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Fundraising for Early-Stage Life Science Companies

Watch as our expert panel explains how early-stage life science companies can best prepare for fundraising in the current environment, from the point of view of a valuations specialist, VC and founder.


Panelists:

  • Richard Chin, MD, Co-founder and CEO, KindredBio
  • Brent Glova, Managing Director, Vantage Point Advisors
  • Nancy A. Hong, Ph.D., Managing Director, RiverVest Ventures
  • David Loseke, Managing Director, First Republic Bank (moderator)

Read below for a full transcript of the conversation.

Chris Coleman - Good morning and good afternoon everyone, my name is Chris Coleman. I'm the head of business banking at First Republic, thank you for joining us today for our webinar on fundraising for early stage life science companies. In my career, I spent a considerable amount of time, focused on financing life science companies founded and led a team to do that at a prior bank, so it brings me especially great pleasure in being able to say that above and beyond banking services, we at First Republic are here to provide content and insights on industry trends, that we hope are helpful to you more broadly. Today's COVID environment has highlighted, the importance of funding biotech and pharma, like never before and it does show up in the numbers, fundraising in the first half of this year, matches all of last year, so we're on a run rate for a 100% increase. More broadly we at First Republic, see both of those challenges, including the potential for ongoing pandemics and the remarkable opportunities for biotech and healthcare companies, to solve the most fundamental needs of our society, we hope today's discussion provides you with the practical information and guidance on fundraising and we've got a great panel here today of experts. First, we have Richard Chin, co-founder and CEO of kindred bio, we have Brent Glova, managing director for Vantage Point advisors and Nancy Hong, managing director at RiverVest ventures, all of which will be moderated by my colleague and teammate David Loseke, managing director here at First Republic and on the frontiers for us in the life science industry, as we expand our services. Before we start a quick housekeeping note, at the end of this session, we will try to answer as many questions as you submit and so how do you submit? Simply go to the Q&A icon at the bottom of your screen, click on that and enter your question, if we don't have enough time to answer all the questions, we'll follow up with you via email, so now allow me to turn it over to our moderator for today, David Loseke, thanks David.

David Loseke - Thanks Chris, Chris we appreciate the support, we're pleased to have great industry experts, who are in this all day every day and they can share their experiences with us with that is my pleasure to introduce you, to our panelists today. Brent Glove is managing director with Vantage Point advisors and brings 15 years of experience as a valuation advisor, performing valuations of businesses and securities, to support complex transactions for privately held venture backed in public companies, Brent, plays a key role in valuations of companies in many industries across the US and a specialized expertise in life sciences technology and the manufacturing sectors. Nancy Hong is managing direct with RiveVest ventures, having joined in 2016 and focuses on both bio-pharmaceutical and medical device opportunities, currently Nancy is a member of the board of directors at scout bio and Zillow therapeutics, Nancy is trained in the areas of immunology and oncology in doing the BS with honors in biology, from the California Institute of technology and a PhD in molecular and cell biology, from the university of California, Berkeley, she conducted postdoctoral training, at the university of California, San Francisco, as a fellow of the leukemia and lymphoma society. And finally, Richard Chin is a Harvard trained physician and former road scholar with a track record of almost a dozen drug approvals in over 50 investigational new drugs, previously, Richard was head of clinical research for the Bio-therapeutics unit at Genentech we oversaw all of Genentech drug development programs, except the oncology products, he was a senior VP of global development , CEO of oxygen, which was a NASDAQ listed biotech company and CEO of One World Health, a Gates foundation funded nonprofit, developing drugs for impoverished patients in developing countries, Richard was named by business week in 2006, as one of 99 youngest public CEOs in the United States, he's authored several major textbooks on clinical development and teaches drug development, at the university of California, San Francisco, it's a very impressive panel indeed. Brent, maybe you can kick us off with a high level snapshot from the beginning of the year, to where we are now in terms of evaluations for the life sciences industry.

