• Greenhouse seeks $150M fund


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    • Abstract: Greenhouse seeks $150M fund. August 22, 2005 - Jennifer Curry and Patty Tascarella. Published: August 22, 2005. The Pittsburgh Life Sciences Greenhouse is looking to raise a $150 million venture fund, as part of its plan to jump-start. growth in the local biotech community. ...

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PLSG :: Pittsburgh Life Sciences Greenhouse ::
Greenhouse seeks $150M fund
NEWS RELEASE
Contacts:
Lynn Banaszak Brusco, Pittsburgh Life Sciences Greenhouse, (voice) 412-770-1353
Greenhouse seeks $150M fund
August 22, 2005 - Jennifer Curry and Patty Tascarella
Published: August 22, 2005
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The Pittsburgh Life Sciences Greenhouse is looking to raise a $150 million venture fund, as part of its plan to jump-start
growth in the local biotech community.
The fund, which the Greenhouse would manage, would be used primarily to help create new companies in the Pittsburgh
region that would, in turn, attract additional venture capital.
The fund is part of a previously announced Greenhouse plan, called the Evergreen Initiative, which is designed to
cultivate an anchor biotech company here that would attract and spin off other companies.
The new venture fund's aim would be to create 15 new Pittsburgh-based companies over the next decade. Many of the
new firms would come from licensing agreements the Greenhouse hopes to form with large pharmaceutical or medical
device companies looking for outside investment to help move their later-stage technologies forward.
Young startup companies or university researchers from Pittsburgh and across the country who have developed similar
technologies would take the products to market, while continuing to develop their own technologies. The larger
companies that initially developed the technologies would receive a portion of the profits from the sales of
these products.
The idea would be to lure these firms to Pittsburgh with the promise of capital, which the Greenhouse hopes to attract
from national venture funds, nonprofit organizations and pension fund investors. It expects to raise the money over the
next 18-24 months and distribute it over the next decade.
"It's a bit scary, and it's also exciting because this would eventually put Pittsburgh on the map," said Greenhouse
president and CEO Doros Platika.
Platika said about eight venture capital firms and eight big pharmaceutical and medical device firms have expressed
strong interest in the project, but he has not gotten any firm commitments yet.
He said the venture capital firms with which he has spoken include Philadelphia-based Phoenix IP Ventures and MPM
Capital LP, which has offices in Boston and San Francisco. MPM spokeswoman Shari Annes confirmed that her
organization has had conversations with Platika about the project, but she did not elaborate. A phone call to Phoenix IP
was not immediately returned.
Platika believes the initial $150 million venture fund could attract between $500 million and $1 billion in additional
investment to the region. Each company would need about $25 million to $50 million to be formed.
"National venture funds want to put more money to work because their funds have gotten bigger," he said. "What they
would love is for somebody to serve to them on a silver platter startups that can accommodate that type of investment. If
we can provide brand new startups with no investments before, they want that."
Platika has discussed the new Greenhouse fund with some of the region's largest foundations, including the Heinz
Endowments and McCune Foundation. He is expected to present a formal plan seeking financial contributions to local
foundation chiefs at a meeting later this month, said Henry Beukema, McCune executive director.
The fund still must be approved by the Greenhouse's board of directors.
Platika said the Greenhouse would continue to invest in and help existing local early-stage companies, and no money
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earmarked for those companies would be diverted to the proposed $150 million fund.
"It is not robbing Peter to pay Paul," he said.
A Tough Road Ahead
Past attempts to raise $100 million in venture capital in Pittsburgh have had short life-spans. Saturn Capital announced
plans during the summer of 2001 to raise a $150 million life sciences fund. It proceeded
to miss four projected closings, and Saturn finally closed its Pittsburgh office two years ago.
In 2003, Birchmere Ventures, North Side, said it would raise a $100 million fund that would invest partially in life sciences
companies, but settled for a $47 million fund.
Arthur Boni, who led Saturn's local efforts and is now deputy director of the Donald H. Jones Center for Entrepreneurship
at Carnegie Mellon University, said the Greenhouse -- which has not managed a venture fund previously -- would likely
encounter more resistance for its lack of a track record in raising and managing venture funds than for the amount of
money it wants to raise.
"It's a lot of money for a first fund but not for what he's (Platika) trying to do," Boni said. "It continues to be a difficult
climate for raising money, particularly for a first fund. Even if their people are experienced, even if the fund managers
have a portfolio track record, it's not as a group working together. That's what would be held against them by institutional
investors."
Boni said the Greenhouse's strategy to build from the grassroots up is "a long process." He questioned how Pittsburgh
would compare to better-established infrastructures in Boston, San Francisco, San Diego and Philadelphia.
John Taylor, director of research for the National Venture Capital Association, an industry organization based in
Alexandria, Va., said there hasn't been much preseed investing activity in the past few years. But he believes the bigger
issue for the Greenhouse is selling venture capitalists on a fund managed by a group that also has an economic
development commitment.
"The experience in venture capital is that it's tough enough to provide successful returns to the investors," Taylor said.
"So if there are other objectives mixed in, such as trying to create jobs or other economic development goals, it will be
difficult to be successful. It's hard enough if you only have to look at investments that seem to be sure things."
Part of the Puzzle
Some local companies are cautiously optimistic about the Greenhouse fund. Alan Seadler, head of Duquesne
University's Center for Biotechnology and the former president and CEO of Harmar Township-based Crystalplex Corp.,
said having a fund located here should help draw additional money to the region from other sources.
"It is one of the parts of the jigsaw puzzle that is really needed in the region," Seadler said. "... What the Greenhouse is
doing will give us additional capital to get us through the gap and match funds through Innovation Works and other
funding sources."
Pete DeComo, chairman and CEO of Warrendale-based Renal Solutions, agreed that the fund, if successful in being
established, would be positive for the region. He hopes that it will help to fill out the spectrum of funding that is needed in
the region, ranging from early stage to late stage.
DeComo added that, although it strays from the original mission of the Greenhouse, it ultimately would help the
Greenhouse accomplish that core mission.
"I don't know that any mission you have initially won't go unmodified as you try to accomplish that mission," he said.
"(There's still) the same general mission -- to grow life sciences in the region. ... (It's using) different strategies to
accomplish the same thing."
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About the PLSG
The Pittsburgh Life Sciences Greenhouse is a public/private partnership, founded by the University of Pittsburgh,
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PLSG :: Pittsburgh Life Sciences Greenhouse ::
Carnegie Mellon University, UPMC Health System, the Commonwealth of Pennsylvania and our regional foundation
community. Together with private industry and advanced research and healthcare capabilities of our institutional
partners, PLSG invests in and supports the growth of regional life sciences companies. The PLSG is focused on
developing a portfolio of companies in the following industry sectors: drug discovery tools and targets, medical devices
and diagnostics, tissues engineering and regenerative medicine and therapeutic strategies for neurological and
psychiatric disorders.
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