BOSTON — Wednesday, June 20, 2012 — Seven global biopharmaceutical companies have each pledged to contribute $250,000 a new consortium that will fund preclinical neuroscience research in order to accelerate and make available academic research from Massachusetts to the pharmaceutical industry, Massachusetts Governor Deval Patrick and consortium members announced today.

Companies participating in the Massachusetts Neuroscience Consortium include Abbott, Biogen Idec, EMD Serono, Janssen Research & Development, LLC, Merck, Pfizer and Sunovion PharPmaceuticals Inc.

“From Alzheimer’s disease, to Parkinson’s disease, to multiple sclerosis, neurological diseases affect millions of Americans and millions more across the globe,” Patrick said. “Through the research that this consortium will fund, we aim to bring those people, their families, and many others hope for a better future.”

The announcement took place in the Massachusetts Pavilion at the 2012 BIO International Convention.

According to a press release from the governor’s office: the Consortium is a pioneering new model designed to leverage Massachusetts’ rich environment for purposes of accelerating early-stage research available to the pharmaceutical industry, introducing academic researchers to the challenges of targeted research, and facilitating industry-academic collaborations.

A number of factors make the Massachusetts Neuroscience Consortium unique:

• Proposed projects will be short-term and results-oriented. Timelines, milestones, budgets and objectives will be clearly defined by the industry sponsors.

• Industry sponsors will identify common standards, e.g. levels of validation necessary for a project objective to be considered “complete.”

• Industry sponsors will work in collaboration with principal investigators and their teams; sponsors also will contribute tools, data and other resources to the project teams to expedite their work.

• Results are shared with all participants; companies and academic researchers will have access to the use of any tools developed by each project; industry sponsors will determine their interest in validated targets as projects are completed.

“The Consortium is a pioneering new model that is designed to leverage the rich research environment in Massachusetts for purposes of accelerating pre-clinical research available to the biotech and pharmaceutical industry, introducing academic researchers to the challenges of targeted research, and facilitating industry-academic partnerships,” said Susan-Windham Bannister, Ph.D., President and CEO of the Massachusetts Life Sciences Center. “I sincerely thank our seven charter members for stepping up to this challenge and joining in this new collaboration.”

Each participating company has pledged to contribute $250,000 to the Consortium, for total initial funding of $1.75 million. Members of the Consortium will solicit and review proposals from academic research institutions for pre-clinical neuroscience research. The first solicitation is expected to open in the fall of 2012. All Massachusetts academic and research institutions will be eligible to apply for grant funding through the Consortium. The Massachusetts Life Sciences Center will administer the Consortium, and will use its convening power to reduce barriers to collaboration and to expedite access to the research community.

Massachusetts is a center of excellence in the field of biomedical neuroscience with world leaders representing all major fields of neurobiology and neurology. The combination of basic neuroscience, translational and clinical research across more than a dozen world-renowned institutions represents what may be the world’s highest density of neuroscience research. This provides a rich and fertile environment within which to advance the understanding and treatment of brain disorders.

“EMD Serono is proud to be a part of this new initiative to further neuroscience research within our company’s home state of Massachusetts,” said James Hoyes, President of EMD Serono. “This Consortium represents true collaboration amongst industry leaders, to foster breakthroughs in science today that will change the shape of medicine for tomorrow. We look forward to accelerating research and innovation in the area of neuroscience, and together, making a difference in the lives of patients.”

“Janssen Research & Development is pleased to be a charter sponsor of this innovative approach to advance neuroscience research,” said Husseini Manji, MD, Global Therapeutic Area Head, Neuroscience, Janssen R&D. “We believe scientific collaboration that brings together the best ideas and expertise from both academia and industry will play an important role in helping translate basic science discoveries into promising new treatments.”

“We are delighted to be a founding member of the Neuroscience Consortium,” said Douglas E. Williams, Ph.D., Executive Vice President, Research and Development at Biogen Idec. “New types of collaborations among academia and industry are increasingly important to stimulating the discovery of better therapies and advancing science and medicine. At Biogen Idec, we are working on discovering and developing drugs across a number of areas in neurodegenerative disease and believe that this first-of-its-kind collaboration among the state, biopharmaceutical companies and top academic researchers is important for maintaining a vibrant and innovative research organization and making sure we deliver better therapies to patients with these difficult diseases.”

