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GSK Partners With SG3 Ventures to Add $100 Million to the Pittsburgh Biotech Scene

From Biospace News: Backed by GlaxoSmithKline (GSK), New VC Firm SG3 Ventures Has $100 Million to Bet on Pittsburg Startups

Reporter: Stephen J. Williams, Ph.D.

Source: http://www.biospace.com/News/backed-by-glaxosmithkline-new-vc-firm-sg3-ventures/412039/source=TopBreaking?intcid=homepage-seekernewssection-tabtopbreakingnews

 

Pittsburgh-area entrepreneurs will soon have another funding option for growing early phase startup companies.

Pharmaceutical giant GlaxoSmithKline has thrown its support behind the creation of a $100 million venture capital fund, which will help meet a need for early stage business startup capital in the Pittsburgh area. Philadelphia-based SG3 Ventures anticipates awarding its first round of funding in about a year, according to Brian McVeigh, vice president of worldwide business development transactions and investment management at GSK.

From Pittsburgh Post Gazette: http://www.post-gazette.com/business/healthcare-business/2016/03/11/New-early-stage-venture-fund-forming-with-eye-on-Pittsburgh-startups/stories/201603090016

New early-stage venture fund forming with eye on Pittsburgh startups

Pittsburgh-area entrepreneurs will soon have another funding option for growing early phase startup companies.

Pharmaceutical giant GlaxoSmithKline has thrown its support behind the creation of a $100 million venture capital fund, which will help meet a need for early stage business startup capital in the Pittsburgh area. Philadelphia-based SG3 Ventures anticipates awarding its first round of funding in about a year, according to Brian McVeigh, vice president of worldwide business development transactions and investment management at GSK.

“There is a huge untapped opportunity,” Mr. McVeigh said. “Let’s bring the money here.”

New prescription drug treatments will be a priority for fund investments, but a balanced portfolio including life science technologies is planned.

In the venture ecosystem, insurers, pension funds and other institutions use such funds to invest in promising startup companies — both to balance their portfolios and to get a shot at investment returns that would not otherwise be possible. The venture funds oversee allotting capital to a portfolio of startup companies.

The investment money enables startups to mature and eventually bring in other investors through a public offering or acquisition by a larger company, generating money to repay the initial investors.

GSK and other big pharmaceutical companies are making similar investments to maximize returns and keep their product pipelines full, but GSK has been focusing on earlier stage companies, shifting its focus to pre-clinical technologies about five years ago, Mr. McVeigh said.

In addition, Big Pharma is increasingly relying on outsourced research and development operations, often in collaboration with universities, to fill industry product pipelines. GSK has funded a number of these initiatives, including a cancer collaboration with the University of California, San Diego School of Medicine and Moores Cancer Center.

SG3 Managing Director Keith Marmer said the new venture fund will be committed to technologies developed outside the better known tech hubs of Silicon Valley and Boston-Cambridge.

“We’re here, we’re from here, and we want to be here,” he told a group of entrepreneurs at a recent breakfast meeting in Oakland. “Sustaining technology through research funding isn’t happening anywhere.”

Parsippany N.J.-based GSK closed its consumer health care operations in Moon in 2015, eliminating 274 jobs a year after the company’s merger with Swiss vaccine maker Novartis. Mr. McVeigh works at the company’s offices in King of Prussia, Pa.

With federal research dollars flat in recent years, universities nationwide have been turning to commercialization of intellectual property as a new source of revenue.

At the same time, Pittsburgh’s startup community is showing signs of new life.

Among the signs: Patrick Gallagher’s commitment to the commercialization of faculty research since becoming University of Pittsburgh chancellor 18 months ago, awakening a sleeping giant of economic development and innovation and hospital system UPMC’s creation of a commercial enterprises arm to fund promising technologies.

The timing couldn’t be better for venture capital funds like SG3.

Nationwide, early stage funding has been chasing fewer deals, according to a report by Money Tree, which was compiled by PricewaterhouseCoopers and the National Venture Capital Association based on data provided by Thomson Reuters.

Early stage investments nationally last year totaled $19.8 billion, a 23 percent increase from $16.1 billion in 2014. But the number of deals were essentially flat from the previous year, suggesting that some companies were left out in the cold.

What’s more, the amount of money available to Pittsburgh-area entrepreneurs after the earliest rounds of investment isn’t keeping pace with the innovations coming out of the city’s universities, said Dietrich Stephan, a serial entrepreneur who also chairs the human genetics department at Pitt.

“There’s real substance here,” he said. “Without money, we can’t build.”

Seed investment funding — the earliest level of funding — is not a problem in Pittsburgh, said Buchanan Ingersoll Rooney PC lawyer Jeremy Garvey, who also chairs the Bridgeville-based Pittsburgh Venture Capital Association.

“The predominance of funding in this market comes in the earliest stages,” he said. “Institutional funding is much harder to get in this market.”

Early stage venture funding began drying up with the stock market crash of 2008, which also chilled the financial markets for initial public offerings for biotech companies, Mr. McVeigh said. Eventually, conditions thawed for IPOs, but the lower valuations for new companies than before 2008 made that less attractive than before.

“We’re really energized by the energy there” in Pittsburgh, Mr. McVeigh said. “We’re looking to bring venture capital to the region.”

Kris B. Mamula: kmamula@post-gazette.com

About SG3 Ventures

SG3 Ventures is an early stage life science venture capital firm. Our primary focus in on therapeutics and digital health; however, we will invest opportunistically when presented with a potential vehicle to drive superior returns for our limited partners. We are active in company formation, deploying financial and human resources to help deliver value. In addition, we access deep industry networks to ensure a path to market with strong commercial partnerships built into our companies from the beginning. SG3 prefers to invest in the greater Philadelphia Region (Princeton to the north, Baltimore to the south and Pittsburgh to the west). We prefer to make initial investments at the formation or seed stage with a focus on providing financing through mature rounds of investment.

  • Website

    http://sg3ventures.com

  • Industry

    Financial Services

  • Type

    Partnership

  • Headquarters

    3711 Market Street Suite 800Philadelphia, PA 19104 United States

  • Company Size

    1-10 employees

More articles on the Open Access Journal on Biotech Investing Include

J.P. Morgan 34th Annual Healthcare Conference & Biotech Showcase™ January 11 – 15, 2016 in San Francisco

New Values for Capital Investment in Technology Disruption: Life Sciences Group @Google and the Future of the Rest of the Biotech Industry

Bristol-Myers Squibb: A global BioPharma leader – Tracing the innovative biotech core of $3.7 billion R&D Investment and $16.4 billion in Net Sales

 

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