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VCs Should Go Back to School


By Michael A. Greeley
Dec. 17, 2007 | Venture capitalists need to go back to school. It is that simple. Some of our best, most innovative, most promising investment opportunities are coming from campuses of many of the universities in our back yards. In fact entrepreneurs would also be well-served going back to school.

In addition to generating wonderful ideas, faculty at leading universities are able to secure meaningful government and other non-dilutive grants to launch projects that have potentially compelling commercial applications. Many of these projects will become the great venture-backed companies of the future. The government has been aggressively funding many bio-IT projects; it is these grants which serve as an important source of validation and raises their visibility within the investment community.

An area of particular focus has been the molecular detection field. "With the sequencing of the human genome, the National Cancer Institute (NCI) has been very focused on being able to detect cancer better and sooner," observed Professor Bill Hancock at Northeastern University, who chairs the Chemistry Department. Hancock recently secured a meaningful grant from the NCI, part of the National Institutes of Health (NIH), which is funding a new $15.5 million, five-year initiative to discover, develop, and clinically validate cancer biomarkers by targeting the carbohydrate part of molecules.

The Northeastern team recognized that many of the genetic tests available today are inadequate and require greater insights from the proteomics field. Tissue analysis is acceptable but expensive and laborious. The challenge today is identifying proteins of interest which may be in low abundance. This analysis may be facilitated by glycosolation which researchers expect will lower the detection thresholds by 10-20 times. Ultimately this should meaningfully magnify the disease signal to make detection more readily available.

Particularly notable about this grant is that Northeastern worked across a number of labs and academic centers to secure this commitment. Thirty-seven labs competed for aspects of the overall grant. The Northeastern consortium developed a comprehensive proposal. This approach had important benefits: it allowed individual labs to focus on their core competencies and permitted the consortium to refine the overall strategy based on multiple inputs.

The complexity of the problems being studied demanded a multi-lab, multi-disciplinary approach. "Treatment will ultimately be a data-driven decision...it will be a combination of all the "omics" fields such as genomics, proteomics, glycomics, peptidomics which solve these issues around cancer, and bioinformatics will be in the center of it all," stressed Hancock. It is this lack of clarity around the complexities of the biology surrounding cancer which drives these types of grants.

"Within a couple of years, informatics will generate "actionable" data and truly specific biological insights...my guess is that occurs over the next five years and then another five years from that point we may begin to see real clinical benefits. The black box may be a little more transparent with our work," said Hancock.

Ordinarily you don't expect a venture capitalist to be overly supportive of government's intervention in the funding of promising technologies but there may well be complex cross-discipline examples which underscore the value of such grants. The promise of bio-IT will only be realized by the interactions of various disciplines focused on solving a common set of problems. It is this broader ecosystem which the government and other academic/philanthropic entities can support.

Many VC's track grant recipients as well as encourage our portfolio companies to aggressively seek similar grants. Applications can be painfully long and decision insufferably slow to be reached but are often well worth it; many times winning is more important than the actual dollars received. The attention and notoriety with securing an award can serve to attract additional venture capital dollars as well as facilitate recruiting of other management team members and scientific advisors.

My advice to would-be entrepreneurs is to also pay close attention to these academic thought leaders. There is plenty of capital available to fund innovation, and there is a reasonably strong pipeline of innovative ideas coming out of academic environments; the most important missing ingredient in this equation is competent management talent to drive these projects forward. It would serve you well if you aspire to start a company to mine carefully the list of grant recipients at leading universities. You do not need to be the technical inventor to be a founder of a venture-backed company, but you do need to be there early.

Michael A. Greeley is managing general partner of IDG Ventures. E-mail: mgreeley@idgventures.com

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