“Pfizer Neuroscience is in Cambridge, Massachusetts, largely due to the intense concentration of neuroscience thought leaders,” said Dr. Michael Ehlers, Chief Scientific Officer for Pfizer Neuroscience. “This collaboration is a step forward in our effort to address the urgent need for therapies in neurologic and psychiatric disease.”

“This is an exciting and promising new model for collaboration to advance the study of behavioral health and neuroscience disorders. Sunovion is proud to participate in this initiative,” said Richard Russell, Executive Vice President and Chief Commercial Officer, Sunovion Pharmaceuticals Inc. “The Life Sciences Center has played an essential role in convening this group and making this collaboration happen, and we thank them for their leadership.”

“The academic research community is committed to understanding these neurologic conditions at the most basic and fundamental molecular level, and most importantly, to translating that depth of understanding into clinical application,” said Jeffrey S. Flier, Dean of Harvard Medical School. “Basic discovery and translational science are essential to our success, and we in academia have the infrastructure to do it.”

“When I was first diagnosed with MS nearly 20 years ago, there were no approved treatments on the market,” said Joann D’Amico Stone of Waltham. “Since that time, there have been tremendous advancements made, opening up a number of options for patients – including my MS treatment from Biogen Idec. It’s heartening to see these companies collaborating, because I think that it will ultimately help speed and increase the number of important treatments that can benefit patients like me.”

“In 2009 I became the fourth member of my extended family to be officially diagnosed with Alzheimer’s Disease,” said Allen Krieger of Lexington, a distinguished astrophysicist. “Alzheimer’s has changed my life in a number of ways – I have difficulty finding things, making decisions, and remembering things that used to be routine. I’ve participated in clinical trials and other research to do what I can to help. This consortium is a new and promising approach to advancing Alzheimer’s research through collaboration between the companies and academic institutions that are leading the way in the search for a cure.”

“We are in a race against time in our fight to find treatments and a cure for Alzheimer’s,” said James Wessler, President and CEO of the Alzheimer’s Association, MA/NH Chapter. “We applaud Governor Patrick and the Massachusetts Life Sciences Center for the foresight shown in the creation of this new neuroscience consortium. For the 120,000 people in Massachusetts with Alzheimer’s, this cannot come soon enough.”

The BIO International Convention provides Governor Patrick, Lieutenant Governor Timothy Murray, state and industry leaders with an opportunity to showcase Massachusetts as a global leader in the life sciences industry, and the preeminent place for life sciences companies to invest in and expand.

Governor Patrick’s ten-year, $1 billion life sciences investment package has strengthened the state’s global leadership in the life sciences. The initiative melds all of the state’s key resources in order to spur research, investment, innovation and commercialization. Now the life sciences industry in Massachusetts is thriving, with more than 52 percent job growth in the biopharma sector since 2001 and more than 80,000 employees working in the life sciences.

–Anita M. Harris

New Cambridge Observer is a publication of the Harris Communications Group” , an award winning public relations and marketing communications firm based in Cambridge,

CNN host Fareed Zakaria said yesterday that despite the world’s current economic and political difficulties,   he is optimistic about the future  but that it is by no means clear “who will be winners and the losers”  in what he called a “new global landscape.”

In a keynote talk at the Biotechnology Industry Organization International Convention in Boston,  Zakaria said, that the world is currently “extraordinarily  peaceful” compared with previous decade and that it is quite “unified, with a global economic system, interactive communications and technology and greater computing power than ever before.  (For example,  the cell phone has more computing power than did the Apollo spacecraft capsule in 1969. ” It could go to the moon, he said, but it could not tweet,”  he quipped. )

In the past, he said, the US has always been able to emerge from  economic difficulties  due to its tremendous capacity to innovate–and in the second half of the twentieth century, maintained a substantial economic and innovative edge over other nations.  But, he said, “we forget that at other times, other countries have  had the edge.”    He asked, “Will the US  maintain its edge?”

