The atmosphere has grown tense in the small lecture theatre, where the visibly frosty eyes of 200 or so wealthy investors are fixed upon the charts displayed on the projector in front of them. They are here to discuss the progress of their investments in a small UK venture capital firm, which specialises in investing in early-stage science and technology companies. For many in the room, progress has not been good – and they aren’t happy about it.
I’ve spent the summer working at a firm, learning how it does business and understanding the particular challenges which the venture capital industry faces. For many scientists, certainly those with interests and aspirations beyond academia and touching on the commercial application of their work, the world of small-scale private equity and the ‘high-net-worth’ individuals who ultimately finance its operations may come to play a crucial role in their future career. Yet, for most, it remains a mysterious world – poorly understood and far-removed from the day-to-day challenges of the laboratory. So as a research student based in a university spin-out firm, this was a rare chance to witness first-hand what life was like on the ‘other side of the table’.
The conversation in the investors’ meeting has moved on to discuss one of the firm’s portfolio companies, which is in the process of developing what could prove to be a ground-breaking new technology for delivering targeted cancer treatments. More to the point, at least as far as the current audience is concerned, this particular business is doing well; perhaps well enough to make up for losses incurred elsewhere. One investor wants to know what the eventual sale value might be. Another speaks up to ask what the timescale might be for the company to exit (the point at which investors can sell off their shares and realise a return). Question after question all focus in on the overriding issues of the day: ‘When will we get our money back?’ And ‘How much will we get?’
These, then, are the harsh realities at the nexus of science, business and finance: in this room, years of dedicated research, individual hopes and frustrations are distilled and re-packaged into hard figures, and displayed as cash values, projected returns and multiples within the charts displayed on the all-engrossing overhead. For an aspirant scientist, it’s an eye-opening experience.
Eye-opening, perhaps, but hardly surprising considering the audience. They are wealthy people, of course. But their wealth is not that of the billionaire philanthropist; they can neither afford nor, perhaps, have the desire, to plough millions into a risky venture purely because they are partisans for its cause. More typically, at least among the small-scale investors with which I came into contact, they will have made tactical investments for tax purposes, or to follow the guidance of their financial advisor in adding some ‘alternative assets’ to their portfolio. Is it reasonable, then, to expect such an audience to be particularly sympathetic to the fickle fortunes of scientific progress, or indeed responsive to its more utopian goals?
Yet it is this audience, and others like it, on which many smaller-scale venture firms depend in order to function, and on which, in turn, a great many emergent science and technology companies equally rely. In Europe, many smaller venture firms are going through tough times: barely had the sector begun to recover from the ‘dot-com’ crash of 2000 when the credit crunch of 2008 hit, and portfolio values tumbled as companies went bust or were forced to re-finance at rock-bottom prices. Ultimately, it is to a clientele of cynical, small-scale investors which many such companies will have to answer for losses incurred.
So while this unfamiliar world may not be an entirely comfortable one for many scientists, the scientific community, especially those aspiring to commercialise their ideas, or to grow a business, would do well to keep it in mind: Your company’s science might be brilliant, the technology ground-breaking; but if it can allow Mr and Mrs Fortnum-Smythe to leave the annual investors’ meeting with a smile on their face, then you’ll really be in business!