Brent Glova - Yeah, thank you, David, so I guess if we could bring up the slides that I have, we'll get started, so yeah as David said, I'm Brent Glova, managing director of Vantage Point advisors, today's general topic is how early stage, life science company can get funded, so we're going to start the presentation, really with some data to drive the discussion for the rest of the hour, there's two key things to understand right now as the founder, one is you know, what's happening with valuation and two is what's the recent VC activity been during COVID and how are the VCs acting right now? So we'll start with valuations on a very macro level, the public markets are really the first key, to having a good general understanding of how private company value may have shifted, as a result of COVID-19 and our current environment, the precipitous fall and subsequent recovery of the stock markets probably isn't a surprise, to most of us on this webinar, the S&P bottomed out on March 23rd, as the COVID reality really hit home in the US and the index was down about 34% from its peak in late February. Since late March, we've seen the market's trend back upward, the S&P is really flatting since February peak, the larger cap companies, the Dow Jones down only about 5%, the NASDAQ is booming up about 14%, since that February peak. Now there's not always a direct linear correlation, between the public indices and private company worth, however, the public markets serve as a good real time, leading indicator on how valuations are moving and shifting. On the next slide, we'll see a little bit on the markets recovery since mid-March and how that's been kind of changing by industry.

The recovery since March has been painted, as a little bit disconnected from the reality of kind of main street private companies, however, that concept is really less relevant in the technology sectors, valuation exposure has been increasingly industry centric, during the pandemic and a great example of that is the NASDAQ biotechnology index, which is actually up about 10% since the February peak and this is, you know, naturally, the importance of healthcare in science, have taken center stage to lead a US recovery, the only stocks that have really outperformed, the biotech index and the biotech companies, that make that up or the Netflix and Amazons of the world and if we think about how all of us, spent the past six months or so at home, I think it's natural why stocks like Netflix and Amazon, are currently booming.

With that I want to move on to the venture markets a bit, so we can go to the next slide. So we'll kind of talk a little bit here, about the overall venture market trends, before diving into life sciences. The Q2 venture data that you see on the left here, really shows positive deal volume growth in the second quarter and that was after three quarters of consecutive declining activity, so positive signs there clearly, we're still off from the two year average levels of deal volume in the venture world but it again, positive sign that things uptick again in Q2, Q3 data isn't obviously out yet but I think the trend is expected to continue, when you look at investment volume by dollars invested, you see that volume has stayed relatively consistent, even in quarters when deal count is declining and this really means that more mega deals are happening and the VCs are investing bigger dollar amounts. On the right of this slide, when you expand kind of pitchbooks venture definition, to include Angel deals as well, you see that see that deal count, compared to the same period last year is down about 15%, essentially 800 less deals got done and I think the lesson here is and you see this kind of throughout the data is when you expand that definition, it's really the Angel and the Seed deals, that are a little bit harder to come by and that's evidence, you know, kind of in the graph there and you know, we've seen very early stage concepts, perhaps not getting funding at all or being delayed. On the next slide, you're going to see that trend further explained in the overall venture market, Angel, Seed and early stage deal counts have declined versus last year, however Later Stage VC investments have actually increased as the focus has shifted to more mature assets and slightly less speculative stage investing, what's interesting here and you see this, at all stages actually, all three of these graphs, the average post money evaluations are actually up, despite less deals getting done, now that doesn't necessarily mean, that pre money valuations are up but instead means that, investors are putting bigger dollar amounts, into higher quality companies, again, kind of repeating some of what we saw on the prior slides. On the next slide we can move to like the same trends but being kind of focused specifically on life sciences, on the left you see some data from Cooley, which shows the average series, a pre money valuation for life science companies was down as of June 30th about 9% from pre money values the prior year, the dynamics here, I guess they're not at all surprising, there's slightly less appetite at the unproven stages and it probably what's more at play here is COVID has created a bit of a buyer's market, both in M&A and investing, buyers or investors essentially have more leverage and down times naturally and this is you know, perhaps playing out, even in industries like healthcare and biotech, that are outperforming others.

Again, you see the same trend where post-money valuations, have actually increased, again, that's just bigger chunks of money being put to work with investments that the VCs are, you know, have a strong belief in essentially, you see that concept on the right side of that graph. Now, if we can move to the next slide, again, we're seeing basically the same information, that we saw before for the overall venture market, this is again, just life sciences, specifically, the trend is relatively similar in that there's less Angel deals happening, more late stage deals but what's different is those non Angel early stage deals, essentially your series A and your series B deals in life sciences have actually accelerated in volume, over the same period last year, so again, more positive news, the series A deals are indeed happening, just perhaps at slightly reduced pre money values, bigger initial investments and again, perhaps changing deal terms, which we'll talk a little bit about, if we move to the next slide, we can talk about kind of the takeaways, that are at play here, you know, really the first one and this is natural in any industry and we're seeing it in life sciences as well is down cycles are going to result in a VC flight to quality and less risky investments, VCs, they're essentially going to invest in teams with a strong track record and asset types, where there's some kind of precedent for success, later Stage deals will be more attractive, even if the returns are not as good, as the early stage deals, Angel and Seed deals are going to be harder to come by and many concepts at the initial stages, you know or inception may not get funding, to get off the ground at all. Series A and B deals are still happening at a good clip but valuations may be down slightly and may come with more dilution or deal sweeteners from the VC but again, on the positive side here, we're seeing the overall VC activity, actually increased last quarter in the midst of a pandemic, which is pretty amazing. Biotech again is uniquely positioned, to continue to lead a recovery and companies with solid teams that are getting funding, are actually getting more money to put to use and so with that, I think we want to transition, the conversation a bit to Nancy Hong, Nancy and I have chatted about the data, that I just presented and I think from what our conversation was, I think RiverVest has actually observed, some of these trends playing out kind of in the real world and so, David, I guess we want to turn it over to Nancy.

