Los Angeles Business Journal

Medical Startups to Pursue Injection of Funding

HEALTH CARE By Deborah Crowe Monday, September 15, 2008

A select group of 23 young Southern California companies will speed-date potential investors later this week at the region's premier life sciences investor conference.

But organizers of the Wilshire Grand Hotel event aren't predicting how many unions will result.

Raggedy financial markets have made it harder for startups to obtain funding. And while the health care industry generally is a safe haven during economic uncertainty, investors are worried as typical exit strategies such as initial public offerings and mergers and acquisitions have stalled.

"Investors are looking for exits and early stage deals in life science take a long time to mature," said Dr. Allan Wolfe, the Manhattan Beach-based general partner for UV Partners, a Salt Lake City firm that invests in life science companies. "Great deals will still get done, but the uncertainty has eroded peoples' patience."

Even so, life science venture capitalists aren't going hungry.

In July, Versant Ventures, a life science venture firm with offices in Newport Beach and Menlo Park, closed fundraising for its fourth fund after reaching $500 million. Prism Ventureworks, a Boston firm that has established an L.A. outpost, recently launched fundraising for its sixth fund, which will invest in both bio and high tech companies.

"In an environment like this life science investing can be a way to minimize risk, and we've seen in recent months life science funds attracting a lot of money," said Ahmed Enany, chief executive of the Southern California Biomedical Council.

The trade group is in its 10th year sponsoring its SoCalBio Investor Conference, which attempts to lure health care venture capitalists from around the country. The event begins Thursday evening and runs through Friday.

Dr. Anthony Natale, who scouts life science companies from Prism's Venice office, said the credit crunch has actually served to encourage institutional investors that were pouring money into private equity to take another look at venture opportunities.

"The Southern California market is clearly an attractive market," Natale said. "There may not be too many VC firms here in town, but it's certainly considered a fertile ground for new companies. There are lots of investors in the Bay Area that have come to realize that L.A. is only a 45-minute plane ride away."

Enany said he won't know how many VCs will show at the conference until the last minute. Many may decide to attend as much for the networking and socializing as the prospecting.

"The average VC these days is seeing two to three business plans a day come across his desk without leaving the office," Enany said. "They aren't in a hurry to come to a conference to see more new companies.

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