Friday, April 18, 2008

Venture Round: No Scoop for You

A year ago or so IN VIVO Blog thought we had a pretty good scoop.

While we were writing this piece on specialized health care funds, we heard from TWO independent sources that InterWest Partners—the Sand Hill road stalwart—was dropping its technology team and going with a life sciences only strategy. Feeling pretty good about the information, we called InterWest for the obligatory “No Comment” or a cryptic denial that left the door open while still trying to clear the smoke.

That’s not what we got. Instead, General Partner Arnie Oronsky told us flat-out it was not true. No way. No how. No equivocation. No matter how many different ways we asked the question, the answer was the same. Not true.

So, despite having two solid sources, we didn’t include this tidbit in the article. Quite simply, we didn’t think Oronsky was the kind of guy to mislead, misdirect or—let’s say it—lie. And we’re happy to report we were right.

Earlier this week, VentureWire reported that Interwest Partners would be launching a bid to raise its 10th fund with a $650 million target. The article, drawing on information from limited partners, suggested only one-quarter of the fund would go to information technology investments. So we were feeling pretty good about our earlier information being nearly right, but Oronsky once gain nailed us with a stream of cold water. He says the split will probably be two-thirds to life sciences one-third to IT, a fairly standard split.

“We’re still a diversified fund,” Oronsky says. “We will be more focused in the IT area. We’re not going to do certain parts of IT investing so we will just be a little more focused. We will continue the same focuses in life sciences: medical device, biotech, and biopharma. Otherwise it’s pretty much business as usual.”

We still find off-the-record comments that InterWest had indeed considered dropping IT. But Oronsky says that isn’t going to happen. He vividly recalls a decade ago when venture capital firms dropped their life sciences teams to concentrate on technology investing only to see the fortunes of the industries turn around in just a few years.

InterWest, Oronsky says, didn't make that mistake a decade ago and isn't going to make it today.


Speaking of break-ups of the late 1990s, Versant Ventures is in the market with its fourth fund, a $500 million partnership, according to this morning's PE Week Wire. Versant, of course, was founded by health care partners from Crosspoint Venture Partners, Brentwood Venture Capital and Institutional Venture Partners after the IT partners from those three firms flew off to form the IT-only Redpoint Ventures. It certainly seems that Versant handled the break up quite well.


One of the tougher jobs a reporter has is trying to determine when a new investment trend has run its course. (No, it ain’t digging ditches, but yeah, it’s tough.)

No doubt, one of those questionable trends is the consumer medicine market. We have covered this area extensively, specifically the aesthetics market. And we mean extensively. Just over the past two years we’ve written about aesthetics plays here, here, here, here, here, and here .

But we're getting the feeling we ain’t seen nothing yet. A collection of some of our favorite venture firms—Aisling Capital, InterWest, Palo Alto Investors, Technology Partners, Versant and Vivo Ventures--pieced together an invite-only conference on consumer medicine a few weeks ago at the Ritz-Carlton at Laguna Nigel. And they jammed the place with 200 VCs who are trying to get a handle on how to invest in this very different business of private pay, limited regulatory oversight and direct-to-consumer marketing.

In addition to aesthetics, VCs talked about fertility, eye care, orthodontics and other markets where a growing number of patients seem willing to pay for services and products themselves. According to one organizer, the discussions identified a few key—and not at all surprising—challenges: finding executive talent capable of bridging the gap between health care and consumer markets, determining how much regulatory involvement is required, if any, and devising the most effective marketing strategy to hit consumers.

Bottom line, the number of attendees suggests the consumer medicine trend isn’t close to peaking.


IN VIVO Blog loves a good buddy flick/TV show. Starsky & Hutch, Butch Cassidy & the Sundance Kid, Turner & Hooch. So we were happy to see our industry’s own dynamic duo got a little big-time pub in the Wall Street Journal this week. We’re talking, of course, about Polaris’ Terry McGuire and MIT’s Robert Langer. They’re cozy relationship is no secret in the start-up world. We reported about it often including here, here and here. The ultimate culmination of pair's work may not thwart the criminal plans of some over-the-top bad guy. But if McGuire has his way, there's an even bigger prizing awaiting Langer someday. Heck, what are buddies for?

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