David - Yeah, very much and thanks Brent, you know, so Nancy is the VC of working with Bio-pharm and medical device opportunities, she's on the board of two life science companies, what's your focus and what have you been seeing in the market in terms of fundraising?

Nancy Hong - Yeah, sure thing David, RiverVest as you said, we focus on both drugs and medical devices, you know, I think what we have in common with many of our other VC peers, the first thing as we're approaching COVID, you know, back in February was shoring up the portfolio company, right, the portfolio is obviously the priority and fortunately, everybody in our portfolio was really well positioned, you know, they're well financed and I think, you know, this goes to something that Brent, highlighted in the data, you know, the trend for the past probably five or six years now, has been towards larger financings, higher conviction investing, financing risk is one of the few things, that venture capitalists can control from the outset, you know, how big do you build a syndicate and with how strong of players around the table and if we all decide at the outset, let's hold our hands and you know, raise a bigger amount, that helps the company, you know, see itself through tough weather and so it was very gratifying to see that our portfolio, you know, was kind of built to withstand bad weather and you know, not necessarily a pandemic but it turns out that you know, pretty much, every company was well-financed and, you know, secure from that perspective, I think the next level of questions was, you know, clinical trial execution, right, enrollment and of patients clinical trial site access, obviously very impacted during, you know, the most intense times of COVID, RiverVest, we tend to focus on high unmet medical needs, you know, very serious ones but even you know, deadly cancers, you know, at some point, you know, it was hard to get trials, you know, set up and continuously I think, you know, we're beyond that, you know, critical stage at this point, a lot of sites are reopening, it was kind of lumpy also across, you know, different kinds of sites, how, you know, integrated, they were or close they were to, you know, ICUs, so that part feels like it's getting back on track and you know, companies were differently affected, depending on which sites they had open, so that part all seems to be going better now and then, you know, maybe then we turn to kind of new deals and you know, due diligence, I think it has been a very busy time, we've been in a very strong part of our cycle in biotech for a long time now, maybe be coming on six or seven years of an up cycle and so lots of capital flowing, lots of deals happening, you know, we like Brent have been participating in, you know, some very big financings, you know, nowadays a series A that's a hundred million dollars, it doesn't necessarily even cause the blink of an eye, so it just goes back to that financing risk, that that's one of the few things that we can control, I think that RiverVest personally, has struggled a bit with, you know, the new Zoom era of not being able to meet founders and management teams in person, you know and you we were taking all our meetings virtually, it's been going fine but I think, that it's a bit of an experiment and you know, we'll never really know if some of the deals, that we didn't necessarily get across the line, you know, would it have helped if there were some more in person meetings, would it have helped if we knew, the management team personally and had gotten more time to get to know them and get comfortable with the team and you know, I have had a few cases too, you know, when presenting via video, it's really tough to kind of grab people and you know, have your personality, kind of jump out at the screen and if you're a quieter more introverted founder, maybe you are the, you know, domain expert and really know your stuff but if you have trouble kind of telling your story and making that connection and it's even harder via video than in person, you know, we'll just kind of never know if that kind of influenced the number of deals I got done and the types of deals that got done right, we always love to believe at RiverVest, that were very rigorous, you know, we do a lot of technical diligence, we have a whole laundry list of diligence items, that we need to you know, investigate but there's always that magic of you know, making a connection and, you know, really kind of building conviction, around the founder's vision and obviously it's very, very important for early stage deals where there isn't much of you know, necessarily clinical data to evaluate, you know, we really have to get ourselves to believe in the story and in the potential of what we're hearing, so that to me has been very interesting and you know, again as I say, like a bit of an experiment, that we won't really know, how it plays out for a few years, actually, maybe one other point was just that, you know, we are kind of in this up cycle and you know, does the kind of COVID challenge, you know, represent, you know, a stress test to the system, you know, there's normally a bit of a you know, survival of the fittest kind of Darwinian thing going on, when you know, the capital kind of becomes more tight, only the best ideas and best teams get funded, we haven't really been in that part of this cycle for a while now, so there's probably a lot of, you know, as I say, kind of experiments being done, a lot of speculating being thrown on the wall, you know, to me it would be healthy for our industry, to you know, cycle a little bit back, to you know, more rigorous diligence and you know, a healthy balance of risk taking and I think that COVID, to some extent, you know, kind of helped people have, you know, quote on quote the excuse of like you know, we want to be careful, we want to be thoughtful, we want to think, you know, a few years out, you know, not necessarily take the highest risks, that we know have very little chance of success, you know, to me as a scientist, you know, again, I want our industry to be, you know, at least somewhat rigorous, about evaluating the chances of success and you know, in the long-term, I think that that serves everybody well, that we're not necessarily just throwing darts, I think that the challenge of COVID and the challenge of you know, thinking, that you know, there might be a lot of turbulence coming up, in the economy, you know, it's probably a healthy thing for our industry in general and, you know, I think that early stage founders, should also be thinking like that too, right, you don't necessarily want to get money for any idea, that you get excited about, it has to really be something that you believe has legs and it's going to have long-term impact, you know, ultimately on patients someday.