Zakaria outlined what he called three distinct historical  phases or causes that, he said, account for the US’  “extraordinary” lead:

(1) During World War II, the forces of destruction had a huge spillover effect.  Germany, a major US competitor, was “leveled to the ground” and England was bankrupted.

(2) During the Cold War, fears of losing out to the USSR in the 1950s  led the US government to make double the investment in US companies than it is making now;  government purchases of US computers and components accounted for the lion’s share of profits for those companies, until the cost curve began to decline. What is more, the government invested heavily in higher education, so that citizens could obtain the world’s finest education in public universities” without paying a cent”

(3) “The third pillar was Jews ” he said. “If  Hitler had not made the morally reprehensible to target Jews, the US would not have had the influx of scientists who created the bomb, transformed theoretical physics and gave the US a 30-year lead.”

What this shows, he said,  is that America’s propensity of innovate is “not due to DNA,” but rather, that there are specific historical reasons why the US took a commanding lead.

Today, he said, there is a new global landscape  in which it is possible for smaller nations– such as Denmark, where  the Global company Novo Nordisk, known for its diabetes treatments,  was founded–  to be at the leading edge in certain technologies.

What is more, Zakaria pointed out,  innovation does not necessarily correlate directly with spending for research and development.  Apple is often considered one of the most innovative companies in the world–but that is because it understood consumers and  how to create a new need,  rather than because it offers the most cutting edge technology, he said.  “Big company and big country advantages no longer hold, going forward.”

On a panel following the talk, Kiran Mazumdar-Shaw, founder and chair  of the Indian biotechnology company Biocon, said that the current process of biotechnology development is unsustainable and most products are too expensive to benefit most of those who need them.  “Countries in Asia must reinvent the process of drug innovation,” she said.

Greg Lucier, CEO of Life Technologies, which supplies systems, biological reagents and services to enable scientific research, said that  new genomics tools will be the stimulus to streamline innovation, cut costs,  and change the future of  human health.

Derek Hanekom,  South Africa’s Deputy Minister of Science and Technology emphasized the importance of  government’s role in providing access to care and sanitation. Governments can promote innovation by recognizing and supporting it,  reducing unnecessary regulations yet adding regulations to promote competition, and supporting  education to develop a skilled workforce.

Yucel Altunbasak, president of Tubitak, the Scientific and Technological Research Council of Turkey, listed financing, talented people, regulatory framework, and a governmental support mechanism as keys to helping emerging markets do “what the US did in the 1950’s.”

Four Massachusetts-Israeli business collaborations have received a total of $1.3M in grant funding under the  Massachusetts-Israel Innovation Partnership (MIIP)–a  formal collaboration between the State of Israel and the Commonwealth of Massachusetts to encourage and support innovation and entrepreneurship between Massachusetts’ and Israel’s life sciences, clean energy and technology sectors.

The grants were announced yesterday at the  2012 BIO International Convention in Boston by Massachusetts  Governor Deval Patrick and  Israeli Chief Scientist Avi Hasson, of  MATIMOP, the  Israel Ministry of Industry, Trade and Labor.

The four winning projects are:

• SBH Sciences (Natick) and Improdia (Israel) will work together toward the development and manufacture of a chronic inflammation-dependent immunosuppression prognostic kit. SBH will receive $184,000 from the Center and Improdia will receive $202,000 from Israel’s OCS.SBH Sciences is a discovery and preclinical contract research organization with expertise in production and analysis of cytokines and biomarkers. Improdia is a life science start-up focused on implementing novel biomarkers for immune system modulating therapies– using  simple blood tests for patients with chronic disease.

•  Automated Medical Instruments (AMI – Needham) and STI Lasers (Israel) will develop new technology involving radio frequency energy to perform circumferential ablation of the pulmonary veins. AMI will receive $116,000 from the Center and STI Lasers will receive $110,000 from OCS. AMI is a start-up medical device company developing novel technology to perform atrial fibrillation treatment. STI Lasers is a medical device company specializing in laser cutting, micromachining and finishing of miniature metal components.“AMI is developing the CircumBlator™,  to offer a reliable and curative, minimally invasive treatment for millions of patients with atrial fibrillation, a disease that causes over 20 percent of strokes and untold misery,” said Martin Sklar, President and CEO of Automated Medical Instruments.

