OLAV BERGHEIM, FOUNDER AND MANAGING DIRECTOR, FJORD VENTURES
When I look at the maybe 30 or more companies I've been involved with at various stages, I've realized that about 80 percent
of the money is spent on things that don't create value. That money is being used to build corner offices, computers, coffee
pots—all the overhead. On the other hand, maybe only 20 percent is used for things that help foster breakthroughs.
My best advice is to raise only the money you need. The slogan here is "virtual." I started a company a couple of years ago
called Symphony Medical, which now has a compound in Phase II—and a second compound right behind it ready to start US clinical
trials this fall. You would think we spent $30 million, and have 30 or more employees.
The truth is, we spent $4.5 million, and we have four employees. How? We go virtual. And in an organization like that, where
management owns 40 percent of the company, you have a real opportunity to get a good return on sweat equity.
I think that there is a way to do the same work for much less. I don't think a company needs to be a building with everything
in it. Manufacturing is something that is done better in Taiwan than in California. We use institutions around the world to
do our clinical trials. There's a fantastic clinical-trials center in Beijing, where we can get a lot done for much less money.
We've shown that we can do about the same work for maybe one fifth of the capital otherwise needed. We are using a lot more
resources that already exist. For example, a surgeon from the Cleveland Clinic ran our last trial in Europe. He just flew
over, and we paid him for two months of work. We didn't have to hire anybody to do that.
MARK KESSEL, MANAGING DIRECTOR, SYMPHONY CAPITAL
We and a group of co-investors fund a development company with the amount of capital needed to take compounds through
to an agreed-upon stage of development. We're focused more on Phase I and Phase II compounds, and we try to establish a model
that gives companies the capital—and the clinical design and management expertise—they need.
In return, those compounds are licensed to us. The biotech company gets an option to reacquire [the portfolio company that
we create for them] at a predetermined price. At any point along the development cycle where they feel the value of the compound
exceeds the purchase price, they have the right to buy back our portfolio company. We pay them on a slant market rate for
actually working on the clinical trials with us, or we'll pay clinical research organizations, or whoever the other service
One of the benefits of our financing model is that it avoids "premature licensing syndrome"—when a company does a corporate
deal with Big Pharma, gets single-digit royalties, and maybe some milestone payments in return for a lot of backend-loaded
royalties. If you do a deal with Big Pharma, the net effect is that you're giving up control of the development and a lot
of the future value. In our model, you prevent current dilution, add development expertise, and transfer the risks to a third