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Life-sciences
firms took the spotlight January 6, 2003 Philadelphia Business Journal Local venture capitalists remained an upbeat lot through 2002, despite a slow market for fund-raising and investing. The optimism could have been caused by a feeling among them that the worst of the tech and telecom collapse is over; most of the companies in those sectors that were going to go out of business or file for bankruptcy already have. It also could be because of the feeling that the area is better-positioned to become a hotbed of life-sciences investing than Internet investing, and that demographics, if nothing else, suggest that life-sciences companies have more staying power than business-to-business e-commerce solution builders. The Greater Philadelphia Venture Group jumped on the life-sciences boom, dividing presenting companies at its November Mid-Atlantic Venture Conference into life-sciences and technology tracks. It also announced a verbal agreement with the Biotechnology Industry Organization to hold this year's conference in conjunction with the BIO VentureForum. Assuming the agreement can be implemented, the conference probably will draw investors and presenters from the entire East Coast, rather than just the mid-Atlantic States, giving more exposure to local companies and bringing more potential investments to the attention of Philadelphia-area venture firms. Poised to make news in the life-sciences area is Quaker BioVentures, a Philadelphia-based fund started by venture and real-estate fund magnate Ira Lubert and two people with good track records in life sciences: P. Sherrill Neff, former president of Horsham-based Neose Technologies Inc.; and Brenda Gavin, former president of GlaxoSmithKline PLC's West Conshohocken-based venture fund, SR One Ltd. Quaker was one of two area venture firms to get $20 million from Pennsylvania's settlement with the tobacco industry on the condition that they invest the money in life-sciences companies in the state. PA Early Stage Partners of Wayne was the other. Both Quaker and PA Early Stage spent last year raising money for new funds. Quaker expects to close on $170 million for its fund this month and expects the fund to top out at more than $200 million. PA Early Stage reported significant commitments for a $100 million fund it's raising. Two venture firms with offices in the area were able to close on money for their funds. Anthem Capital Management, which is based in Baltimore but has an office in Rosemont, closed on $33 million for its second venture fund, Anthem Capital II, in September and was on track to have $75 million in commitments by year's end. It was a mostly quiet year for funds affiliated with Safeguard Scientifics Inc. of Wayne, except for PA Early Stage. Safeguard itself completed a major acquisition on the way to becoming more of a holding company of information-technology firms than an early-stage investor. It bought Alliance Consulting Inc. of Philadelphia for $55 million last month and merged it with two IT outfits it already owned. Venture investing in local companies continued to be slow. Companies in eastern Pennsylvania, South Jersey and Delaware only received $465 million in venture funding in the first three quarters of last year, according to the PricewaterhouseCoopers/Venture Economics/National Venture Capital Association MoneyTree Survey. That's down about 44 percent from the $825 million they got in the same period of 2001 and off about 75 percent from the $1.93 billion they received in the first three quarters of 2000. Despite the slow pace, venture capitalists said last year was a good year for investing and this year probably will be, too, as stakes in promising companies can be had at rock-bottom prices. To encourage more investing in startups by the wealthy individuals known as angels, Ben Franklin Technology Partners of Southeastern Pennsylvania set up a subsidiary called Ben Franklin Investment Partners that would, in effect, offer angels some insurance on their investments. The subsidiary received a $2 million grant from Ben Franklin's parent organization, which is part of the Pennsylvania Department of Commerce and Economic Development. Probably the biggest story in the area venture community last year was the implosion of Philadelphia-based Keystone Venture Capital, which saw management of its funds taken over by the limited partners in the funds. Keystone's problems date to November 2001, when Kiernan J. "Kerry" Dale left the firm. The two remaining principals in Keystone, Peter E. Ligeti and John R. Regan, told the limited partners in Keystone's funds that they asked him to leave because of suspected inappropriate, if not illegal, activity. Dale's lawyer said he left because he didn't like the investment strategy of Keystone's newest fund, Keystone Venture VI LP, and wanted to raise his own fund. Whichever was the case, when the limited partners heard what Ligeti and Regan had to say about Dale, they hired investigators. Their findings prompted the limited partners in Keystone Venture V LP to file legal documents in Philadelphia Common Pleas Court in February that preserved their right to sue Dale, as well as a Maine entrepreneur named Michael A. Liberty, who committed to investing in Keystone V but may not have invested in it, and about 15 companies associated with Liberty. The crux of the matter is whether all the money from Keystone V that was sent to Liberty to invest in companies found its way to those companies. Liberty, through his lawyer, maintains it all did. Keystone V's limited partners still don't think all of it has been accounted for. Meanwhile, the limited partners in Keystone VI have hired Cross-Atlantic Capital Partners of Radnor to manage the money in the fund; the limited partners in Keystone V have hired Penn Hudson to liquidate the portfolio; and the limited partners in the little that remains of Keystone IV are deciding what to do with it. © 2003 American City Business Journals Inc. |