• Lantheus Medical Imaging, Inc. (North Billerica) and Check-Cap (Israel) will  develop a novel 3-D imaging capsule that can be used to screen for polyps and lesions associated with colorectal cancer. Lantheus will receive $300,000 from MTC and Check-Cap has been selected to receive at least an equal amount from OCS. Lantheus  develops, manufactures and distributes innovative diagnostic imaging agents. Check Cap is a medical device company located in Mount Carmel, Israel with a “breakthrough” solution for Colorectal Cancer Screening.  “As a global leader in diagnostic imaging, Lantheus is dedicated to providing physicians with breakthrough new tools to enhance patient care. Teaming up with Check-Cap to develop and manufacture a cutting-edge imaging capsule further advances this ongoing commitment,” said Don Kiepert, President and CEO, Lantheus Medical Imaging.

• FloDesign Sonics (Wilbraham) and Transbiodiesel (Israel)  will use FloDesign’s acoustic molecule separation technology to separate oil that can be used to create fuel from Transbiodiesel’s oil-generating algae. FloDesign Sonics will receive $55,000 from MassCEC and Transbiodiesel will receive $20,958 from OCS. FloDesign Sonics uses a novel ultrasonic acoustophoretic separation technology developed at Western New England University for a more efficient approach to wastewater treatment and micro-algae harvesting for biofuels. Transbiodiesel is a start- up company with a novel technology for producing biodiesel fuels from a variety of oils

The MIIP program was first announced in June 2011 at the BIO International Convention in Washington, D.C. and the first joint solicitation for proposals was launched in September 2011 by MATIMOP on the Israeli side and by the three participating Massachusetts agencies: the Massachusetts Life Sciences Center, the Massachusetts Technology Collaborative (MTC) and the Massachusetts Clean Energy Center (MassCEC). Total funding for the current projects is approximately $3m.

The partnership came as a result of a 2011 trade mission in which  Governor Patrick and a coalition of Massachusetts business executives and senior government officials explored growth opportunities of common interest for Massachusetts’ and Israel’s innovation industries. During that mission Governor Patrick and Shalom Simhon, Israeli Minister of Industry, Trade and Labor, signing on behalf of their respective states, signed a Memorandum of Understanding (MOU) in Jerusalem. MIIP was established to implement the MOU’s framework.

Massachusetts is the first U.S. state to establish a significant industrial R&D program with the State of Israel, according to a press release issued yesterday by Patrick’s office.

Today there are nearly 100 companies with Israeli founders or Israeli-licensed technologies in Massachusetts, according to the release.  In 2009, these companies employed nearly 6,000 people and generated $2.4 billion in direct revenue for the state. Local firms exported over $180 million worth of goods to Israel in 2009. Home to 377 hospitals and 37,000 practicing physicians, Israel is an important market for health-related technologies.

The New England-Israel Business Council, the US-Israel Science and Technology Foundation, the Government of Israel Economic Mission to North America, the Consulate General of Israel to New England and MOITI have all played an important role in promoting the program, according to the release.

–Anita M. Harris

New Cambridge Observer is a publication of the Harris Communications Group, an award-winning strategic public relations,  marketing communications and thought leadership firm in Cambridge, MA.

UK-based Alacrita, a global life science consulting firm with consultants worldwide, will soon be opening an office in Cambridge, MA, according to Robert Johnson, who will head the office, here.

The company was co-founded two years ago by Anthony Walker, who had previously served as Executive Director of Global External R&D Europe at Eli Lilly,  and  by Johnson, who had led business development at Onyvax, a biotech company that developed biopharmaceuticals to combat cancer.

Drawing on the capabilities of more than 50 consultants worldwide, Alacrita  provides strategic, operational,  technical  advice or  hands-on project management to organizations of all sizes in  the pharma, biotechnology and life science industries, Johnson said.

