choose a model that could be financially very successful in addition to playing a role in the transitional phase for Genzyme. How? Here are our thoughts:
• Choose experienced VCs, not just pharma people, to run the new fund. Best would be to hire investors such as the current head of Genzyme’s existing venture effort, Alan Walts, as well as some people who have experience as financial VCs in order to get away from “corporate-think” and recognize the best deals.
• Don’t insist that all the deals come from within Genzyme. Only by looking at and doing some outside deals will your fund managers be able to recognize the value they see from the inside opportunities.
• Give the Genzyme groups some support as they transition to the possibly unfamiliar role of entrepreneurship. Well before the potential merger, many of Genzyme’s R&D people have already been preparing themselves for a more “Darwinian” type of project funding environment. Offer them some help in the form of business planning and financial advice as well as market research.
• Insist on financial performance instead of or in addition to “bringing products home” as the driver for the fund managers. One shortcoming of some corporate VC funds is failure to incentivize their managers sufficiently compared to their colleagues in the financial VC sector. Another one is insisting on “callback rights” for any product funded by the VC fund. We think that such callback rights are a millstone around the necks of company founders and that everyone is better off if the corporate VC parent is given the freedom to seek out those deals that will make the most money, not those which will bring back the most products. Both of these pitfalls can be avoided by allowing the financings to take place in the absence of any coupled corporate deals (more like the way Siemens Venture Capital does it) and rewarding the managers in a way that is more in keeping with the way the financial VC sector does so.
• Be patient. A five-to seven-year time horizon should be sufficient to see significant progress from some of the portfolio of such a fund. Ten years, which is more the industry norm, would be even better. Many corporate funds live at the mercy of yearly or even quarterly budget cycles. The best ones—think Novartis, Lilly, JJDC, GSK’s SR One—do not.
We realize that $200 million is not an easy amount to commit. However, given the synergies and benefits that Sanofi expects to reap from the Genzyme deal, it seems to us that it would be a small price to pay for an entry ticket to the future of biotech and to the tight-knit and productive community of Boston healthcare innovators.
Your new neighbors,
The Boston Biotech Community
