Seattle biotech start-ups have difficult time raising VC funds

venture capital-backed companies in order to make up for companies that fail. Ranken, who has tracked the number of local venture capital-backed businesses in the area for the past seven years, said that a company could do “everything right” — business and science-wise — and, in the end, “the science just plain doesn’t work… You need 24 companies to be started to get one or two that have developed a product and have become profitable,” he said. Robert Nelsen, the cofounder and managing director of Arch Venture Partners, which has an office in Seattle, said the state’s lack of new venture capital-backed biotech firms isn’t necessarily a problem. “What’s the goal?” he asked. “To me the goal is to get successful, large companies that make people lots of money and employ lots of people. And create lots of cures for disease. The goal is not a hundred mediocre companies that can never go to market and go under. And the goal is not to subsidize local entrepreneurs or anything like that. The goal is to make the best possible companies we can.” He said that the companies that have gotten funds in recent years — startups such as Spaltudaq, Alder Biopharmaceuticals, and VLST — had a higher probability of success. Indeed, one of the firms which has received early-stage venture capital funding this year — Calistoga Pharmaceuticals— licensed potentially leukemia-fighting compounds from Seattle’s Icos Corp. Icos was purchased by Eli Lilly earlier this year, and has already had spent five years researching the compounds.

Accelerator Corp. a Seattle investment firm finances concepts which venture capital firms might otherwise shun as too risky. Accelerator operates very much as the dot.com-era incubator used to operate: Since VCs look not only for good science but also good management, Accelerator allows young businesses to develop their ideas in its South Lake Union facility and, in turn, takes care of the business side. Over the past four years, Accelerator has financed six businesses, says Carl Weissman, Accelerator’s CEO, who is also a venture partner at OVP Venture Partners, which has offices in Seattle and Portland. He says that Accelerator had been able to fund every concept it was interested in. “I don’t see any VCs saying anything like, ‘Wow, we just aren’t able to put our money to work,’ ” he said. “The things that they feel are fundable they’re funding.” He said that it was possible that there were fewer “great technologies emerging from academic institutions” in the state and therefore fewer new companies. “While the Hutch (Fred Hutchinson Cancer Research Center) and the other great institutions in Seattle are really truly world class institutions, they’re not Harvard and not Stanford and not MIT and UC-Berkeley,” Weissman said. “The places where (there are) more seed deals are places where there are more venture capital companies and more money. The reason that the venture capital companies are there is that there are more great technologies emerging from academic institutions.”

Tartakoff quotes Gregory Sessler, chief financial officer of Redmond-based Spiration, which is developing a device to treat emphysema, as saying that if there were more venture capital companies around or initiatives such as Accelerator, it would be easier to raise funds and, therefore, more companies. “While there is some venture capital money locally, most of it is in California,” Sessler said. He added that since early-stage companies need “a lot of attention,” venture capital firms want to have offices close to the firms they fund. “There are a lot of doors in California, so you go to where the money is.”