The first deal by any fund is always scrutinised carefully, both within the company and without. So, UK-listed drugs company GlaxoSmithKline’s (GSK) new strategic corporate venturing fund for bioelectronic medicines and technologies’ decision to invest in the $27m round for SetPoint Medical offers plenty of opportunities for reading the tea leaves, as it were. Of interest for “why this deal?” is the background of Imran Eba, who moved over this month after nearly two years as director of the drugs company’s investment management practice to be partner of GSK’s $50m Action Potential Venture Capital, which plans to invest in five to seven companies over the next five years. In his former role, Eba was responsible for identifying, evaluating, structuring, executing and monitoring GSK’s investments in life science venture capital funds as limited partners; managing GSK’s direct investments in biotechs made as part of research and development R&D collaborations; and establishing spinouts based around GSK technologies. Last year, GSK set up a $1m research prize fund for projects around electroceuticals, according to news provider Fierce Biotech, while the company has also collaborated with portfolio companies of some of SetPoint early-round investors. These earlier SetPoint investors included venture capital firms Morgenthaler Ventures, which has had portfolio company OncoMed Pharmaceuticals sign in 2007 a worldwide strategic alliance to discover, develop and market novel antibody therapeutics to target cancer stem cells. What is also apparent with the fund is GSK’s preparedness to be selective and heavily fund these portfolio companies in what is still a nascent area, although pacemakers have been regulating heart beats for decades. Given the GSK fund’s plan to back five to seven companies with $50m ringfenced for the businesses, the company is preparing to take relatively big bets, a strategy that often comes when the business is commercially supporting the entrepreneur and can learn as the start-up develops its technologies. It is a strategy that can be very effective but can run the risk that as the area emerges it is realised that its potential is less significance than first thought, which runs the risk the portfolio is left high and dry, while the corporation has in a cost-effective way explored the market segment. But this is the nature and risk of venture and start-ups and with all parties aware of these risks is a sign for sensible discussions. The first deal for GSK’s Action Potential fund, therefore, looks a good place for it to start.
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Big Deal: GSK electrifies with first deal
Aug 9, 2013 • Global Corporate Venturing
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