According to the Alacrita Web site, clients may be academic institutes, tech transfer experts,  life science investors, startups  or  established companies in need of expertise in:

• Business development and marketing
• Intellectual property
• Product development
• Regulatory affairs

Recent whitepapers available on the  company Website   include:

• Biotech in Israel: A Land of Promise » May 2012 – by Anthony Walker, PhD
• FDA Approvals Provide Reason For Cheer » March 2012 – by Robert Johnson
• Deal Watch Annual Review 2011 » January 2012
• Viewpoint: Pharma Industry Myths » January 2012 – by Anthony Walker, PhD
• Europe’s stellar decade of prostate cancer innovation » September 2011 – by Rob Johnson
• Are we all biotech now? » June 2011 – by Anthony Walker and Rob Johnson
• China: Opportunities for biotech firms » March 2011 – by Rob Johnson and Li Zeng
• Re-Profiling: a Hidden Threat to Originators? » February 2011 – by Dr Jo Davies
• Deal Watch Annual Review 2010 » January 2011 – by Roger Davies and Jill Ogden
• Mitigating Out-sourcing Risk » December 2010 – by Robert Johnson and Anthony Walker
• Deal Watch: a Review of Notable Deals » October 2010 – by Sharon Finch

Alacrita’s US offices will be located in the Cambridge Innovation Center in Kendall Square.  The company name comes from the Latin, “alacritas,” or “lively.”  It is meant to convey “a cheerful readiness,” Johnson said.

–Anita M. Harris

New Cambridge Observer is a publication of the Harris Communications Group, an award-winning strategic public relations,  marketing communications and thought leadership firm in Cambridge, MA.

SHANAHAN NAMED VP OF BUSINESS DEVELOPMENT

—One of the newest international companies to expand into Cambridge is Ariana (R)  Pharma–a 2003 spin-out of the Pasteur Institute in Paris.  Its  subsidiary, Ariana Data Intelligence, Inc., located in the Cambridge Innovation Center at 1 Broadway,  will provide novel non-statistical clinical data analysis technology to pharma and the FDA,  Ariana announced today.

The technology,  “Knowledge Extraction and Management Technology (KEM)” is aimed at reducing cost, bias, and risk in clinical trials.

“The US pharma and biotech markets tend  to be early technology adopters and are searching for better data analytics tools to advance personalized medicine using all the new biomarker, genomic, proteomic and metabolomic data now being generated,” said  Dr. Mohammad Afshar, Ariana’s President and CEO.

KEM   “is the only FDA-tested technology that  can simultaneously analyze all these variables and pull out patient responder sub-groups, optimize biomarker signatures and remove bias from clinical trials,” Afshar said.

A “unique” association rules-based (non-statistical) analytical technology, KEM  finds patient responder sub-populations and biomarker signatures that statistical methods are unable to detect, according to Afshar.  KEM thus optimizes clinical trial inclusion/exclusion criteria, thereby lowering the number of patients needed to reach clinical endpoints and saving sponsors both time and cash, and reducing clinical drug development risk.

In conjunction with the opening, Ariana has appointed James M. Shanahan as Vice President  of Business Development.  Shanahan was previously a co-founder and is currently a  board member of SynDevRx, Inc., an oncology-focused biotech company. He was also a co-founder and VP Corporate Development of JAM Technologies, Inc.

Ariana offers something “special and desperately needed “by the pharmaceutical industry, Shanahan said.   “Companies spend tens of millions generating data.  Now, it’s all about making sense of that data.  KEM identifies useful, complex biological relationships that statistics routinely miss.”

More information is available at  http://www.arianapharma.com/  .

–Anita M. Harris

Chicago-based  Healthbox is now accepting applications for a new,  $50,000 three-month  health tech business accelerator program  to start August 13,  in Cambridge.

In the program, up to ten  selected New England-based companies will receive: $50,000 in seed capital;  collaborative workspace;  access to a mentor network of industry experts  and strategic guidance, according to Dan Phillips, a director of  Sandbox Industries, Healthbox’ parent company, who attended Venture Cafe in the Cambridge Innovation Center last week.  The  program will conclude with a high-profile conference in November at which each participant will pitch to an audience of investors and healthcare leaders from across the country.

Healthbox  is one of the first business accelerator programs in the healthcare industry to support a platform for  innovation among seed-stage companies, according to the Sandbox Website.

