Re-Boot

Venture Capital Investing

in the 21st Century

S. Jordan Associates

Life Sciences Business Development & Finance

Introduction Direct Investing

Healthcare venture capital fundraising and investment activity
is at historical levels. Bolstered by robust Initial Public Offerings (IPOs), business development/licensing and Mergers
and Acquisitions (M&A) activity, unprecedented amounts of
capital are being raised/deployed into healthcare companies
and distributed to General Partners (GPs) generating consistent, positive returns for investors.
While healthcares resurgence has been breathtaking, considerable challenges for those seeking to invest in venture still exist
including:
Access to top-decile performing funds
The number of healthcare focused venture capital
firms (especially those funding early-stage companies) rapidly declined following the Great Recession and have only moderately recovered
Healthcare continues to compete for investment
capital vis-a-vis sectors with perceived greater upside and lower risks (Technology)
In particular, the biotech and pharmaceutical market sectors dissuade many investors from participating given longer
development timelines, and burdensome clinical, regulatory, and commercial hurdles. Though capital flows into the
healthcare sector remain robust and forecasted to remain strong throughout 2015-2016, there is risk of a crowded private
market without investors if the IPO window closes and non-venture capital (VC) investors (Crossover) pull back funding
the sector.
Venture capital has oftentimes struggled returning alpha to Limited Partners (LPs) leading to constriction of active
venture funds in the sector (inability of underperforming funds to raise capital and dissolve). However, recent market
outperformance (more IPOs during 2013-2014 period than the cumulative total of the previous decade) has elevated
distributions ($20 billion in 2014) and returns to record levels stimulating capital raising activity by leading venture funds.
(Flagship Ventures raised $600 million, 3/15; SV Life Sciences, $400 million, 5/15, Clarus Ventures, $500 million, 6/15)

Source: Bruce Booth, Venture-Backed Biotech Today, Reflections

on Exits, Funding, and Startup Formation, Forbes 1/22/15

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Life Sciences Business Development & Finance

In this market environment, management fees and carry are less of a concern to LPs but could change quickly with a
reversal in capital flows and if lower returns ensues. Historically high fees detracted significantly from returns rendering most venture fund profits comparable to public market growth (Source: Kauffman Study). These high fee structures
(2/20 model) further incentivize fund managers to raise larger funds making it more difficult to invest in early-stage
deals (cant put enough capital to work) which is the primary source of innovation in the healthcare sector (as evidenced
by decreases in the number of Series A companies funded year-over-year, 2014-2015).
History has a tendency to repeat itself and venture investing is nor the exception exhibiting cyclical waves of outperformance and underperformance. Periods of outperformance characterized by significant inflows of capital and plentiful
exits/liquidity (IPOs) are followed by time periods (Great Recession) when investors (capital flows) flee the sector for
safe havens. Not surprising then to note prior to recent outperformance, the high risk of venture coupled with meager
returns led many to declare the venture model broken. Venture is far from dead, however, consider how answers to the
questions below have the potential to smooth out capital flows into the healthcare sector throughout market cycles.
When venture fundraising/investment levels do subside, will alternative sources of capital become available to meet the
growing capital needs of emerging growth companies in the healthcare sector?
Will LPs investing on a direct basis (co-investing vs. through traditional GP structures) be that source of alternative
capital for emerging growth healthcare companies?

