After 13 years of building Health Cap in Sweden, Magnus Persson wanted to try something new and changed his work place to San Fransisco, California.
Magnus Persson may be known to most Scandinavians in the Life Science arena as one of the partners at Health Cap, an internationally known Life Science venture capital group in Sweden. Since the beginning of the year, however, his name is no longer on the doors of the posh Strandvägen office, but rather nine time zones away at the San Francisco based Column Group. “After 13 years of taking part in building HealthCap, I felt the need to try something new. Coming to the Bay Area to work with early stage Biotech investments is a dream come true.”
After driving over the stunning Golden Gate bridge, we meet Magnus at a small wine bar tucked away outside the center of town. With the many famous Sonoma and Napa wineries in the area, it is no surprise that the wine list contains an impressive local selection. The high regional quality, however, is not limited to wines. “The Bay Area is the cradle for fruitful combinations of venture capital and Biotechnology,” Magnus explains, “with a history of successfully financing of early stage Biotech ideas which cannot be found anywhere else in the world.” He refers of course to giants Amgen and Genentech, sprung from the fertile soil of three world class universities and a large cluster of local venture capital companies dedicated to Life Science. “Ever since I started working in the Pharmaceutical industry, I have seen the Bay Area as the role model to the industry, and to experience this first hand was an opportunity too exciting to pass up.” He decided to give it a try.
New country, new team
“What was so stimulating about joining the Column Group in January was the opportunity to focus exclusively on early stage, new molecule research investments, and to do this in the Bay Area.” The team he joined includes a management team with people who have built (and sold) large Biotech companies, four science partners whereof three are Nobel laureates, and a track record of high-return capital investments. One of the partners has headed up both the NIH and the Bill and Melinda Gates Foundation. The Column Group manages 260 MUSD and follows the investments through maturity, placing between 20 and 40 MUSD USD 20-40M from start to exit.
Biking to the billions
The location (and the group’s good reputation, which coincidentally includes two other native Scandinavian partners) translates into opportunity, and Magnus shares a recent experience. “Last week we initiated a new Kinase-based company in the portfolio. Within days I had the opportunity to present the case to some of the largest venture capital funds in the world. They pick up the phone when we call, and we can take a five minute bike ride to to see them. Almost immediately, we could attach a CEO who has taken two companies from start to IPO, and who has managed a staff of over a thousand scientists in two Big Pharma companies. This kind of profile just can’t be found in Scandinavia, whereas in the Bay Area I had more than one candidate to choose from! There is a relaxed, informal but professional local cluster of investors and experienced Biotech business builders in the Bay area who know what they can expect from each other and how they work together – a critical mass within biking distance so to speak.”
Venture capital loosing the appetite for risk
Something that might have played into his move that European venture capital players have become prone to increased risk aversion in the past seven years, affecting research intensive companies in particular. The trend for venture capital has thus been to enter more mature companies and reduce risk. “Biotech companies in Sweden have definitely been affected by this. Scandinavia needs more capital, particularly more high-risk capital, to fuel growth in the stages between original idea and clinical trials.”
Attracting international capital
So if the risk aversion of Scandinavian capital is a hindrance, how do we attract more international, and possibly “risk friendly” investment to Scandinavia? “Scandinavia, and particularly Sweden, needs new role models. We have Q-Med, Meda and Swedish Orphan (now SOBI) who are all doing well. Clearly, a few Biotech success stories built on original molecules would be good; to inspire both investors and the industry itself.” Stimulation from foreign investment would in itself be beneficial, as it could link in international networks and global competence, and provide more international exposure.
What attracts investors?
“The same basic rules apply for domestic and international investors,” says Magnus. In his eyes, what a company needs in order to attract investors is:
1.) a compelling story,
2.) a well defined medical need,
3.) an addressable market (a vacancy in the market, it won’t do to go for the same target as everyone else), and
4.) an experienced management team with a proven track record.
“It is the content that matters, but a good and clear communication strategy and presentation simplifies the understanding of the idea and increases the interest to listen to the whole story” Magnus underscores. In this respect, Magnus feels, Scandinavians may have something to learn from their more verbal and communication trained American counterparts. “Additionally, a company must show that it will not waste the investor’s money, but rather show that it can develop good products in tune with agreed timelines and with limited cash expenditure.”
Early stage investment
As the Column Group invests only in early stage projects, how do they combine this strategy with risk control? “To be able to invest in early stage ventures one must be extremely selective in which projects to join, and attach management with a proven track record of drug development and company building” Magnus describes. “I have been impressed by the extreme discipline used to prepare cases in the US, and how detailed monitoring of the investments is. We practically get involved in the daily workings of the company.” This is decidedly more hands on than companies would expect in Sweden, where it is more common that the company expects to be allowed to allocate the resources without too much interference from owners. “This level of detailed involvement of course requires extensive experience on the part of the investor.”
So is there anything Magnus misses from Sweden? “Most things can be found at IKEA’s grocery store, this cultural sanctuary for Swedish ex-pats. But unfortunately there’s no salty liquorish!” he laughs. Long working hours have reduced the spare time for Magnus, who is an avid outdoors man. “People average longer work-days here in the US, and going to the office on weekends is quite common.“ Lucky thing then that he can take his beloved bike to get there; a scenic, hour-long, bike ride across the Golden Gate bridge and through the hilly city. “ The differences aside,” he concludes, “I must say I really miss my good friends at HealthCap.