Confessions of a VC on a Total Write-off

In a very candid entry on his blog, Bruce booth postulates on what could've gone wrong with the once highly promising Dx dream-venture, On-Q-ity - a must read!

http://lifescivc.com/2013/04/on-q-ity-a-cancer-diagnostic-company-r-i-p/

Below's the comment I posted on the above entry;

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Murali Apparaju•2 hours ago

It's always painful to see a promise not living up to the faith of those who believed....

I'm not exactly sure, but what you said about recapitalization sounded like 'despite the value of the combined capital raised by the two merging ventures prior to 2009 was USD 31mio, the merged entity (On-Q-Ity) prior to investment was valued at USD5mio', To me this initial valuation (& disregard of capital) is where the deal started going wrong?? - wasn't this one of the risks flagged in 2009?

While not tranching the investment does look like the most probable reason for the VCs losing out on the return, I'm wondering what promise of return led to the VCs risking a USD 21mio investment upfront into a company wherein a cumulative capital of USD 31mio only resulted in a USD 5mio valuation? - probably there was something prophetic about the then CEO using a term "diagnostic blackhole" back in 2010..... (different context ofcourse..)

PS:

It'd be interesting to understand why the exit-route expectations involved "oncology focused Pharma M&A"?, consdiring Dual Capture OnQChip techonology wasn't really being worked on as a customizable companion diagnostic platform? OR was it?

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Pfizer Venture Investments (PVI) - a quick analysis of portfolio companies, categories

Trying to understand the driving factors behind the trends of life science investments in 2012, I was wondering if VC & CVCs behave differently or if one determines the trend & other follows it largely - which I realize is putting it too simplistically and perhaps the VC operates as one organism.

However, I believe that, with the genericization troubles looming large, the big pharma started to rationalize the product development strategies by taking into account parameters which hitherto were not given a serious thought.... foremost of which I'd guess is consumer behavior - This new diligence I expect will translate into the way big pharma CVCs have been building their portfolios over past 3+ years. 

Based on this premise, I tried to analyse the PVI portfolio & see if the data throws-up any tangible trend. Since I was unable to find the exact value of the funding in most cases (the funding rounds involved more than one VC, hence), I stayed with number of investments & hopefully the trend will still make some sense; 

A snap-shot of investment across innovation categories:

Some trends:

• Medical Diagnostic investments equal Drug Discovery numbers (& not in all cases it is merely companion diagnostics related investment)
• Enthusiasm for Medical devices & equipment is much lower than the overall average in 2012 (~50%) - However this I feel is still significant, as logic says a medcines company would be more interested drugs than devices
• Interesting appearance of investments into companies that'd contribute to research /business/ operational advantages for the investing big pharma - surely pro-logical, but interesting nonetheless & showcases the emerging realities in sustaining business
• Drug discovery at 30% only marginally higher than the 23% overall in 2012

Within the drug discovery investment, the innovation sub-categories point to a definite preference to go after platform technologies that'd generate leads in multiple therapeutic domains/ indications;

Overall, very interesting & I will hopefully continue this line of thought with another post or two.

Comments?