S. Jordan Associates

Life Sciences Business Development & Finance

The goals of this paper are to establish best practices for direct investing while providing managers (GPs), institutional
managers (LPs), and early-stage/emerging growth companies with a greater understanding of the opportunities/challenges associated with this unique funding mechanism. We believe successful implementation of these best practices will
increase direct investing participation rates. Below is a summary overview of potential superior outcomes associated with
direct investing:

Sources of Potential Superior Outcomes in Direct Investing

GENERAL PARTNERS:
Transition from Traditional GP Role to

LEAD INVESTOR

Reduce Financing Risk

Access to $11 billion in available co-invest capital

Enhanced Control

Direct investors are passive participants

Lower Investment Expense

Eliminate costs and complexity of syndication with

other GPs

Rapid Decision Making

Direct investors depend upon diligence and track

record of Lead

Greater Strategic Flexibility

Ability to finance to Peak Value

Higher Capital Efficiency

Tighter reserves

Stronger Portfolio

More companies, broader diversification

New LP Relationships

Deal-by-Deal leads to stronger relationships

LIMITED PARTNERS:
Transition from Traditional GP Role to

DIRECT INVESTOR

No Fee, No Carry

Gross IRR = Net IRR

Shortened Investment Horizons

Average Hold period for discrete healthcare investment = 4.7 years

Accelerated Liquidity

Distributions made immediately upon Exit of each

Company

Maximize MOIC

$100 to $150 million of annual investment potential in

(12) to (15) deals

Participation with Top-Tier Managers

(8,300) Lead investors have made at least (1) investment since 2012

Extensive Deal Flow

900+ Direct healthcare co-investment opportunities,

annually

Established Exit Pathway

Institutional leadership and strategic validation

Transparency

8-week due diligence; Online portfolio management

and reporting

Access To Management & Board

Opportunity evaluation, performance measurement,

exit planning

Tailored Portfolio

Focus on sectors, stage of development, asset class,

Lead investors

Favorable Valuation & Structure

Pari Passu investment directly alongside institutional

Lead investor

Deal-By-Deal Discretion

Flexibility in decision-making, customizing portfolio

S. Jordan Associates

Life Sciences Business Development & Finance

State of the Union Venture Capital

By any measure 2014 was a remarkable year for the venture capital industry. Fundraising surged 56% over 2013 reaching
its highest level since 2008 signaling confidence in the industry is high due in part to increased distributions to investors
over the past few years who then reinvested capital in new funds. (Source: Jonathan Norris/Kristina Peralta, Trends in
Healthcare Investments and Exits 2015, Silicon Valley Bank)
Investment levels soared to post-bubble heights! Healthcare venture investment grew significantly, reaching $8.6 billion
in 2014, a 30% increase over 2013. However, only around 50% of the $6 billion invested in private biotechs came from
conventional venture investors. (Source: Bruce Booth, Venture-Backed Biotech Today, Reflections on Exits, Funding,
and Startup Formation, Forbes, 1/22/15)

The total number of rounds and the number of first funds remained relatively unchanged from prior years (meaning
the average values per deal are steadily escalating accounting for increase in aggregate capital invested), while seed and
early-stage companies continue to be the recipient of the majority of deals. (Source: Bruce Booth, Where Does All That
Biotech Venture Capital Go, Forbes, 2/9/15 - Data Source: HBM)

The IPO markets hit post-millennium highs in many key metrics, and the performance of the market has proven broad and
resilient. The strong IPO markets continued to include a number of small-medium sized deals, and for the second year in a
row and the second time ever, the majority of venture-backed IPOs were in the biotechnology/pharmaceutical industry.

S. Jordan Associates

Life Sciences Business Development & Finance

Source: Jonathan Norris, Kristina Peralta, Trends in Healthcare

Investments and Exits 2015, Silicon Valley Bank
A healthy venture capital ecosystem requires its metrics to be in balance. And while the quality of new business opportunities (deal flow) remains very high and the best opportunities are getting funded, stresses remain. For instance, nearly the
same number of private biotech companies received venture financing in a lean year for the capital markets (2009) then in
the IPO and M&A fueled year of 2014. (Source: Bruce Booth Data Snapshot: Venture-Backed Biotech Financing Riding
High, Forbes, 4/21/15)