“Massachusetts’ world-renowned academic institutions, cutting-edge provider systems and strong investor community make it an ideal location for a healthcare accelerator to stimulate the ecosystem and support new ideas,” said Healthbox founder Nina Sharif, in a press release.  “We are looking forward to working with New England’s most promising healthcare entrepreneurs to help them gain traction in the industry and develop sustainable businesses.”

Massachusetts Blue Cross Blue Shield Venture Funds will be among those providing financial support for the Cambridge program, according to Ryan Boxill of the BCBSMA Finance Development Program.

Earlier this year, Healthbox hosted its first program in Chicago.  According to a company press release, ten healthcare technology startups were selected from hundreds of applicants and, within three months,  the teams were able to evolve their business models and establish new partnerships and pilots. The program was supported by strategic partners including  Boston-based HLM Venture Partners; Ascension Health;  BlueCross BlueShield Venture Partners; California HealthCare Foundation; Merge Healthcare;  Merrick Ventures; Sandbox Industries and Walgreens.

David Nichols of CareWire, a Minnesota-based company that participated in the Healthbox Chicago program said: “This program has helped us really focus in on our core value, rapidly test assumptions and launch pilots with new customers.”

Mark Hall, the CEO of New Jersey-based United Preference, another Healthbox Chicago participant, added “Things that take 6 months or 12 months in other environments, we’ve been able to achieve in 2 to 4 weeks here.”

According to its Website, Sandbox Industries creates, invests  in and explores new businesses that it believes could change markets. Through a new model of business development that “helps rather than harass entrepreneurs,”  it aims  to “grow successful companies through collaboration and knowledge sharing…redefining the way great ideas are generated and transformed into successful companies.”

Applications are currently being accepted on the Healthbox website at www.healthboxaccelerator.com/apply. For information and announcements about the program, visit www.healthboxaccelerator.com and follow the Twitter feed – @health_box

—Anita M. Harris

Anita Harris is a writer and journalist based at the Cambridge Innovation Center in Kendall Square, Cambridge.

Newspapers have long kept tabs on the changing world–but have themselves been slow to modernize. To  flourish these days,
when anyone with a computer can be a publisher,  news organizations must develop a “culture of innovation. ”

So said Richard Gingras, the head of News Products at Google,  on May 11, 2012 in a talk at Harvard’s Nieman Foundation.

Gingras, a founder of Salon.com and long-term media technologist , said “I push people to rethink every aspect of what they’re doing”–including their mission, ethical guidelines, how they interact with their audiences, transparency regarding sources,  and even whether reporters divulge their personal political positions. In light of today’s powerful new technologies and human interactions,  “innovation  must be part of an organization’s DNA,”  at the core of newspapers’ culture, and  incorporated into “the role of every member of the team.”

Gingras pointed out that this by no means the first “disruption” time for the media.  With the advent of television,  for example, newspaper advertising declined and in some cities, the number of newspapers went from five to one or two.   This was not great for the newspapers that went out of business and  led to monopolitistic control by the  survivors. But it also led to    “40  golden years of profitability” for those survivors.

Today, the Internet has “disaggregated” the advertising economy., he said.  No longer do consumers look to their local newspapers for car ads, for example: rather, they search the Internet for information and deals.  “In the past, you could have an ad in the New York Times for Tiffany’s near an article on starvation in Darfur… or articles for garden centers in  the Lifestyles section,” Gingras said.   But on the Internet, such “vertical models” for advertising  are not effective.  ” Might news organizations’ Web sites do better as “a stable of focused brands with independent business models?” he asked.

Gingras also suggested that news organizations:

• Optimize news Web sites for multiple entry points,  because individual story pages are, today, more valuable than first or home pages. These individual pages should be updated so that urls remain constant–thus optimizing search engine results.

• Include more “computational journalism”–in which reporters post interactive information tables that would allow readers to answer their own, individualized questions.  For example, in a story on the state of education, provide tables showing student progress in school districts across the city–so that parents could assess statistics on their own children’s schools

•  Leverage the assistance of  “the trusted crowd”  (interact with readers and keep them involved)

•  Make reporters responsible for updating their own stories–with “constant” urls  to encourage multiple visits to their pages

Gingras also said that  in a culture of bulletpoints, updates and posts,  there  is low return on investment for long articles–and advised keeping articles  under 500 words.