David - So let me ask you a question, Brent mentioned that, kind of there's a flight to quality with larger deals in the series A is not as active, it kind of makes sense that that was a COVID thing, where the money's going to go to more quality but it sounds like you have steamed that trend, over the past couple of years, where the deal sizes get larger is that because of efficiency or a state you reflect equality, so that like a trend or is that more of a blip with COVID? What do you think?

Nancy - I think in our industry you know, experienced jockeys, are always, you know well sought after and highly served by capital, right, you've been successful for the syndicated of investors, you kind of have that mandate, to keep doing what you know how to do and you know, that dynamic of backing up a prior winner is a very, very powerful one, right, you know, no VC is going to be embarrassed, about, you know, backing a prior winner, even if their next deal doesn't end up working right, so yes that's kind of a table stakes in our industry I think it does become even more powerful, when you know, there is a challenge to the system, it is kind of a safety net that, you know, no one will ever criticize you for backing someone that's already been successful, you know, I guess at RiverVest and that many other firms, you know, the team is really only one piece of the puzzle though right, you know, I often say, we want to love the jockey, the horse, the track, the weather, the whole shebang and you know, when the weather's tough, you really need to count on, all those other factors even more.

David - So along those lines we had a question come up, you know, we've got some volatility, elections coming up, the general market may have a pull back, that biotech investors, this is the question, biotech investors flush with cash and haven't been as impacted as other sectors, the market builds resilience, what is the outlook from your perspective, the life science sector for the remaining 2020 and going into 21?

Nancy - Yeah, I think it's good, you know, we have seen, that the industry has responded really well, you know, somewhat unexpected challenge, you know, the people really prioritize their health and understand that it's something, that kind of is pandemic proof in a way, you know, the point that the capital, kind of is already in the system, right, so many venture firms have raised really large funds and that's their mandate, they need to deploy that capital, you know, the outlook is relatively good, you know, the question about the IPO market staying open is a big, hot one in our industry now, you know, every time there's an extended up market, people wonder, you know, is this the new normal and maybe this is sustainable now and we'll never cycle back to the door being completely shut, I think that those of us that lived, through the 2008/9 timeframe, you know, wonder about that still, I would like to see it to believe it, I think, you know really high quality stories, do you always find a way to get funding but you know, there's no question that we've had just, you know, unprecedented levels of access to public markets lately, so to me that that'll be an interesting thing, we'll find out maybe in the next year or so, that you know, is this kind of a new normal and there's going to be a steady trickle of biotech IPOs, kind of, regardless of anything else going on and in the external environment, you know, there are some early stage stories, that are kind of built and predicated, on being able to access larger pots of capital and you know, the public market, serves a very important purpose for those kinds of stories, you know, we tend to focus more on product development, you know, tight stories, you know, don't necessarily have to rely on going IPO, to finance across the finish line, so for us we feel like either way, you know, it's kind of okay, you know, we think we'll be able to venture, you know, finance our projects but if they do have access to public capital great but it will affect, you know, other kinds of early stories, that are more kind of platform and technology based, you know, really have kind of a broader story to tell and oftentimes you know, need those bigger pots of cash and really need taxes to the IPOs to sustain themselves. So we're watching.