Given newly funded companies are the lifeblood of innovation in the healthcare ecosystem, this trend should be carefully analyzed. From a venture capital perspective these financing levels may reflect the equilibrium level wherein companies deserving of funding receive it. But from a company perspective, the costs of rejection and associated opportunity
costs (another company selected by venture capitalists instead, fails) are high given capitals influence on advancing pre/
clinical milestones (proof of concept) in a timely fashion in light of competitive threats and limited patent lives.
And unlike the software industry, exit demand far exceeds the pace of startup creation highlighting the disconnect
between demand for innovation and formation of new startups. (Source: Bruce Booth Startups, Exits, and Ecosystem
Flux: Bullish for Biotech, Forbes, 9/8/2014)

S. Jordan Associates

Life Sciences Business Development & Finance

In addition, despite the strong year for later-round deals, 2014 saw a drop in Series A funding (often involves a syndicate
of venture firms backing a new approach to drug development funding early-stage companies). Series A round investment dropped from $1.2 billion in 2013 to $0.9 billion in 2014. The number of first-time Series A investments also
dropped from 63 in 2013 to 62 in 2014. Not surprising, the biotech sector started fewer companies in the robust 4Q 2014
than in any quarter of 2009 and 2010. (Source: Bruce Booth Data Snapshot: Venture-Backed Biotech Financing Riding
High, Forbes, 4/21/15)

S. Jordan Associates

Life Sciences Business Development & Finance

Investment Activity & Capital Commitments

2014 was a great year for investment activity and capital commitments in healthcare! However, owing to the nature of
venture capital as a long-term investment, the well-being of the asset class must always be considered from a historical
perspective taking into account multiple market cycles.
In fact, the activity level of the US venture capital industry in 2014 was roughly half of what it was at the 2000-era peak.
For example in 2000, 1,049 firms each invested $5 million or more during the year. In 2014, new firms and new players increased that count from recent years but still only to 635 firms. Of those, 195 invested in first financings, and 197
invested in life sciences.

New commitments to venture capital funds in the United States (U.S.) by LPs increased to $30.0 billion in 2014 from
$17.7 billion a year earlier, and this increase is not surprising. The strong IPO markets in 2012 (although it was selective),
2013, and 2014 returned long-deployed capital to the investors in venture capital funds which was then reinvested into
new funds.
Investment levels in 2014 were remarkable; they were the highest amount since 2000, and the third-highest ever at
$48 billion. This compares with $30.1 billion in 2013 which was more in line with the prior several years. Healthcare
venture investment in biopharma, device, and dx/tools companies accounted for 18% of all venture capital dollars
invested in 2014 compared to 22% a year earlier. The dip resulted from the exponential growth in venture investment
overall not from a decline of interest in the sector. In fact, healthcare venture investment rose 30% to $8.6B, the highest
level in seven years.

S. Jordan Associates

Life Sciences Business Development & Finance

And corporate venture capital played a major role in funding companies. Corporate venture investment dollars increased
69% in 2014 and deployed an estimated $5.3 billion into 766 venture rounds creating the highest investment total by far in
the post-millennium period. This trend is reflective of the high dependence by corporate partners on outside innovation
to sustain their own growth objectives (External R&D). Interestingly companies receiving corporate venture investments have a ~60% higher rate of licensing deals, M&A, and IPOs. (Source: Bruce Booth, Want Better Odds? Get a
Pharma Corporate VC to Invest, Forbes, 5/22/12)

2014 is the seventh consecutive year and the 12th in the past 14 years in which more money was invested by the
industry than raised in new commitments. Although this trend clearly illustrates the appeal among investors for venture
capital investments, this imbalance is not sustainable. Over time, in order to sustain innovation and growth along with
superior investment returns which accompany them, either.
1. More capital must be raised, OR
2. New investment models must be created

Source: Jonathan Norris/Kristina Peralta, Trends in Healthcare Investments and Exits

2015 Silicon Valley Bank

S. Jordan Associates

Life Sciences Business Development & Finance

Exits
Once successful portfolio companies mature, venture funds generally exit their positions in those companies by taking
them public through an IPO or by selling them to presumably larger organizations (acquisition, trade sale or, increasingly,
a financial buyer). Exits are critical for generating investment returns for capital providers who oftentimes recycle capital
back into more healthcare companies and in recent years this capital cycle has been robust.
In 2014, 83 venture-backed healthcare companies went public, the highest count since the post-2000 bubble. Add in the
37 IPOs in 2013 and these companies now account for $60 billion in aggregate market value.Interestingly, as was atypically the case in 2013, many IPOs were early-stage biotechnology companies.

