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 July 07 | St. Louis CEO “Deal Maker” article by Matt Berkley The Enabler Venture capital was a $7.1 billion industry for the first quarter of the year—the biggest since the fourth quarter of 2001. There were 778 deals in three months. And St. Louis saw some of that action, according to the MoneyTree Report by PricewaterhouseCoopers and the National Venture Capital Association. Three St. Louis deals with a value of $13.43 million were reported, and there was one local VC firm that participated in all three: Prolog Ventures LLC. “On one level, venture capital is about generating good returns for your limited partners. That is a challenging and stimulating responsibility,” says Ilya Nykin, managing director and co-founder of Prolog Ventures with Greg Johnson and Brian Clevinger, who have been at the helm through multiple deals in St. Louis. “But on another level, as you do this job, you also acquire the position of enabler of people’s dreams. You enable them, help them to put their ingenuity, inventiveness, intelligence, hard work to the sort of use that results in breakthrough products and significant advances that, in the end, have the potential to have tremendous effect on people’s lives,” Nykin says. Since its initial closing in 2001, Prolog Ventures, a Clayton-based venture capital firm, has poured millions of its own funds and effectively drawn outside investors into a score of St. Louis life sciences and technology firms. Past high-end deals have included local companies such as Kereos Inc., Akermin Inc. and Divergence. Last fall, one of Prolog’s interests, Singulex Inc., raised more than $10.5 million in new capital, an infusion that will allow the company to meet its commercial launch of Zept(x), Singulex’s digital single molecule detection system. Nykin, a successful entrepreneur and 20-year veteran of the life sciences industry, notes that venture capital deals certainly don’t happen overnight. But when they do, the rewards can be phenomenal — especially for fledgling science firms and the lives of individuals affected by their research. At Prolog’s headquarters, 14 floors over downtown Clayton, Nykin took time between the steady stream of meetings and conference calls to talk at length about the deal process, Prolog’s clients and the venture capital scene in St. Louis. Q: Are there any unique challenges that life-science companies pose to investors? A: Life sciences generally is for patient investors. Development takes longer when compared to a field like computer technology. It isn’t uncommon, particularly in the traditional health care investment field, to spend a great deal of money and time to even know if you’ve got something. In order to address these unique challenges, we try to make smart investment decisions and, on a very systematic basis, have been looking at other areas of life sciences outside of human health and disease treatment. We find other fields which St. Louis is particularly well-positioned to support: plant sciences, bioenergy, nutrition, personal care products. Q: Why is St. Louis a good environment for the life sciences/biotech industry? A: St. Louis has some extraordinary life science resources. There is a great deal of infrastructure. Washington University is one of the top medical schools in the country, and there are a great number of scientists and researchers working in both academic and corporate world. We have some unique institutions here, cutting-edge facilities like the (Donald) Danforth Plant Science Center, which is evolving into a world-class institution in applied sciences. These are all areas that are of great interest to us. This is good place to be if you want to invest in opportunities of this kind. Q: How were you involved with the Singulex deal? A: Singulex is a great example of what we do in St. Louis. Early on, we noted its technological potential. It was an early-stage situation, which our fund excels in because we have experience as entrepreneurs, not just investors; we’ve continuously supported (the company) with capital advances and advice. An important thing we can do for the company is try to identify and recruit successful leaders, like Philippe Goix, who came with Singulex as CEO and helped bring it to a whole new level. Q: What does your job entail? A: The managing director job encompasses all aspects of the investment cycle. You source investments, identify opportunities, sort through them with partners. You have to understand what a company is about, perform due diligence on all aspects of operation, intellectual property, etc. After that, you structure the deals, work the transactions and make the investment. But that’s where your work really begins. At that point, you’re committed for a number of years of hard work with the company—serving on the management team, adding value, periodically adding capital and helping the firm grow. You’re involved in the entire cycle from the beginning to the end until these companies become sufficiently successful to where some of them might go public. Q: The St. Louis venture capital market has been tagged conservative. Do you think this is true? A: Reputations typically take years to form, and the reputations tend to be a lagging indicator of reality. I suppose if you look at St. Louis 10 years ago, this was true; few deals were done. Not much money was available. Not much was flowing from outside, particularly in life sciences, which is amazing because of the enormous assets that exist here. Perhaps there was some degree of conservatism, but we feel that we’ve been able to do something to change that. This reputation reflects more the previous decade than the current. We certainly are bullish in the area and are glad to be contributing to the change. We can’t, by any means, take all the credit. There are visionaries in our community, especially those at Washington University and the Danforth Center, who have played a tremendous role in creating the opportunities. Q: Will life sciences continue to flourish here? Is there anything missing? A: Our area happens to be in the center of some of the most interesting developments in life sciences, which capture public consciousness, such as emerging bioenergies. The outlook is bright, not only because of the assets that have been here for some time, but also because of new initiatives and developments in the market that are putting this area in a strong, central position. I think that all the components that we need are in place. The capital is in place. The infrastructure, in terms of research and corporate resources, is in place. But we do need to have more time to continue to develop them in order to put St. Louis more on the map. Q: What does it take for an early-stage company to impress investors and achieve funding? A: If you’re looking for funding, you need to think through very carefully what it is you’re bringing to the table. What is the real value in what you’re trying to do? What is the real uniqueness of the technology or the solution that you have to offer? How can you protect it through patents? How deep (is your) understanding of the market, of the competition? The more you know, the better your chances of funding. In the end, it’s all about fundamentals. But it still has to be a great solution for a significant problem that is worth solving. © 2007, St. Louis CEO Magazine. All rights reserved. Reprinted with permission.
T O P I N T H E N E W S S E L E C T E D R E L E A S E S H O M E |
