A popular panel on Tuesday at BioPharm America™ in Boston sought the answer to the question, “What's the next big thing on investors' wish list?”
The venture capitalists on this panel were elusive in answering that question. However, they did impart some other pieces of information that may be useful to an early stage company.
First, large series A rounds are here to stay in the US (and certainly in the Boston market), and this is the approach that Todd Foley's firm, MPM, takes to investing. This is not the case in the Europe, where according to Kevin Johnson of Medicx, a more stepwise process is pursued, starting with modest seed round of ~$1 million, followed by a Series A in the range of $20–25 million. This amount should be sufficient to drive the investment to a meaningful event, such as a partnership. The place not to invest, according to Johnson, is the series B round, where they have gotten "hosed" in the past. "Returns come in early or late," not in between, he said.
Whether floating a company with a massive A round or smaller stepping stones, both Johnson and Foley agree that it is preferable for management of the companies they invest in to focus on creating value, not raising money, which is an unproductive activity.
Rather than trying to predict what will be "hot" five years from now, Johnson's investing philosophy is to put the patient in the middle of an evaluation. If the opportunity will make a positive impact for patients, then you can't go too wrong. However, a more important criteria is whether the science is translatable. Johnson says that some great science gets stuck on translatability, therefore human validation is critical.