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Pharma-instigated venture funds (Table 1) are in the game, at least in part, to provide strategic benefits to their parent companies rather than direct financial returns. Unlike private VC investors that live and die by the rewards they pay their partners, so are highly exit-driven, corporate funds can afford to take a longer view. The global crisis is forcing traditional VC firms to pull back and refocus investment in later-stage companies, especially those already in their current portfolio (see Nat. Biotechnol.27, 103–104, 2009). “With fewer VC [venture capital] companies willing to chase the best startup opportunities, valuations on early-stage deals are well down, and so the strategic funds are getting better value. That in turn is making them even more aggressive for deals,” says Jamie Topper, general partner at Frazier Healthcare Ventures in Menlo Park, California. Currently, he says, GlaxoSmithKline's (GSK) SR One Ventures of Conshohocken, Pennsylvania, is the most active in early-stage ventures, but there is also plenty of activity from funds backed by Basel-based Novartis; Amgen Ventures, of San Diego; and Medimmune/AstraZeneca, of Gaithersburg, Maryland, which expects to begin European investing in 2009.
Merck Serono, the newest entrant to the world of corporate venture, believes it has spotted the perfect moment to launch its new fund. “The financial situation has helped us, it would be crazy to pretend otherwise,” says Vincent Aurentz, vice president of portfolio development at Merck Serono, headquartered in Geneva. “Venture capital's move away from the early stage has left a gap for companies like us who want to make a direct early investment.” Previously, he says, innovators at the first phase of incubation would not approach a big pharma or biotech company because they were not yet looking for a partner; now they do. This suits Merck Serono, who is not looking to invest vast amounts—the goal is to fund one or two new startups a year over the next five years, with either seed or first round funding of €4–8 ($5–10) million each. It is already close to clinching its first deal, says Aurentz. In return, it hopes to plug an acknowledged gap in its innovation efforts.