Article preview from Start-Up - September, 2012
Our second annual survey of institutional and corporate VCs puts FDA, public markets, and limited partner support high atop a long list of concerns, although the attitude toward regulators is on the mend. A notable number of respondents also say they’ll have to accept lower terms and shrink ambitions as they raise new funds.
Article preview from Start-Up - September, 2012
Optimism is a critical element of the venture capital industry, almost as important as the capital itself. These days, both are in short supply, according to our second annual survey of life science venture capitalists. A collection of more than 100 VCs – both institutional and corporate investors – answered more than three dozen questions about fundraising, investment strategies, politics and policy, and other aspects of the beleaguered venture industry. Their answers paint a bleak portrait of their business. There are bright spots – less antagonism toward federal regulators, for example – and perhaps more telling, a few signs that VCs have begun to accept a new set of rules for their work, such as the importance of their corporate VC peers and a shift in their own pay structure. But generally life science VCs are having a rough time. “Both the VC model and the institutional investor model are, we believe, under duress,” was one typical comment from the survey. (All participants were guaranteed anonymity; some agreed to speak on the record in follow-up conversations.)
Nearly half of our survey takers (44%) answered “negative” when asked how they feel about the state of the venture capital industry. Another 25% reported having “neutral” feelings, and only 30% were positive. Last year’s answers came in at 36% negative, 36% neutral, and 28% positive. (See Exhibit 1.) We also teased out the differences in mood among different subsets of life science investors, and found medical device specialists to be more pessimistic than the others. (See "Device VCs Choose Flight, And Fight, In Face Of Challenges" — START-UP, September 2012.) One notable mood shift from last year occurred among the biopharma specialists. In 2011, well more than half felt positive about the state of the industry, but in 2012 they’ve come back to Earth, with 36% now feeling positive. (See "No Obvious Prescription For Biopharma Investors" — START-UP, September 2012.)
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