Let’s Talk Exits
Seroba Partner, Daniel O’Mahony, talks about being a VC and about investing in life.
What’s the most exciting part of your role as a VC - Is it all about exits?
I think venture capital is one of the most exciting jobs in the world. On a daily basis I get to see amazing science and witness up-close paradigm shifts in the understanding of disease. I get to know and understand novel break-through technologies from a really early stage. Some of these technologies have the potential to change the future treatment of debilitating diseases and improve the lives of patients, their families and healthcare in general. The trick of course is to figure out which ones. What’s not to love about that?
As a venture capitalist I’ve met some great (and yes, sometimes not so great) management teams and serial entrepreneurs. Entrepreneurs who have been deep in the trenches with innovative technology, fighting daily challenges as their technologies progress from the lab bench, into preclinical models and thereafter into clinical trials and regulatory approval.
I also get to talk with leading key opinion leaders in Europe, the USA, and elsewhere to understand both the challenges they face in treating patients and why and how they seek out new technologies that will make all the difference for those patients.
What are the key attributes that you believe VCs need to be successful?
There’s no doubt that we venture capitalists need strong conviction as well as clear thinking, curiosity and strategic decision making. Strong conviction because, although there are many highs, there are also many challenges in venture capital investment.
I’ve shared the “high” of witnessing a new technology change the lives of patients in clinical trials and I’ve felt the thrill of a portfolio company securing regulatory approval to offer a new product across multiple territories where the need is great.
On the other hand, I’ve seen great potential suddenly dampened by failure of a promising novel technology. I’ve often met with entrepreneurial teams who present with a strong underlying scientific rationale that can translate from preclinical models into positive human data, but they subsequently can’t realise that potential because of issues unrelated to the product itself. It could be due to strategic blunders, funding problems, or even just bad timing.
As VCs we have a strong network to call upon and we’ve seen companies cope (or not) in numerous scenarios. That gives us a huge breadth of experience to help our portfolio companies along their own journey. It can be very satisfying when a first-time entrepreneur and CEO tells you about a challenge they are facing, and you can tell them exactly how another company overcame that same problem.
So, is it those little wins that keep you focused on a daily basis?
Venture capitalists have the privilege of investing LPs’ money into new exciting companies and technologies. As such, our first loyalty is to our LP base and our aim is to reward the trust they place in us by delivering strong investment returns. That’s the big picture, but like any big screen there are thousands of pixels making up the image. Big exits are great, but all the incremental wins along the way help keep the main goal in sight.
Is finding the right venture to back like solving a mystery or cracking a code?
Is there a recipe that venture capitalists can follow for making good investment decisions? The short answer is no, but there are a few magic ingredients. At Seroba we have had the privilege of investing in some great companies and ground-breaking technologies. We’ve backed first-time and serial entrepreneurs and excellent management teams who don’t accept failure and will go the extra mile to maximise the potential of their innovation. But it’s not always easy to recognise which opportunity to back.
A strong team is one good ingredient in the recipe. A serial entrepreneur can be another. The solution the entrepreneur presents must try to address a clear and real clinical need. That’s actually the glue that holds the other ingredients together. If you have a novel product, strong market and a team that can deliver on the potential of the product, then you’re well on the way to a good recipe.
And the rest of the bake?
Well that’s often just down to luck. It can be timing and market trends. You’ve got to have the product ready at the right time and also have the right people onside. VCs can help management teams by ensuring they get introduced to the right people and by keeping strategics aware of exciting developments that are coming down the track, as well as updating them about key milestones reached along the way.
Another thing I love about being a VC is that we have the privilege of co-investing with other syndicating investors and learning from each other on the shared journey. From initial investment through to clinical success, regulatory approval and ultimately successful exit, we’ve had a collective shared experience. Of the companies that we all meet, even if when don’t we back them, we still follow their story. If the technology doesn’t make it, we often see the same entrepreneurs again in the future with a new technology. The story of each opportunity also provides valuable lessons that ultimately help us all be better VCs for our next deals.
Describe some of the ingredients that led to exit success in the past?
In the case of Apica Cardiovascular we had an excellent CEO, serial entrepreneur and co-founder in Jim Greene who, along with his co-inventor Jorge Jimenez from Georgia Tech in Atlanta, developed a platform technology to deliver therapeutic medical devices safely into the beating heart of patients. The key ingredients of Apica’s success were a platform technology, first mover advantage and an excellent management team.
Apica had a development team under Jim’s direction with clever engineers. In addition, Apica surrounded itself with dedicated clinicians and key opinion leaders in Europe and the USA. They worked very closely with management and the engineers in designing, testing, critiquing and bringing a very smart, but at the same time a very simple, device through clinical trials and regulatory approval.
Seroba had the privilege and satisfaction of being involved in the development of the Apica device from early prototype through to design freeze, successful FIH clinical trial, regulatory approval and early commercialization in Europe. To know that’s now a device that can save human lives – that’s exciting.
If the team are new to entrepreneurship, is that a no-no then?
Not at all. Every entrepreneur must have a first time. Another Seroba investment, Covagen, was different to Apica in so many ways. It had a first-time CEO scientist, Julian Bertschinger, who along with his academic co-inventor Dragan Grabulovski spun their Fynomer technology out of the ETH, Zurich. Together they had deep knowledge of protein engineering and the design, conceptualisation and development of bispecific antibodies.
As a first-time management team, they developed the skillset, knowledge, and confidence to lead a technology concept through to preclinical validation and early Phase I studies before being acquired by Janssen. As an “untested”, “unproven”, CEO and senior manager team, both Julian and Dragan succeeded by staying focussed and by being open to leveraging the experience of others. Along with the other members of the Covagen management team, they showed us the value of investing or “venturing” both in technologies and in people that could push scientific boundaries. With the right surrounding support and infrastructure in the form of international VCs, strategic investors, seasoned board and advisors, the first-timers delivered.
The Covagen exit also highlighted the value of selecting the right drug targets for novel, first-in-class, ground-breaking bispecific antibodies, drug targets which both strategics and clinicians were seeking for new drug candidate solutions.
Is the magic behind each exit different?
Of course, every exit is unique, but there will also be similarities. Earlier this year we exited Prexton to Lundbeck in a deal with “unicorn” potential. My colleague, Alan O’Connell, led that investment backing a product designed to treat the terrible symptoms of late-stage Parkinson’s Disease (PD). When Parkinson’s is advanced, the treatment options for patients are greatly reduced, making a new solution for late-stage PD highly attractive.
From the date that we invested in Prexton to the exit, it was just 13 months. A key learning for us as VCs was that the market is prepared to move early if the need for the product is great enough and if they want to get in ahead of their competitors.
The satisfaction of being part of the journey to providing a new solution for patients who have so few existing treatment options is hard to measure. VCs stand on the side-lines of these great advances in medicine, but we feel part and parcel of it nonetheless and that raises our adrenaline and keeps us excited to find the next big thing – and the next.
You said at the outset that venture capitalists have one of the most exciting jobs in the world. You’ve shown it can have big rewards, but on balance do the ups outweigh the downs?
The biggest personal reward for a life sciences venture capitalist is to witness, invest in and support the development of amazing products and technologies that change and improve the lives of patients. We get to do this while simultaneously working to return capital to our LPs.
Other rewards include supporting serial entrepreneurs in their determination to change the world through new disruptive, first-in-class technology development. We get to know smart people with big ideas that can change the world. Would I exit this job for something else? Not a chance!