BioGenerator, St. Louis’ innovative investment fund for biotech startups, has figured out that money often isn’t enough to launch successful companies.
The fund invested $3 million last year in 16 companies, but it was far more than a passive investor in many of them. Eight of the firms are led by CEOs who came straight from the BioGenerator payroll, and three firms were created purposely to address what BioGenerator executives see as promising market opportunities.
Those are departures from the usual venture capital process, in which investors listen to pitches from promising companies and decide which ones to fund. Charlie Bolten, BioGenerator’s senior vice president, says that process still works well for some investments, but he has adapted the fund’s model to fit a couple of realities in the entrepreneurial world.
For one thing, capital is no longer the scarcest resource for St. Louis startups. Experienced management talent is. BioGenerator addressed that with its entrepreneurs in residence program, begun in 2011, and a newer venture capital fellows program.
The fund spent $800,000 last year on talent development. In some cases, as with Edison Agrosciences and Readout Health, having an experienced leader available was key to a decision to move the company to St. Louis.
The technology-first approach to investing was reactive and seemed risky. “There are a lot of mistakes made,” Bolten said.
In 2017, working with a couple of its entrepreneurs in residence, BioGenerator decided to assemble a team and then find promising technologies for the team to develop. The first company using that approach, Canopy Biosciences, has acquired several genomics products and services in the research-tools market. Canopy employs more than 50 people and has raised more than $4 million in capital.
Last year, BioGenerator launched two more companies with the talent-first model. Cadre Bioscience, led by former Pfizer executive Robert Karr, intends to build a portfolio of promising drugs, and Wellth Holdings, led by former Express Scripts executive Laura Burkemper, focuses on consumer health and wellness products.
Wellth’s first product is WineStiq, formerly known as StiqIt, a swizzle-stick-like product that removes sulfites from wine. Sulfites cause headaches, rashes or other symptoms in some people.
Since acquiring StiqIt last year from another St. Louis startup, Burkemper has rebranded it, expanded distribution and created a full-bottle version of the original single-serving product. She has assembled a board of experienced consumer-products executives and is looking for other “brands in evolution.”
“We see a huge opportunity,” Burkemper says.
As investors and board members, BioGenerator officials will have some say over what technologies Cadre and Wellth pursue, but the direction will be set by Karr and Burkemper and the people who work for them. “It’s about trusting that team to find the best opportunities,” BioGenerator President Eric Gulve says.
The three talent-first companies represent a small slice of BioGenerator’s 50-company portfolio, and less than 10% of the $26 million it has invested in local startups since 2004.
The new approach could, however, have a disproportionate impact in St. Louis. A traditional venture-capital investment might, if all goes well, be sold after a few years to a larger drug or medical device company.
Canopy, Cadre and Wellth should have longer lifespans. If the model proves sustainable, each could go on acquiring and developing products for decades.
In the process, they should develop a deep bench of management talent, and help solve the shortage that led BioGenerator to adopt this approach in the first place.