere. TheydontknowthatmuchaboutStockholmUppsalaregion. EthinksStockholmsituationquitesimilartoCopenhagen,NewZealandorIsrael.Thereare somanycountriesareenhancingpharma/bioventureactivity.SwedenisagoodplaceforE tothinkofinvestment.Unfortunately,theycantfindsuitableopportunitythere.Thatisthe onlyreason.

Survey from F

Fhasstrategicangeltoourbusiness,theydontinvestanycompanyfromfinancialprospect. Countryandgeographyarenotissuesandproblems.

CompaniesshouldbeactiveintheareathatFinterestedin,suchasdiabetesand inflammation.Someothertechnologycompanywhichcouldgenerateandcomplementtheir internalpipeline. FhasverygoodinternalcollaborationwiththeirR&Dfunction.Theirneeds,interestswill makethedirectionoftheinvestment. FsearchtargetsbasicallythroughotherVCs.JoiningtheVCpool,andattendlotsof investmentconferences.