Source: Jonathan Norris/Kristina Peralta, Trends in Healthcare Investments and Exits 2015,
Silicon Valley Bank
Despite the higher totals counts than recent years, the overall scope of the IPO market is considerably less than it was in
the 1990s when 14% of first fundings eventually went public.
Healthcare M&A still accounts for a large percentage of exit activity of any size. (Source: Bruce Booth, Acquisitions As
the Silent Partner in Biotech Liquidity: IPO Vs. M&A Exit Paths, Forbes, 10/27/1014)

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Life Sciences Business Development & Finance

Returns
During the past 5 years, investment returns for the Venture Capital asset class have returned to the peak of the risk-reward
scale. The Cambridge Associates U.S. Venture Capital Index climbed 2.4% and 10.8%. For comparison, the S&P 500 was
up 1.1% and 8.3% for the quarter and YTD, respectively. Q3 marked the ninth consecutive quarter of positive returns for
the private equity benchmarks and the 12th consecutive quarter for venture capital.

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Life Sciences Business Development & Finance

Investment Thesis: The Global Healthcare Industry

Over the last decade the healthcare industry has experienced significant innovation, reform and expansion, which in turn
has created a catalyst for continued business formation and growth. Venture capital investors thrive in such environments
and healthcare, broadly speaking, is one of the most dynamic sectors in venture capital investing. These circumstances
will allow venture capital investors to help bring novel, innovative, and profitable healthcare technologies to market while
generating superior returns for their stakeholders.

Healthcare Investment Environment

The healthcare venture capital industry can be classified into several sub-sectors. Each of these sub-sectors is characterized by unique strategic and investment dynamics and is affected differently by the macro-environment in ways that can
be exploited by astute investors:

The demand characteristics for each sub-sector is driven by a unique combination of the aging U.S. demographics,
advances in medical care and technology, and changes to the current regulatory environment. The profitability of individual companies is largely dependent on their ability to create innovative and disruptive technologies while maintaining
efficient operations.

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S. Jordan Associates

Life Sciences Business Development & Finance

Signs of Renaissance
Many market trends point to a stronger U.S. healthcare investment opportunity going forward. For starters healthcare
venture capital firms have adapted by placing more emphasis on areas of greater unmet need including orphan diseases
especially in cancer. They have also begun to drive the utilization of discoveries made in the genomics revolution
targeting rare diseases with genetic abnormalities where successful treatments can be life altering and garner stronger
reimbursements.
Emerging companies have a robust pipeline with over 3,400 drug indication programs under development, based on
recent analysis of the BioMedTracker database. This accounts for a full 69% of the entire global industry pipeline. Roughly
43% of these programs are partnered with other companies demonstrating the importance of licensing and alliance development in the industry. Late-stage compounds are more likely to be partnered than early-stage assets. For example, only
36% of emerging company drug indication programs in Phase I are partnered, whereas 51% in Phase III are partnered.
(Source: David Thomas, Chad Wessel, Emerging Therapeutic Company Investment and Deal Trends June 2015)

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S. Jordan Associates

Life Sciences Business Development & Finance

2014 was also the best exit year for VC-backed biopharma companies over the past decade the value both in terms
of up fronts and full biobuck potential have reached new highs topping over $5 and $8 billion, respectively. (Source:
HBM Pharma/Biotech Report 2014, and Bruce Booth, Data Snapshot: VC-Backed BioPharma M&A 2014)

This is not surprising as many large pharmaceutical companies have significantly pruned their research and development
staff and expenses and seem to view smaller biotechnology companies, many VC-backed, as outsourced R&D. With the
predicted patent cliff of Big Pharma now a current reality, and with many of the larger biotechnology companies aggressively participating in acquisitions, we expect this favorable M&A environment to continue.

