Members of the region’s scientific, medical, academic and business communities seeking more knowledge about innovative early-stage investment strategies in the biosciences packed the ballroom of The University Club, 1346 Central Avenue, on Thursday, Feb. 23, for a panel discussion hosted by Memphis Bioworks Business Association.
The event, co-hosted by partners Life Science Tennessee and the Southeastern Medical Device Association, centered on the TNInvestco Program.
Launched in 2009 by the Tennessee Department of Economic & Community Development, the program has allocated $200 million in tax credits to a cross-section of venture capital funds with broad experience in developing new companies in Tennessee.
Thursday’s discussion was moderated by Henry P. Doggrell, vice president, general counsel and secretary of Memphis-based pharmaceutical company GTx Inc., and each of the four panelists represented TNInvestco venture capital firms.
Panelists were Charlie Crawford, senior analyst with Innova Memphis; Joe C. Cook III, principal of Nashville-based Limestone Fund; Gary Stevenson, co-founder and managing partner of MB Venture Partners; and Dr. Brian Laden, co-founder of Nashville-based Tri-Star Technology Ventures.
Stevenson said there’s never been a better time than the present for bioscience startups in Tennessee.
“In our history of investing over the last 10 years, there’s never been this much opportunity in the state of Tennessee,” he said. “That’s good news. Let’s remember what it really represents; there’s a pool of capital here for investment in Tennessee-based startup companies.”
He said the real investment is in the multiplier effect – getting innovative companies to a place where they can attract additional venture capital firms from outside the state, making Tennessee a net importer – and not an exporter – of venture capital.
Laden said Tennessee’s life science sector is “incredibly robust.”
“It’s our thesis that there was sort of this untapped need out there because of a lack of capital, and it’s proved to be overwhelmingly true,” he said. “The number of deals that find us is a lot. We also go to universities. Our funds and some others have a particular interest in university-based technologies, so we maintain relationships with the universities in state and, in fact, around the country, looking for life sciences type of deals.”
Laden said one of the great benefits of the TNInvestco program has been the strong, collaborative bioscience investment network that’s emerged.
When asked what qualities Innova looks for in an investment, Crawford said the firm primarily looks for a company to which they can add value as a long-term partner.
“We look for a business where we can add value beyond our capital in the form of our experience and our expertise,” Crawford said. “We tend to be very active investors. We don’t just write a check and walk away in five years and hope to go the mailbox and find our returns. We’re going to be involved in management on a weekly and sometimes daily basis, helping build value.”
He also said effective management is a critical component in seeking out startups with tremendous growth potential.
“In many cases I’d rather have an excellent management team and a good technology, not the other way around,” Crawford said. “A management team with startup experience that understands that we all have titles in a startup company, but everybody’s going to be involved in doing a little bit of everything, is very important.”
Cook said venture capital firms provide much-needed solid business experience, including management expertise and tremendous resources, to bring the early-stage startups to fruition.
“The regulatory environment uncertainty and everything else is really different than a lot of other industries that don’t have some of the same risks,” Cook said. “So the marrying up of the management team and the technology and a market need is something that we spend a lot of time on early to see if there’s a good fit…we’ve got to have those pillars in place because there are different ways to go about developing technologies.”
Memphis Bioworks Business Association’s next luncheon, “Building the Talent Base for Bioscience: Workforce Development Initiatives in the Mid-South,” will take place March 15 at the University Club. Visit www.bioworksbusiness.com to register.