David - Yeah, well thank you for that and we want to go to Richard, so Richard, you've founded multiple companies, obviously most recently, KindredBio sciences, which is traded on the NASDAQ but from your perspective and given that San Diego, Boston, San Francisco, we're all with life science hubs, early stage life science founders, what's your advice in terms of what should they be thinking about right now and maybe share some of your experiences?

Richard Chin - Sure thank you there David, I was on mute, so I founded one company, I have run several startups, first, I want to thank First Republic and Vantage Point advisors for inviting me to this, I actually opened my account with First Republic eight years ago from my company with $5,000 personal check and First Republic has been great, through the private stage, IPO public stage, so thank you. So I handle a lot of experience with fundraising across private and public sector, as well as government and foundations and I agree with Nancy right now, the fundraising environment is unprecedented, I think maybe you'd have to go back to 1999, during the genomics bubble in order to find an environment that's as favorable, as it is right now, there's a lot of capital, a lot of VCs have very large funds and several raising funds right now, I have a lot of different things I could talk about maybe I can focus on three things. My first advice to people raising money, would be to make sure that you're telling a story, so there are a lot of advice out there on the internet, about how to put together the perfect pitch deck, what kind of things you get to put in there and all that is correct, you need everything in there, that these websites and videos tell you, that you need to put in there but the most important thing, the part that they don't focus a lot of attention on is that you have to put that together into a story.

Just putting up data is not going to help you, a lot of advice out there says your first slide, you got to put a summary, explain your whole business model, before you lose the investor's attention, my advice would be to tell a compelling enough story, so that you don't lose them after the first slide, so let me give you an example, a friend of mine who was in medical school with me, came to me and said, hey Richard, I'm trying to raise money for this startup but I'm not getting any traction, so could you look over my pitch and give me some advice, so I took a look and his pitch was exactly, what a lot of these expert sites would tell you to do, put a summary in the first slide, put the market size and then technology and sort of formulaic and I said, James, no, no you have to approach this in a completely different way, you have to start with a story, say, look, I'm a dermatologist at Harvard, I'm the guy that tertiary care dermatologists refer to, when they have a patient that they can't treat, so I treat the sickest of the sick patients and over the years I've developed a therapy and it's combination therapy and I've treated hundreds of patients, that were basically untreatable and it's been working great, so I want to start a company around it and so he's changed this pitch and he had a lot more success, the exact same set of data, the clinical data didn't change, the science didn't change, the market didn't change, the only thing that changed is how he put the story together, so that's number one. My second advice is to keep in mind, that investment is a bet on the team, much more than it is on the technology at the business plan, it's exactly what Nancy said, there are multiple examples of people, pursuing the same business plan, where one team succeeded and another one failed, the very recent example is Tesla versus Fisker, a lot of people don't remember Fisker but there had the exact same business plan, electric cars, their first models were Sedans, the first and second models were Sedans, the only difference is Elon Musk on one side and Fisker on the other, as you are talking to investors, remember on the conscious level, they may be evaluating a business plan but subconsciously they're evaluating the team and to link this to COVID, I think it has become a lot harder for early stage companies to raise money because as Nancy said, you have to build a connection with the investors, they have to feel like they can trust you with their money and that can be done over a video conference but obviously it's a lot harder and then the third piece of advice I would give to people, who are trying to raise money is that there are these fads in investment circles, so right now, gene therapy for example and email oncology is very, very hot in life science, it may be easier to get funding, if you try to follow that said, try to modify your business model, to fit in with what's trendy but that's exactly the wrong thing to do and the reason is that hot areas, attract a lot of companies and a lot of investors and you're competing against all these companies, it's much, much harder to have a successful company, if you have a company in a hot area, than in an area that maybe out of favor, so how do you get investors invest in something that's out of favor? And to answer that you have to step back and just ask, why do investors invest in similar things?

Why all these trends? And really boils down to risk avoidance and social proof, you don't want to be the one investor, who made the wrong choice, when everyone else made the right choice, if you all make the wrong choice together, then once again to what Nancy said, you're not going to be embarrassed, so what do you do about that? The only thing that's more powerful, more convincing, than saying, hey, I'm doing this thing, that's really trendy and they're billions of dollars going into it, so it must be a good idea, the only thing that's more powerful than that is to look at the past and pull out analogies, to past successes because once again, you're tapping into the same social proof risk avoidance on the one side, you have to thinking that, well, everyone thinks this is a good idea, so this must be a good idea, the way to counter that is to say, look at these companies, that have been successful in the past, so that's why you might pitch your company, as a genetic for pets or Uber for bicycles or something like that, so the worst thing you could do is follow the current trend, the current fad from a business stand point, so you don't want to do that, what you can do is reposition and tell your story such that you make your company and your business plan as attractive and as low risk as following something, that is in that sort of trendy area.

