San Francisco-based Burrill & Company looked like it had beaten the odds a little more than a year ago during a tough time for biotech venture capital firms. Burrill said in a statement that it had put together Burrill Capital Fund IV, with “aggregate capital commitments” of $505 million to invest in drugs, diagnostics, medical devices, healthcare delivery, wellness, and digital health.
Actually, it turns out the fund raised about $200 million. Partly as a result of the size difference, the team responsible for investing the cash has split off from Burrill into a new venture firm called Biomark Capital, Xconomy has learned.
“The fund was staffed up to be a $500 million fund,” said Steve Burrill, the prominent life sciences merchant banker and CEO of the company named after him. “It was about a $200 million fund.”
So on Nov. 1, less than three years after pooling resources with David Wetherell’s GBP Capital, Burrill formally transferred his full ownership stake in Burrill Capital Fund IV to Wetherell for undisclosed terms, and Wetherell took some of Burrill’s venture team with him. The newly renamed Biomark Capital, with offices in Greenwich, CT, Moscow, Russia, and San Francisco, will continue to manage Burrill Capital Fund IV’s existing portfolio and is seeking to close on additional financing by year’s end, Wetherell said. The new Biomark investment team is made up of Wetherell, Douglas Lind, Bryant Fong, Joshua Zelig, Sergey Axenovich, and Janos Redei as an entrepreneur-in-residence.
The split in Burrill’s venture capital team occurs during a period of cutbacks at Burrill & Co., the diversified merchant banking firm that does venture investing, investment banking, private equity, media, and events. The company has shrunk from about 60 employees a year ago to about 40 today, Burrill said. The firm got out of the sell-side research business this year, and converted its media/events team from employees into contractors to save on healthcare costs and office space, Burrill said. The sell-side research group was supposed to help generate trading volume for a small trading desk, and commissions to go with it, but that didn’t work out, he said.
“It’s not a business,” Burrill said, referring to the sell-side research model in the post-Eliot Spitzer reform era. He adds that the firm is still active in investment banking, with efforts spearheaded by Fred Frank and Mary Tanner.
To reduce expenses and re-focus efforts around the world, “we’ve done a right-sizing,” Burrill said.
Wetherell joined Burrill in January 2011 after spending 20 years as a high-tech CEO, including a long run at CMGI (now ModusLink), where he oversaw a company that grew from $3 million in revenue to $1 billion, according to a Burrill & Co. statement from 2011. Wetherell switched to life sciences investing in 2005 at GBP Capital, where he was involved in investments like Lentigen, MabVax, TMune, HyperMed Imaging, and Spectral Image. Biomark Capital’s new website lists some other investments, including WhiteGlove Health, Strand Life Sciences, and Adma Biologics.
“It was mostly Dave’s companies, mostly Dave’s money, and mostly Dave’s energy,” Burrill said. “It didn’t make any sense to keep the staffing level we had.” He adds that Fong will continue to work with Burrill on managing investments from Burrill’s venture funds I, II, and III.
Asked if he had any disagreements with Burrill over investment strategy, Wetherell offered a one-word answer. “No,” he said.
So what happened? Both men weren’t exactly forthcoming with deep reasons for the split. But both mentioned Rusnano. The Russian investment firm that bets on life sciences had agreed to put $200 million into Burrill Capital Fund IV, but that agreement was structured so Rusnano’s ownership stake couldn’t exceed 40 percent, according to both Wetherell and Burrill. When then rest of Burrill Capital Fund IV didn’t materialize, that essentially put a cap on the amount that could come from Rusnano.
Where does this leave Burrill as a life sciences venture capitalist? Burrill said his team is still actively investing out of its Malaysian Life Sciences Capital Fund, and Burrill Brazil Fund I, among other funds. Burrill said he’s also at work on raising more money for venture funds, although they aren’t yet ready to be announced. The company’s website says it has raised $1.5 billion across its family of venture funds.
“I’m still very much involved in the venture business,” Burrill said.
Even though the original plan for Burrill Capital Fund IV didn’t materialize, Wetherell and Burrill said they are both bullish on life science investing. “I think it’s a very transformational era we’re living in in every forefront of healthcare and life sciences,” Wetherell said. “When there’s a technology revolution happening, it causes a lot of disruption, and when there’s a lot of disruption, there’s potential for investment.”