A Great Time to Be a Healthcare Investor

Several underlying factors lead us to believe that the recent positive trends in healthcare are sustainable. One major trend
is demographics. Research by the Centers for Medicare and Medicaid Services shows that healthcare spending is projected
to grow at an average rate of 5.8 percent from 2012-2022, 1.0 percentage point faster than expected average annual growth
in the GDP. It also states that at a projected sum of $5 trillion dollars, healthcare spending will be 19.9 percent of the GDP
by 2022. A large part of this anticipated growth is driven by population growth and the aging of America. Furthermore,
the advancement in medical innovations, especially the fruits from deciphering the human genome, is only in its early
chapters. According to the National Human Genome Research Institute, it cost $100 million to sequence a genome in
2000. That cost has been cut exponentially in just the last five years and is now below $10,000.
As gene-based drugs, testing and services have gained traction, investors have taken note. In a report issued by venture
capital database Pitch Book, it is stated that capital invested in genomics-related companies roughly tripled from 2008
to 2012, expanding from $269 million to $760 million. We are optimistic that over the next few years several diseases,
including certain cancers and inherited genetic diseases, will be treated by manipulation of genomic material in-vivo or
ex-vivo causing a paradigm shift in the annals of therapeutics akin to the introduction of penicillin to treat infections.

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S. Jordan Associates

Life Sciences Business Development & Finance

Finally, the potential effects of the landmark regulatory overhaul known as the Affordable Care Act (ACA) have only
begun to surface. The changes in the regulatory environment brought by the ACA will likely create opportunity for
services that reduce costs or manage resources more efficiently; on the other hand, it may adversely impact the pricing
power of pharmaceutical companies given the streamlining of care and the increased power of the counterparties they
negotiate with as more providers bear risk for costs through accountable care organizations and other integrated healthcare delivery models. According to the Centers for Medicare and Medicaid Services, by 2022 the ACA is projected to
reduce the number of uninsured people by 30 million, add approximately 0.1 percentage-point to average annual health
spending growth over the full projection period, and increase cumulative health spending by roughly $621 billion. The
revolution in healthcare delivery from this Act will provide opportunities (as well as challenges) for all areas of healthcare investing.

Out of the Ashes: Re-Inventing VC

Notwithstanding recent resurgence in performance and the accompanying growth in both capital commitments and the
number of funds, fundamental questions persist as to the durability and integrity of Venture Capital.
In fact, it was not long ago that the entire viability of the VC asset class was being questioned:
A Tsunami Rips Through the Venture Industry
Why Venture Capital is Broken
The Death of Venture Capital As We Know It
Venture Must Re-Invent
VC Is Too Fat, and Returns are Too Thin
Honey, I Shrunk the VCs
The ills which plague VC cannot be cured by a single Bull market. As illustrated by a landmark study published in 2012
by the Kauffman Institute which evaluated the performance of 100 VC funds over a 20-year period including several
boom and bust cycles the entire process of growth capital investing must still be re-aligned in order to succeed.
Among the key findings of the Kauffman report are the following:
Only twenty of 100 venture funds generated returns that beat a public-market equivalent by more than 3
percent annually, and half of those began investing prior to 1995
The majority of fundssixty-two out of 100failed to exceed returns available from the public markets, after
fees and carry were paid
Only four of thirty venture capital funds with committed capital of more than $400 million delivered returns
better than those available from a publicly traded small cap common stock index
Of eighty-eight venture funds in our sample, sixty-six failed to deliver expected venture rates of return in the
first twenty-seven months (prior to serial fundraises). The cumulative effect of fees, carry, and the uneven
nature of venture investing ultimately left us with sixty-nine funds (78%) that did not achieve returns sufficient
to reward us for patient, expensive, long-term investing.

