Snapshot: Domain Associates

Print 20 February 2013
California’s Biomedical Industry

Interview with Brian Halak, Partner, Domain Associates LLC.

How would you describe the VC funding environment overall?  In California?

VC investing into life sciences companies is down significantly as of late.  However, it is important to remember that often the best returns in an asset class come by investing when capital flowing into that sector is down.  And the worst returns come when capital floods in (think: internet and housing bubbles!).  Thus, we think now is a great time to invest. We believe returns going forward will be high and in the process human health will be improved and jobs will be created.

Early stage companies are essential for the health and success of the life science industry.  They are on the frontlines of translating scientific breakthroughs into products that can help patients.  California is leading the country in ensuring early stage companies can continue to start and thrive.”

How is this impacting the industry overall?

In frothy markets too many ideas are funded.  In tight markets, such as the current market, not enough great ideas are funded and as a result worthy concepts will be shelved. There exists somewhere in between an optimal state where we are funding and bringing forward only the most worthy ideas.  I fear that in today’s market we are a bit too far to the side of the spectrum that leaves great ideas on the shelf.

Why is VC funding important for the California life science industry?

In addition to future benefits to human health, investing in venture capital can have significant economic benefits.   According to a 2011 Global Insight study, venture-backed companies in healthcare and tech accounted for nearly 12 million jobs and $3.1 trillion in revenues in the US in 2010.  The NVCA website highlights that 11% of private sector jobs come from venture backed companies and venture backed revenue accounts for 21% of US GDP.  These statistics are especially staggering when venture capital only accounts for less than 1% of total money raised in the private sector.

What are you doing that is innovative in VC investing?

Domain is unwavering to our commitment to innovation.  We are currently searching for technologies that simultaneously improve medical care and reduce cost.  This search has brought us toward the diagnostic sector in a meaningful way, having invested in no less than five diagnostics companies in the past two years.  In addition, we are seeking out geographies in need of medical innovation and leveraging our access to technologies to generate funding that will help compensate for the shrinking pool of VC dollars available in the US.  Our efforts on this front have led us to a groundbreaking initiative in Russia (press release) and some very interesting initiatives in China.  We think that California and the US at large would be wise to look at ways to also look for ways to fill the gap created by shrinking venture capital dollars.

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