So  I’ll quit here–at 494.

A video of the complete talk  is posted at: http://www.nieman.harvard.edu/newsitem.aspx?id=100198

–Anita M. Harris

Anita Harris, a former national journalist and Nieman Fellow,  is president of the Harris Communications Group, a marketing and communications firm located in Cambridge, MA.

For entrepreneurs seeking venture capital funding, there’s good news—and there’s bad news. The good news is that  it’s easier now than at any time in the last ten years to get relatively small amounts of seed money. The bad news is that it’s harder to obtain “A Round” or additional series funding after that.

That was the consensus of  three Boston area venture capitalists who spoke at the Cambridge Innovation Center on  Wednesday, May 2.  Moderator Ben Hron of  law firm McCarter -English, which sponsored the event, asked the VCs  how the 2008 economic downturn  has impacted the VC industry;  where things stand now,  and what they foresee for the future.

Impact of the recession
A changing industry
Jo Tango, founder and partner of Kepha Partners, which invests in early stage companies, said that for many VC firms, this is a period of innovation. “We call it VC 2.0,”  he quipped to the audience of  entrepreneurs.  The VC industry, which started in about 1980, used to be dominated by approximately 20 major firms; today, there are more smaller, more specialized VC firms, he said.

David Beisel, co-founder and partner of  NextView Ventures, a dedicated seed-stage venture capital firm focused on Internet startups, said that the downturn has “facilitated a  maturation process,” which he likened to what happened in the beer industry in the 1990s.

That is, “You had to be either one of the biggest, like Anheuser-Busch—or a microbrewery.” Mid-size companies like Genesee fell by the wayside.

Likewise,  today,  he said, “VC firms are no longer trying to be all things to all entrepreneurs; they’re taking a dedicated approach.  Recently, four or five firms raised more than $1B but mid-sized firms are struggling.”

CA Webb, Executive Director of the New England Venture Capital Association, said that considering this a time of “introspection and innovation” is “optimistic…The reality is that the industry is taking a hard look at itself. Some say that the ‘sky is falling,’ because there’s less money being invested; this means that some firms will shut down. Those that succeed will need to articulate clearly just what they are willing to offer and to whom.”

Tango pointed out that “Innovation [in the VC industry] creates a challenge for entrepreneurs because VC firms are “all over the map,” and “it’s difficult to know which one is right for [a particular startup]. It’s easier now to get seed money–but terms are often more difficult to distinguish.”

Current trends
In asking the panelists for their views on the current venture funding situation, Hron shared Q1 2012 statistics showing  a large number of deals but a drop in total funding compared with previous quarters– in indicating fewer “megadeals.”  “Should entrepreneurs should be optimistic because of the number of deals or pessimistic about the size of the deals?” he asked.

Fewer large deals
Tango responded that one reason for the decline in large deals has to do with the number of deals VCs have previously closed.  In the current economic climate, he explained, it’s difficult raise a stream of money. In a recent study of five VC Web sites, his firm found that many VCs are already sitting on the boards of 10-17 companies in which they have invested. “If you’re fundraising…if you’re already on 15 boards, you need to spend your time fund raising,” not sitting on additional boards.

Smaller investments
Beisel described what he called a longer term trend:  in some sectors, especially digital media, companies don’t need to raise as much money for initial funding as in other sectors–so at earlier stages, the venture community is reacting by not writing $5M checks but rather $1M or .5 M.

In Webb’s view, “seeding is now like the old Series A funding: there is a lot of seed money to go around but Series A is now looking like the old series C “(IE–difficult to come by).

Follow-on funding can be problematic.
Tango agreed –describing a firm that backed 20 companies with seed money but told him it will provide only 2 % of those with Series A funding.  He added that the situation is even more complicated because even at the “seed stage,”different VCs require different terms.

In fact, he recommended, “Ninety per cent of startups should be bootstrapped (funded by self, friends and family) because other investors expect that they will get their money out within a few years. “With VC funding, you’re becoming a fiduciary…taking on ‘credit card debt’ that you will need to pay back.”