David - So if you were to be in a position of having a startup today, how would you handle the Zoom distance interactions, since really a large part of your presentation is based on the personality or the team, the story, how would you suggest or how would you do it if you had the Zoom environment?

Richard - Yeah, so there are a of couple of ways because you can't meet face to face because you can't have dinner with investors, dinners are usually where a lot of the deals are stroke, whether it's investment or PT, the other way to do it is through intermediate connections, if somebody they trust  you and they can vouch for you, that'll go a long way, so this is hard if you're new to the industry but if you have connections, that's the best way, in fact, that's the other thing I should've mentioned, rather than contacting an investor, out of the blue it's always best to find somebody who knows the investor or somebody who knows someone who knows the investors because that's a different sort of dynamic, it immediately puts you on a different footing if they say, oh well, this person is close to this other person, I know they have good judgment.

David - We have a question here and also for Nancy too, given Richard's advice to say, hey, you know, trying to connect to these needs, through an intermediary and you're saying you really want to get a feel for the people and you kind of stick with the jockey that's known, if a new company comes to you, would you write a check, having that discussion over Zoom or is that more the exception or the rule these days we think?

Nancy - Yeah I think, it varies from firm to firm, I know that there have been folks doing that, you know, we don't have another choice at this point, right, so I think there are people that are doing that, personally at RiverVest, we actually haven't since COVID, we have not made a new deal, we've done some follow ons in our portfolio, so other people are obviously doing it but no yeah, it has been a tough one for us, you know, just to Richard's point definitely true that, you know, for good or for bad, the network effect is very powerful in venture capital and having that warm introduction, you know, really does help build trust, I just had this one happen to me, where you know, got introduced to a company, by someone we know and trust and then my first diligence call was to someone in the space and he tells me oh, I'm actually, already advising that company you know, so I'm really excited about it and that's like, oh great, you know, now I have two people that I trust, that like this company, so you know, I think even more just, you know, marketing yourself to a venture capitalist, that's susceptible to that kind of network effects, it's also very powerful for entrepreneurs because those experienced connected people, often have great advice right, they're you know, experienced and connected because they probably been very successful, doing what they do and they probably have some really, really great advice for your business, so, you know, I think networking and really talking to as many people as you can and soliciting as much advice as you can is something that early stage investors, you know, them to spend quite a bit of time, doing for all kinds of these things,

David - So have you seen with COVID, you know, it can be a boom or a detriment but have you seen into Richard's point in terms of not jumping into a spat, have you seen companies, you know, when the internet was, you know, dot com was the best thing to have in any company's name, have you had companies, try to, you know, bring in that COVID theme, to get your attention or how do you kind sip in that noise?

Nancy - Yeah, I know we've had a lot of folks, I mean, obviously the interplay between immunology, oncology and infectious disease, you know, it makes sense on some level, you know, if you have a technology, that, you know, kind of boosts the immune system, maybe you should check it out for COVID right and maybe there's a lot of capital flowing, to COVID kind of projects, it was exactly as Richard said, for us it's a bit of too much noise, right, too much activity, everything is moving so fast, you know, we're a smaller fund, so we've decided strategically, that we're probably not quite at leap into the COVID investing world and we're just going to stick to our knitting and you know, it's fine, you know, we've had some portfolio companies, where like, oh, you know, this company makes a ventilator, so yeah, they should really probably figure out, if it's helping for COVID patients, but, you know, kind of the De Novo pivot towards COVID, you know, it has to make a lot of sense and it's going to fit some firms better than others and for us, it's actually not an area, that we're prioritizing, so I will be super interested though if longer term, this means you know, better attention is paid, towards you know, infectious disease because as we all know, you know, it's a great unmet medical need, a lot of progress could be made on it, you know, usually it's pretty translatable from preclinical to clinical results, the problem has really been that not enough big pharma, had been committed to, you know, infectious disease and kind of the market issues around getting paid, for solving infectious disease problems, so if that is a longer term trend that comes out of COVID, I would be really happy because, you know, I think it's one of the few areas, where we could make so much progress and have so much impact and yet for these weird kind of commercial reasons, you know, venture capitalists, don't actually have the mandate to be super active in that area.

