Private Equity Pathways in Today's Post-Bloat Market of High-Risk Investment

By: Glen Grant
Submitted: 2009-08-12 14:15:12
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With odds stacked against fledgling startup companies, especially in the fields of technology, biotech, and health and science research, money managers at venture capitalist firms are tightening belts, from dropping clients to reducing investment capital to early retirement of key staff.

The Wall Street Journal reports1 on the recent retirement of several longtime venture capitalists, including three partners from Sequoia Capital (Google, Cisco Systems), Tony Sun at Venrock (an arm of the Rockefeller Corporation and investor in Intel), and El Dorado Ventures partner Shanda Bables (Access Health, Sun Microsystems), as well as a slew of top tier executives from Atlas Venture, Advanced Technology Ventures, Foundry Group, and VantagePoint Venture Partners.

Further research by the National Venture Capital Association shows that the US had 7,497 venture-capital principals at the end of 2008, down from 8,892 a year earlier. The number of active venture-capital firms fell 13% to 882 from 1,019 in 2007. Nevertheless, NCVA2 president Mark Heesen maintains a positive outlook for the field, saying in a press release from Q4 in 20083, “We do believe that venture capital will continue to perform well relative to other alternative investments and once the exit market improves, so too should return numbers.”

Despite the bad news, certain forward thinking investors are looking to the future with creative strategies for financing entrepreneurship. After all, what's a venture capitalist without a strong taste for risk? (A: A bank loan.) With a track record of generating over $3 billion in shareholder value for companies including Ecast, Voltage Capital founder Mouli Cohen is one such visionary. Intending to incorporate new business models into already innovative companies, Cohen's year-old firm aims to make significant impact in high technology, digital media, consumer products, and healthcare sectors.

“Our motivation is to close the gap between the ideas that often reside in academia and the commercialized world,” he explains. “Often these ideas die on the vine. I get tremendous satisfaction in harvesting innovation and creating real entities that can affect society in a positive way.”

Undeterred by recent market fluctuation, Cohen admits that while the startup environment is often “stressful” and “unpredictable,” a balance of intellectual and emotional commitment is a powerful toolset for continued success. “It is a simple truth that any organization emphasizing a balance of fun and productivity fares far better than those who raise one at the cost of the other.”

So what is the company's special sauce? Voltage Capital's first priority was to assemble a team of experts who can translate concepts and ideas across multiple disciplines. Dr. Bill Balson, a PhD in Engineering-Economic Systems from Stanford, has 28 years of practice in risk management and financial modeling to develop high-value business opportunities, while scientist Dr. Danny Petrasek contributes practical experience in designing medical devices, novel molecules, and computational models. Pharmaceutical training is represented by Michael Reilly, who has spent 22 years acquiring, developing, and commercializing products spanning pre-IND stage, clinical, launch, and patent expiration; and rounding out Cohen's Senior team is Roger McAulay, a fellow “serial” entrepreneur seasoned in applying information technology across a similarly broad spectrum of industries.

The primary target for Voltage Capital is the healthcare sector, a topic of interest throughout Cohen's quarter decade in private equity. Recent advances in molecular and cellular biology have created “unrealized opportunities” for novel diagnostics and therapeutics, and as Cohen says, “The 21st century will be dominated by these applications, which will change our entire view of aging and health."

And until the last cancer cell is eradicated and the final mutated Alzheimer's gene identified, buying into biotechnology research will likely remain an intelligent bet in the game of high-risk investment.

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