Xconomy: Kinsella Redux: Charting a Way Back for Life Sciences Startups
Summary
The VC laid out the specifics of his grievances with Big Pharma for me in early 2011—provoking an industry debate that continues today.He has argued that pharmaceutical companies are driving life sciences VCs to the brink of extinction by their buyout tactics, which in his opinion include bad-faith negotiations, lowball buyout offers, and partnership deals that load all the risk on the startup and its VC backers.Now Kinsella says the effects of what he calls Big Pharma’s “predatory business practices” can be seen on a variety of fronts, as venture firms decide against raising new funds, turn away from further investing in the life sciences, or simply go out of business.Some examples from the public record include Palo Alto, CA-based Prospect Venture Partners, a life sciences firm that is now tending to its existing portfolio companies after it was unable to raise enough cash to execute its strategy for a fourth fund.Foster City, CA-based Scale Venture Partners decided last year to make no more healthcare investments from its third fund, and as Luke has reported, the Column Group is in a holding pattern on new life sciences investments until the San Francisco-based firm can demonstrate what partner Peter Svennilson called “a couple of spectacular exits.” Kinsella contends there are many more examples of life sciences venture firms that are in denial—meaning they won’t admit they have ceased making new life sciences or biomedical investments.
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