David - So this is for Brent or for Nancy is a relatively specific questions but the question is, do you have any thoughts on why small molecules, have received so little funding for COVID, versus vaccines or biologics is it a general industry trend in your view? How about single assets versus platforms? What trends do you see there? Maybe Brent, you have thoughts on that.

Brent - Seems like at least the first part of that, would probably be better for Nancy.

Nancy - Yeah, I mean, I think that we have heard of, you know, some small molecule efforts and do think that that's going to be important longer term, there's no question that there are biologics, kind of already in the freezers, right, that people can kind of pull out or argue in people's blood that they could kind of isolate, so I guess that, you know, versus, you know, kind of starting a small molecule campaign or trying to repurpose small molecules, you know, finding biologics probably maybe in the short term feels a little bit faster, you know, you might have more immediate impact, so I think that that observation is probably right but you know, probably in the pipeline, there are small molecule efforts happening and kind of longer term, you know, I think that there'll be important contributors.

David - Do you see that industry wide branch, what do you see right now?

Brent - Yeah, you know, I think what Nancy said is accurate, I guess on the second part of the question, you know, single assets versus platforms, obviously platform technology is going to drive bigger valuations but it also takes a longer time to get there and, you know, we've seen that even in some M&A activity, where, you know, perhaps company believes, that they really have a platform assets and perhaps the strategic buyer isn't giving them credit for a platform valuation and so, you know, there there's clear valuation differential between platform versus single asset, it's creating that story and getting the technology, to that point.

David - Perfect. And Richard we have a question, question is you mentioned important aspects, to convincing investors such as your pitch deck, till they can build the story and business case, focusing on the management team differentiation and how you plan to deploy the capital, what kinds do you offer entrepreneurs and valuation expectations and not getting caught up on their cap table?

Richard - You know, that's an excellent question, one of the most common mistakes that entrepreneurs make is to try to hold on to majority stake in the company and one of my mentors early in my career told me, Richard, it's better to have a percentage of something, that's worth a lot than have 100% of something that's worth zero. The business model for biotech companies is to put capital in, so you can create something that's worth more and the focus should be on raising as much capital, as possible from good investors and building value and if you do that then there'll be multiple winners, so I would not focus too much on valuation, there are a lot of things to think about valuation, you know, if you go in too high, then you might have a down round at some point, that's a big problem, you want to work with investors that you get along with number one, who have good reputation and going back to an earlier discussion about networks, these Seeds have networks that they rely on, to do due diligence on companies and founders and entrepreneurs have networks, where you can find out how it is to work with different VCs and different VCs have different reputations, whether for better, for worse, so the most important thing is to focus on, are they going to be supportive? Are they going to treat you fairly? And then worry about valuation as a second, now, having said that, the way to maximize valuation is just to have multiple people interested in the company, it's purely on the basis of supply and demand, so ultimately it comes down to how many VCs, you can get interested in your story, often when you have one or two VCs interested, you'll get other ones interested as well.

David - All right thank you and there's another question, which I think Richard, if you can address this, it says, from a biotech company's perspective, would you close on a hundred million dollar IPO or a hundred million dollar private round, to reach commercial launch, same similar long-term investors syndicate, what are the pros and cons of an IPO versus a private round?

Richard - So it really depends on several things, one is the experience of the management team, there are people who, regret running private companies but it's a completely different ball game, when you're running a public company and to take a company public main necessitate, change in management, so that's one thing to keep in mind, now, the founders may not know that but you know you go down that path that that might happen, it also depends on how well you're working with VCs and often the decision will be out of your hands because there are typically clauses, when you take these new money, that essentially hand over the control of the timing of the IPO to the investors, not always, but you know, that's very common, if you have the ability to run a public company right now, it's great time to go public, the valuations are excellent, there's a lot of capital out there and it'll be an exit for a lot of the VCs, I would take it case by case.

David - Gotcha, okay, thank you and then in terms of to the panel, what are your thoughts about all this federal and private money going to COVID and away from other areas of high need right now, like Alzheimer's and Dementia and more delays on finding a cure there, do you see resources being reallocated or short term long-term, what are your thoughts on that? Maybe Nancy, if you see that.

