Attendees representing businesses and entrepreneurs from across Orange County gathered at the Cove for JLABS’ Meet With… Series featuring Peter McWilliams, Managing Director of Sanderling Ventures, a venture capital firm that funds early-stage life science companies. Brittney Sabbah, Marketing Assistant from JLABS and organizer of the event, explained that “JLABS exists to provide entrepreneurs with a capital efficient environment, including space and infrastructure as well as help with the day to day operations. Entrepreneurs have a lot to deal with, and they don’t need the additional headache involved with maintaining equipment or worrying about things breaking down. We take care of all of that for them so they can focus on what’s most important – their science. We also put on programs such as today’s event with Sanderling Ventures to help make connections between entrepreneurs and funding sources in the community.” With JLABS based in San Diego, Sabbah shared her excitement in bringing their events to UCI to build awareness within the community; today’s event served as the second JLABS event in Orange County.
The goals of the event were two-fold. First, McWilliams provided an overview of Sanderling Ventures, their funding criteria, areas of interest, and the current IPO and M&A (Merger and Acquisition) landscape. Afterward, 1-on-1 meetings took place with pre-approved companies throughout the afternoon between McWilliams and participating startups. JLABs put out an open application two months before the event and received over thirty applicants. McWilliams reviewed each application and chose ones that he determined the best fit for Sanderling Ventures’ criteria. Sabbah shared that the total number of applicants for 1-on-1 meetings were a great first step and also shared her appreciation for the Cove’s marketing efforts in promoting the event.
McWilliams began the presentation by sharing that their first fund invested in first-generation balloon angioplasty devices and implantable defibrillators back in 1979. Now on their seventh fund, the firm’s focus continues on seed and early stage investing. Key areas of focus include first-in-class or best-in-class therapeutics such as biological therapeutics, small molecule drugs, and drug delivery technology with applications in a hospital environment. Sanderling is looking for breakthrough ideas in the life sciences industry, not just novel technology. McWilliams mentioned an active approach to managing portfolio companies and a specialization in company formation, university spinouts, assuming operational roles, and providing virtual back-office support. Regarding active management for early stage investment, Sanderling’s approach is predicated on early stage capital being expensive to both entrepreneurs and founders. For this reason, they want to spend their resources as efficiently as possible. This is achieved by keeping operating expenses small and assigning a member from Sanderling to work side by side with a portfolio company. Responsibilities of these members include operating roles such as CEO, CTO, Exec. Chairperson, and virtual back office such as financial, legal, human resources, and other general and administrative functions. With offices on both the West and East coast, over 50% of investments have taken place in California. Some notable public and acquired investments made in California include Ista Pharmaceuticals, Pacira, Vical, and Actimis Pharmaceuticals.
On the topic of the current IPO market, McWilliams shared IPO data from the National Venture Capital Association’s 2016 Yearbook showing that the IPO market is fundamentally cyclical and currently in its strongest and most consistent phase concerning biotech. Though biotech is currently seeing the most money historically raised in this area at the moment, McWilliams also prefaced that there were years between these cycles where it was impossible to do an IPO for a biotech company. Regarding the M&A market, he described it is not cyclical, though there is a structural change that is happening. Ten to fifteen years ago in the 1990s, M&As of biotech companies typically involved the distressed sales of companies. However, as of the middle of the last decade, big pharma has been externalizing their innovations and are now more willing to acquire technology from outside their company and pay a good value for them. This shift forces researchers from within companies to look outside and is something that was unimaginable fifteen years ago.
McWilliams also shared other reporting outlets such as EP Vantage’s perspective and metrics on assessing the IPO market and stated that though the IPOs of VC-backed companies may be down, biotech still leads the charge as the strongest sector. Compared to tech companies, biotech still presents a significant investment opportunity. Regarding other investment trends, he shared that there have been bigger Series A, B, C rounds recently, but they are reticent to follow that trend as it is an easy way to lose a significant amount of money quickly. This trend is driven by non-traditional, private equity players such as pension plans pursuing a return.
The presentation concluded with a Q&A from the audience with questions ranging from the ideal market size to the best way for startups to engage with VCs and send their decks. McWilliams shared an analogy describing the proper conditions for life to exist on earth to illustrate the ideal market size, emphasizing a startup must have similar factors working together to have a chance at flourishing. On the topic of engaging with VCs, he suggested that a personal introduction is made with someone at the firm and a conversation to gain feedback before any proposals or pitch decks are sent. The remainder of the day continued with 1-on-1 meetings, giving pre-screened startups approximately thirty minutes each with McWilliams to discuss their startup in detail.