In Beisel’s view, before taking any money from VCs, an entrepreneur needs to know how outsiders view the firm, the reputation of the VC firm, which partner will be best for the company, and whether the firm usually adds to series funding or “will you be one of the 98% that get dropped?”

Health care vs. other  investment
Citing a decline in financing for health care ventures in Massachusetts compared with increased financing for Internet and mobile technology, Hron asked if investors are seeking short-term gains as instead of  taking the long view required for biotechnology and pharma payback.

Webb responded that one reason for the slowdown in health care company funding is that the US Food and Drug Administration is taking longer to approve products so the horizons for investors are longer. As a result, investors are shifting toward healthcare technology, “big data” and products that will bring a quicker return.

In Beisel’s view, “Over the last ten years the returns for health care investment have not been that great; health care is now even more challenging. But VCs won’t shift to other spaces; the money just won’t get raised.”

Long -term trends
According to Hron, the data suggest a rise in VC investing in Washington State, Texas, and Illinois. “Are we seeing the rise of a national VC community or is this a blip?” he asked. “And will VC investors look at companies nationwide?”

Tango and Beisel agreed that large investors are looking at companies nationally and internationally–especially in the Internet space.

They also agreed that it’s unlikely that VCs will spring up in Kansas or in “third-tier American cities,” as Beisel; put it.  In Tango’s view, “they will still be centered in Boston, NY and California.”  Beisel pointed out that that VC firms are on the rise in nations like Argentina and Eastern Europe.  According to Webb, “Capital clusters around academic institutions: You won’t see much density elsewhere.”

Crowd sourcing
Regarding the  recent passage of legislation allowing corporate fundraising through crowd sourcing, panelists expressed concerns about possibilities for fraud and entry of organized crime; and also  that unsophisticated investors might not know that seasoned professionals expect to lose money on most  investments—in hopes that a few will have big payoffs.

Asked by Hron if VCs will look askance at companies raising initial funding through crowd sourcing, Beisel said  that it’s fine to get seed money wherever you can but a “real company” will need institutional investors in order to grow large.

In Tango’s view, “Your source of funding depends on what you want to accomplish: Do you just want to get money…or are you looking for series of VC rounds, advice and support?”

PANELIST BIOs

David Beisel – David is Co-Founder and Partner of NextView Ventures, a dedicated seed-stage venture capital firm focused on investments in internet startups.  Previously he was an investor at both Venrock and Masthead Venture Partners, where he served on the boards of BlogHer and Gazelle.  Prior to joining Masthead, he co-founded Sombasa Media, an e-mail marketing company which was successfully acquired by About.com and subsequently became a division of Primedia (NYSE: PRM), where he served as Vice President of Marketing.  He is also the founder of the Web Innovators Group, a quarterly entrepreneur-focused event which attracts nearly a thousand attendees.  David blogs atwww.GenuineVC.com.

Jo Tango – Jo is Founder and Partner of Kepha Partners, an early-stage venture capital firm.   Previously, Jo spent was a General Partner at Highland Capital Partners, where he worked for nearly nine year, and before that he spent five years with Bain & Company.  Jo has invested in the e-commerce, search engine, Internet ad network, wireless, supply chain software, storage, database, security, on-line payments and data center virtualization spaces.  He has been a founding or first institutional investor in Azuki Systems, Bit9, ExaGrid, StreamBase Systems, Vertica Systems (acquired by Hewlett-Packard), Virtual Iron (acquired by Oracle) and VoltDB, getting involved nearly always at the company inception phase. Other investments include Ask Jeeves (Nasdaq: ASKJ), Digital Market (acquired by Agile Software), and NextCard (Nasdaq: NXCD).

C.A. Webb – C.A. became the Executive Director of the New England Venture Capital Association in January 2012.  Members of the NEVCA include more than 700 venture capital professionals from over 100 firms that collectively manage more than $50 billion in capital.  C.A. has spent her career in entrepreneurial roles with mission driven, early stage and high growth organizations. Her work has focused on breakthrough business models in a diverse array of industries including retail and packaged goods (Whole Foods Market), consumer internet technology (Care.com), sustainability (Preserve Products), historic preservation (Trinity Boston Foundation), public education (Boston Collegiate Charter School), and publishing (Fast Company magazine