Nancy - I haven't necessarily noticed, you know, as Richard and others have said, like, you know, it feels like there's plenty of capital, to kind of go around at this point, I guess that I've mentioned this on another panel, but you know, there is a lot of attention being paid on kind of COVID approaches and it would be unfortunate, you know, the world changes, such that we get this a little bit more under control and interest kind of dries up and maybe we've created, a little bit of a glut in the system, where now we have all these projects and people kind of dedicated to infectious disease efforts and less demand for it, you know, sometimes that happens, you know, I know that when the stimulus for NIH was tried, you know, a number of years ago, it created the same kind of glut of like, you know, grant applications, right and grant applications, are something that take a lot of time to create and they don't really disappear from the system, you can kind of keep editing them and resubmitting them, so, you know, could something like that happen, I don't know but I don't necessarily think, it's to the detriment of other efforts, I mean, I think there are plenty of VCs that, you know, have enough bandwidth for getting interested in COVID but then also doing what they would normally be doing, I haven't seen so much that we've completely shifted and paved in their interests way.

David - So Richard, mentioned he started the company with a $5,000 check, Brent, do you see, you know, do you see the trend continuing in terms or are you seeing smaller company valuation deals, through your pipeline or is it continuing to go, into larger and recurring opportunities?

Brent - Yeah I mean, I think what we've seen is a lot of kind of mirrors some of the trends, that I talked about is flight to quality, you know, very high quality existing clients are continuing to kind of add, you know, do additional rounds, raise big dollar amounts, you know, we've even seen some of those mega deals, one of the things that's interesting right now and we've touched on this a little bit, right is like all of the different public liquidity options, you know, comparatively pretty early stage enterprises, we have kind of a handful or more of clients, you know, early stage bio-techs, that are evaluating SPAC deals or reverse mergers or you know, an IPO, you know, a very early stage company, by you know, all comparison and that's an option that I think, you'll continue to see the play out for at least until the election and the remainder of 2020 and then, you know, we touched on this a little bit, you know, what happens in 2021 is all of that public market liquidity is still there, I don't think anyone really has the answer but there's certainly a flurry of that activity right now.

David - Okay, well perfect, we're coming up on our time, I just want to ask the panelists, any other thoughts you want to share, that are on your mind right now or any last words, Nancy or Richard?

Nancy - You know, I mean, a lot of what Richard said, definitely resonated with me and I think now the only thing to add, you know, we VCs are humans, right and you know, making that connection is hard in the COVID kind of Zoom era, it's annoying in a way to have to have, you know, raising capital B, so kind of labor intensive but you know, try to make it, kind of a high touch experience right, you know, I've had lots of founders, you know, kind of forget to follow up with me, right, it's more effort to kind of reach out and try to connect but you know, I think maybe these times, really kind of demand that for early stage and first time founders, you know, a lot of us VCs are here to help our communities, you know, we really want to see science and technology progress and have, you know, more options for patients, so even if we don't invest, you know, we're trying to be helpful and I know that that's a bit of a joke, where you know, VCs get a bad rep for saying they want to be helpful but really, you know, a lot of us do, you know, especially on the life science side, so, you know, we try to kind of answer, as many emails as we can and it is hard if you get a lot of cold ones but you know, once I've met you, I really do want to help and so, you know, just a reminder to folks, that I hope I don't get indicted now but you know, to reach out and keep people updated, you know, that's really a point that people try to make and it's a hard one to do, that even when you're not raising right, to keep VCs apprised of your progress, makes a lot of sense, right because you're continually then building that connection and you know, the next time around, it'll be that much easier for you to raise capital.

David - Perfect, thank you.

Richard - If I could build on that, VCs as Nancy said, don't hurt people and many of them are scientists and often VCs do get a bad rep is only carrying money but healthcare VCs often are not, to be frank, if money were the only thing they were interested in, they'd probably wouldn't be investing in healthcare, they might be investing in IT or they might be at Goldman but healthcare VC, it's a tough, tough endeavor, so lots of them love science and they love the big idea, that might change practice of medicine, so when you're talking to them, don't just focus on the numbers, no talk about the cool stuff, they really, really like that most of them.

David - Perfect, well listen, that wraps up our discussion today, many thanks to the panelists, an incredible wealth of knowledge and experience and insight and thank you for sharing, we very much appreciate that, we'll follow up with an email that has links, to the related information and resources, us at First Republic we're proud to serve you, as part of the community across the innovation, across the United States, please feel free to reach out to us by any means and this concludes today's event, thank you very much.

Richard - Thank you.

Nancy - Thanks.

Brent - Thanks everyone.

The guest speaker(s) is neither an employee nor affiliated with First Republic. Opinions expressed by the guest speaker(s) are solely their own and do not necessarily reflect those of First Republic. This information is governed by our Terms and Conditions of Use.

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