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Life Sciences Business Development & Finance

Based on the conclusions on their report, the Kauffman Foundation made the following recommendations for investors
regarding the future of growth capital investing:
Invest directly in a small portfolio of new companies, without being saddled by high fees and carry
Co-invest in later-round deals side-by-side with seasoned investors
Invest in VC funds of less than $400 million with a history of consistently high public market equivalent
(PME) performance, and in which GPs commit at least 5% of capital
Move a portion of capital invested in VC into the public markets. There are not enough strong VC investors
with above-market returns to absorb even our limited investment capital
As the pace of global innovation accelerates and economies around the world depend increasingly on growth, a vibrant
venture capital industry will be vital to securing the future. This sentiment is the subject of a recent study by PWC, which
predicts global alternative assets will increase to US$15.3 trillion by 2020. Among the findings of the PWC study are:
Rapid developments in the global economic environment have pushed asset management to the forefront of
social and economic change
An important part of this change the need for increased and sustainable long-term investment returns has
propelled the alternative asset classes to a more prominent role in the investment management industry.
The global alternative asset management industry is expected to experience a transformation as alternative
asset managers transform their business and operations and make technology a top investment priority
The impending transformation in alternative asset management will have far-reaching effects on medical innovation and
the global healthcare capital markets. For each of the participants, the impact of these transformations will change the
manner in which they do business.

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S. Jordan Associates

Life Sciences Business Development & Finance

Going DIRECT: A New Paradigm in Healthcare Venture Capital Investing

The recent Preqin Private Equity Survey was completed in June 2014. It studied 1,176 Limited Partners (LPs) worldwide with principal investment focus in a range of alternative asset classes.
Following is a summary of the principal findings from the Preqin survey:

92% of investors expect to either Increase or Maintain their allocations to Venture Capital and Private
Equity over the long term
55% of Limited Partners with fund investments in healthcare identified management fees as the principal
motivation for a shift in investment strategies. In addition, investors cited better control of investments, greater
transparency, and an opportunity to increase diversification.
77% of Limited Partners are Actively or Opportunistically engaging in Direct Investments
24% of LPs allocate more than 10% of AUM to Direct investment. By 2016, Direct investments will increase by
50% to 15% of AUM
86% of Limited Partners assert that Direct Investing yields either Significantly Better or Slightly
Better returns
87% of Limited Partners intend to Increase or Maintain their Direct investment activity during the
next five years

(source: Preqin)

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Life Sciences Business Development & Finance

Confronting Risks Direct Investing

Venture Capital investing provides LPs with the potential benefit of outsized returns that beat public markets and the
ability to fund novel ideas, but it does not come without risk. From illiquidity to improper valuation, being able to
successfully navigate and manage these risks is key to generating positive returns. Investing directly can help strategic LPs
mitigate and temper these risks. (Source: Making Waves: The Cresting Co-Investment Opportunity, 2015, Cambridge
Associates, 2015) Inherent risks include:

DIRECT CO-INVESTING REQUIRES THE RIGHT SKILLSET

Investors considering direct co-investments should determine whether they have or would like to add the appropriate
skills in-house, work with advisor, or would prefer to outsource the activity entirely to an advisor or fund manager.

ONE MUST FIND ONES OWN CO-INVESTMENTS

Direct co-investors must regularly remind target GPs of their interest to see sufficient and attractive deal flow. Even then,
access can be challenging when many others are competing for the same opportunities.

TIMING IS UNPREDICTABLE
GPs are likely to syndicate co-investments to their investors when capital accessible via their main funds is low.

