Recruiters harvest a biotech boom
by Katherine Goncharoff
Posted 06:45 PM EDT, Jul-31-2001
If executive recruiters are any sign, biotechnology and healthcare startups may be in for another big round of fundings.
Lingering interest in biotech follows the mapping of the human genome, the promise of proteomics and perennial hopes of speedier drug approvals. This interest has ignited a surge in venture firms seeking investment professionals with a healthcare and biotech backround.
"These days, biotech and healthcare is the pretty girl at the dance, and everyone in the VC world wants to dance with her," said Stephen Bochner, a recruiter at TMP Worldwide Inc. in Encino, Calif. "I know of at least 19 biotech and healthcare searches currently under way for venture capital firms."
Craig Parker, a former senior vice president at Immunex Corp. and erstwhile Donaldson Lufkin & Jenrette drug analyst is a case in point. The Sprout Group, an early stage VC fund, hired Parker this week to help invest its latest fund, Sprout Capital IX, which closed in November, that will plow 40% of its $1.6 billion toward biotech and healthcare. Sprout's prior fund allocated 25% to the segment. "There is definitely growing interest among VC firms in the biotech sector," Parker said.
This, of course, isn't the first time that biotech has resembled a VC promised land. Nonetheless, if only because so many other sectors have suffered, biotech has come into favor in a big way.
Patricof & Co. Ventures, Apax Partners, Atlas Venture, Domain Associates, Highland Capital Partners and New Enterprise Associates are among the traditional VC funds that have recently hired or are seeking biotech experts, executive recruiters said.
"We are looking to hire someone to join our healthcare investment team in California right now with a deep network in Big Pharma," said Lori Rafield, a healthcare expert at Patricof & Co. in Palo Alto, Calif.
Statistics released Monday by the National Venture Capital Association illustrate the boom in the sector. VCs invested $1.47 billion into biotech and healthcare startups in the second quarter, 37% more than the $1.07 billion in the same period a year earlier. Some $4.3 billion was raised for biotech and healthcare investments last year, nearly twice as much as in the three-year period from 1997 through 1999.
Also, by the end of June, VCs raised $3.2 billion this year for the sectors, well on its way to surpassing last year's fundraising. Among those responsible are Palo Alto, Calif.-based Prospect Venture Partners, which announced Tuesday the closing of a $500 million fund to target biomedical technology and life science companies, an unusually large size for such a narrow focus.
Another example: Cambridge, Mass.-based MPM Capital, which closed a $650 million healthcare and biotech fund last year.
"News announcements like these put me on alert that the demand would pick up in the VC community for individuals with expertise in these areas," said Manuj Shah, a recruiter with New York's The Options Group. "There are a lot more searches going on right now on both the senior and associate level."
Bochner said specialist firms have also spurred biotech executive demand. Among them are Care Capital of Princeton, N.J., which has a $100 million fund, and San Diego-based Forward Ventures, which manages a $256 million fund. "In addition, firms such as J.P. Morgan, Burrill & Associates, Lehman Brothers Inc. and InterWest Partners have all hired people in the past year to expand their VC activity in these areas," he said.
James Audet, a VC recruiter at Russell Reynolds Inc. in San Francisco, warns that such hiring can be tricky because biotech investing requires an uncommon sophistication and operational experience.
Jan Leschly, a former CEO of SmithKline Beecham and founder of the Care Capital Fund, added that VC biotech teams must vet deals that are "more complicated than ever before," starting with drug discovery to clinical trials through to Big Pharma, which ideally would eventually acquire the startups.
Victor Kleinman, a VC recruiter with The Stevenson Group in San Francisco, said base salaries range from $125,000 to $200,000 at smaller funds while their percentage of the firm's carry ranges from 2% to 6%. Shah said salaries on the partner level at more established funds can range from $600,000 to more than $1 million, plus the profit share. "I've noticed that anyone with a specialty in bioinformatics, that is to say biotech experience combined with a solid knowledge in information technology, is in high demand these days," Shah said.
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