Over to the Dark Side

Back now from my trip out to the wild, wooly, and wet west, I noted a story by Luke Timmerman, ace biotech reporter for Xconomy Seattle, that Tachi Yamada, former president of the global health program at the Bill and Melinda Gates Foundation, had joined the venture capital firm of Frazier Healthcare Ventures as a senior executive-in-residence (Xconomy article).  While his colleagues and associates in the non-profit world may view his move as one step closer to perdition, I had the opposite reaction, hoping that he will carry his idealism and enthusiasm for global health solutions into the for-profit world and create a model for venture capital investment in companies with global health products.  With further research though, I’m not sure if Dr. Yamada will stick with his new job for a couple of reasons.

First, Dr. Yamada’s work experience doesn’t fit well with the venture capital business; he has no track record in identifying and funding ideas and people who develop commercially valuable products.  Although the Xconomy article notes that he oversaw the Foundation’s Grand Challenges in Global Health grant program (Grand Challenges), which has given more than half a billion dollars away since 2005 and in that sense has been a great source of seed capital for advancing novel ideas that would not have been funded through traditional sources, he did not run it as a venture capital program.  The overwhelming majority of the funding has been given to academic groups and not companies and without an expectation (or an accounting) of a return as I noted in my post of 11/24/09.  The Foundation has taken a few, small steps to become an investor (really a co-investor) in early-stage companies, e.g., their recent investment in Liquidia Technologies which I wrote about with faint praise in my post of 4/14/11.  But as I noted in my post of 1/14/10, although the Foundation has announced in September 2009 that it intended to use $400 million to make “program-related investments,” except for Liquidia, no investments have materialized.

Also, the psychology, language, style, personalities, and atmospherics of a VC firm are different from his previous work environments, although he is familiar with Frazier since, as the Xconomy article notes, he has been a part tine advisor to them.  The best venture capitalists take an active interest and involvement in the operations, planning, funding, and management of the of companies they invest in, which makes sense since they have a chunk of money at risk unlike foundations.  Running a big bureaucracy, as Dr. Yamada did at the Gates and as chairman of r and d at GlaxoSmithKline, is a far cry from helping a small company with their nuts and bolts, like choosing the right CMO to design the clinical trials that will make or break them.  Lots of hand-holding, cajoling, and maneuvering is used and it is not clear to me if he is up to or interested in this role.  In my limited experience, executives-in-residence are also positioned to become interim CEOs for portfolio companies when they need to be put back on track.

So it doesn’t look like Dr. Yamada will have they typical venture capitalist role, and the Frazier press release on his joining the firm was not particularly informative (Frazier press release).  In the Xconomy article, Jamie Topper, a general partner at Frazier, is quoted as saying Dr. Yamada will “open doors, find new opportunities, help us build our existing opportunities, and get access to international markets” which is a pretty general statement.  And although Mr. Timmerman notes Frazier may be interested in global health (“Topper did say that global health is ‘incredibly important’ and that Yamada will help the firm better understand how to invest in it.  “I think there’s opportunity there,” Topper says. “I’m not sure we’ll invest in 15 companies in it, but some of our companies are engaging in it now.”), I looked at Frazier’s existing 12 biotech investments and saw only two (Chimerix and Kalidex) that may have products applicable to global health  (Frazier portfolio).  So if Frazier has a global health investment strategy, it is low-key at best.

I am guessing that Dr. Yamada’s principal role will be to open doors to China’s billionaires, who, although they may be lukewarm to giving money for global health through foundations (PRI article), are likely to invest in new biotech ventures  (e.g., the recent launch of the biotech, Ascletis, with a $100 million from a Chinese investor [FierceBiotech article]), and, since VC firms can always use more backers, China’s nouveau riche is a likely source.  To the extent he is willing to persuade them and his colleagues at Frazier that global health companies are reasonable investments, the better for everyone.  Good luck on your new venture, Dr. Y.

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