APPROVAL IN 30 MINUTES OR LESS

Once a GP decides to pursue an investment, interested co-investors may have as little as two weeks to review available
information, conduct their own assessment of the opportunities, decide whether to participate, and then secure internal
approval.

FINDING A PEARL.OR JUST AN OYSTER

Direct co-investors offers investors the potential by no means guaranteed to try their hand at selecting which of a
GPs co-investment opportunities will outperform, and to add exposure there.

TOO GOOD TO BE TRUE

Even with fund dynamics making co-investments available, investors should be cognizant of adverse selection risk,
including the possibility that managers may, knowingly or not, be sharing their less attractive opportunities.

Though inherent risks remain, the strategys popularity has grown as institutional investor increasingly seek ways to
invest more private capital with select GPs at a reduced cost, often at more than half-off the prevailing cost of access.
(Source: Making Waves: The Cresting Investment Opportunity, Cambridge Associates, 2015) Increasingly, GPs are
offering more co-invest differentiating themselves from the LP community, deepening relationships with key investors,
managing their own risk, and maintaining greater flexibility for themselves.

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Life Sciences Business Development & Finance

Summary of the advantages associated with Direct

investing vs. through venture capital (GP) funds.
RISKS OF VENTURE

Summary Description

Illiquidity

Capital Velocity / Access to Cash

Diversification

Investors should be cognizant of

the possibility that managers may
be sharing their less attractive
opportunities.
Cambridge Associates
Achieving a Portfolio Effect

Correlation

Targeting pure Alpha

Volatility

Extreme dispersion of returns on

company-by-company basis

Performance

Generating superior IRR / MOIC

Adverse Selection

Scalability of Venture
Capital

Access to Best
Managers / GPs

Valuation

At fund sizes greater than $200

million, performance suffers
Kaufmann Foundation
Increasingly challenging to get
into top tier funds since VC funds
are getting smaller and access is
limited.
National Venture Capital
Association
As early-stage investors seek to
preserve their positions in companies in early rounds of financing,
venture co-investments are more
often offered at late-stage rounds
when they may also be subject to
high valuations.
Cambridge Associates

Zeros

High loss ratios associated with

write-offs

Inconsistent Cash
Flows

Cash flows from venture capital

are lumpy.
Preqin

Relationship with GPs

GPs assume significant reputational risk with their investors when

offering co-investment opportunities. Poor interactions with LPs
and poor results could cost future
fund commitments.
Coller & Company

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The DIRECT Investment Solution

Reduce investment horizon
Create Evergreen fund mechanism
Establish stringent investment criteria
Rule Set stipulating that every Direct
investment be subject to leadership from
new, third-party institutional investor
Invest at same rate as top-decile GPs
# of General Partners, multiplied by the # of
institutionally-backed portfolio companies,
equals the potential for non-correlated IRR.
Eliminate J-Curve
Mitigate downside through deal selection
based on Rule Set
65.3% of Standard Deviation of Returns in
VC due to upside events
No Fee, No Carry.
Gross Return = Net Return
(900) direct transactions
$11 billion opportunity
Broad exposure to top-tier funds
Dating Prior to a Marriage
Eliminating the effect of fees and carried
interest enables greater universe of GPs
to achieve top-decile Gross IRR

Every direct investment made on pari

passu basis, subject to discrete,
independent pricing as established by new
institutional Lead investor with like-minded
return expectations
Single Purpose Investment Vehicle (SPV)
permits diversification, attenuates impact of
losses, preserves return profile of portfolio
Continuous distributions upon exit of
each discrete portfolio company
Continuous liquidity following investment
period of initial portfolio companies

Third-party, Arms-Length structure

Deal-by-Deal decision making

S. Jordan Associates

Life Sciences Business Development & Finance

For more information, contact:

S. Jordan Associates

Life Sciences Business Development & Finance

Scott Jordan
312.451.6210
scott@sjordanassociates.com

S. Jordan Associates

Life Sciences Business Development & Finance