Amid the hoopla a few weeks ago at the annual NVCA meeting, where the focus was rightly on improving liquidity, it was barely noticed that a new chairman was elected – Polaris co-founder and managing general partner Terry McGuire, one of the leading life sciences investors in the industry. In normal times, the NVCA chairman is hardly an earth-shaking position (although certainly of higher value than FDR’s Vice President John Garner felt about his office). But these are hardly normal times and the NVCA chairman is bound to find himself in the middle of many interesting policy debates in the coming year. I was therefore intrigued by Terry’s election and so talked to him the other day about his new role.
Terry co-founded Polaris in 1996 after seven years as a VC at Burr Egan. His focus on life sciences emerged over the last 10 years, although he started in the business as a generalist and has had no formal medical training or education. In addition to his impressive life sciences portfolio (including Sirtris, GlycoFi and Cubist), Terry was the initial investor in one of the most successful VC deals of all time, Akamai, a company that Polaris invested in (alongside Battery) with an $8m Series A in 1998 and then went public in 1999 and commanded a peak market capitalization of over $20 billion shortly after the IPO (the market capitalization is now $3.5 billion, as the company has successfully “grown into its valuation” and become the leading in the content delivery market).
Terry’s ascension to chair of the NVCA comes at an interesting time, to say the least. In our conversation, he made a few observations in his usual soft-spoken but pointed way that I found particularly interesting:
(1) Small Ball. At $20-30 billion per year, the venture capital industry as a whole remains a “drop in the bucket” in terms of capital deployed relative to the over trillion dollars sitting in private equity firms. Yet the impact is enormous, with 18% of GDP provided by venture-backed companies. Thus, there is great (positive) leverage in the VC model and, as a result, policy makers should be paying more attention to it and demonstrate an interest in how to accelerate it.
(2) Wanted: Grumpy Old Men. There is a tremendous need for “old guys” to stick around in the VC business rather than fade off into the sunset. In the private equity world, the industry leaders hang around forever well past their 50s and 60s. In VC, it’s considered more naturally a young person’s game (perhaps because we’re always dealing with waves of new technology, young founders). Yet, the VC business takes a long time to figure out. The industry needs the investors who were around in the pre-bubble era (1980s and first half of the 1990s) to stick around and impart their wisdom on the next generation, who has grown up in the business during unusual times. It is scary to reflect on how few of the 7,000 professionals active in the industry today were general partners before Netscape’s IPO in 1995.
(3) Life sciences. With the incredible advancements in genomics, computational power and miniaturization, we are arguably entering into a golden age of innovation in life sciences (which encompasses healthIT, medical devices, diagnostics, and touches adjacent areas such as materials science and robotics. Having an NVCA chairman steeped in that world, at a time when the US Government is looking to perform a top-down re-engineering of the health care system, which is projected to make up 20% of GDP in a few years, is good timing indeed.
(4) Boston. With 14 teaching hospitals and world-class research and entrepreneurship factories like MIT and Harvard, Boston has arguably emerged as the top life sciences start-up environment. With related technology advancements in energy technology and strong legislative support from the state of Massachusetts, it is arguably uniquely positioned there as well. Admittedly it is a distant second to California in software and Internet innovation, but as a proud Boston-based VC, I was pleased to see Terry brimming with confidence in Boston as an entrepreneurial hub.
It will be a year of both challenges and opportunity for the VC industry, but Terry was eager to dig in during the year ahead.