I spoke to Nigel Pitchford, Chief Investment Officer of Imperial Innovations yesterday about discussion points for our upcoming event at J&J Innovation Centre on 23 October, where he will be speaking as one of the panellists. One of the points I was keen to explore is what VC’s look for when investing.

Nigel made the point that if you ask any VC that invests in biotech what they look for in an asset and you’ll probably get a range of responses, extolling the need for great IP, an asset that meets a demonstrable market need, that has great data behind it, something where there is a clear potential exit in a fixed time frame.

However, without exception there is one factor that stands out above all others: the right people.

Management, Management, Management!

I was reminded of when I interviewed Sam Fazeli, the well known Bloomberg analyst. Sam said there were three things that would determine the success or failure of a biotech: management, management, management!

What sort of management? What does that mean?

VC’s are not only looking for individuals with the required commercial nous and management skills to move an asset forward, they are looking for individuals to lead their projects who have a sufficiently broad experience of drug development processes.  And the sorts of people with the required “helicopter-view” of the drug development process are very thin on the ground because most people got their experience of drug development through large pharma companies and there, with teams of hundreds of people developing a drug, there’s often no one individual who is, if you like, the overall pilot.

So, why the obsession with management teams?

From a VC point of view, it centres on risk. What’s clear is that while VC’s can tolerate technical risk, they absolutely abhor operational risk.

As David Grainger, Venture Partner at Index Venture puts it:

‘having an asset that would have worked, would have been the biggest selling drug of all time, except for the fact that people who were responsible for looking after it took the wrong decisions. That is what I call unacceptable failure. If you failed because you did the wrong things, please don’t come back and see me again. If you failed because the asset didn’t in the end have the properties that we originally thought it would have, but you did all the right things to demonstrate that quickly and cheaply, then you’re our kind of person.’

The biggest challenge?

Unfortunately for VC’s, while management is the most important determinant of success, it appears also to be one of their principle challenges.

David at Index goes as far as to say it is his biggest challenge. He points out that those individuals who understand the whole drug development process are extremely rare. He argues that is the principle limiting factor for Index’s ability to scale their operations and do more than they do.

Nigel at Imperial Innovations agrees that management is key, but points out that different VC’s have different nuances about who like to work with and why.

As for me, I have no doubt that management is vital, but so is a great technology with great science. After all, you can build a management team around a great asset - but if you haven’t got the asset and technology, you can’t build anything.

I’d be curious what our readers think: is management the be all and end all?

Nigel Pitchford will be speaking alongside Jeanne Bolger of J&J and Hakan Goker of MS Ventures at our evening event on Oct 23rd, hosted by J&J innovations. Click here to find out more.