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Robert Langer, Ph.D.

Polaris Venture Partners

Featuring an Exclusive Interview with

Terry McGuire
Co-Founder and General Partner  

Overview | Interview
by: Carlo Rizzuto, PhD.

Polaris Venture Partners
1000 Winter Street
Suite 3350
Waltham, MA 02451-1215
Phone: 781-290-0770
Fax: 781-290-0880

Company Overview

High on a hill overlooking the Cambridge reservoir, Polaris Venture Partners is well positioned to survey the entrepreneurial landscape literally embodied in the Rte. 128 technology corridor below. The stylishly spare offices appointed with blonde woods, frosted glass, and supple, black leather furniture are occupied, somewhat incongruously, by casually dressed professionals in jeans and button-down shirts. It's worth noting, however, that the entrepreneurs making pitches on the day of my visit were not quite as relaxed. In a sleek reception area, a trophy case of sorts holds products and momentos from Polaris' portfolio companies, including a boxed set of the multi-volume History of the Icelandic People (deCode genetics) and the highly successful Cold Fusion web server software package from the Allaire corporation.

Polaris Venture Partners was founded in 1996 by Steve Arnold, John Flint, and Terry McGuire, experienced venture capitalists who had previously worked together at the venture firm, Burr, Egan, Deleage & Co. Polaris has since grown to eleven professionals and has offices in the technology hotbeds surrounding Boston, Seattle, and Austin. Despite having been formed at a time when most VC firms were pruning back their biomedical investments to focus on internet-related ventures, Polaris has maintained a strong commitment to investing in the life sciences. One the founding partners, Terry McGuire, has championed much of the effort on the life sciences side. Currently, about one third of the assets under management are invested in biomedical companies and two thirds are targeted to the IT space.

To date, Polaris has raised three funds beginning with Polaris I ($80M) in 1996. Polaris II ($180M) was subsequently raised in 1998 and, in January 2000, the mammoth Polaris III fund was closed at $800M.

Below is a summary of Polaris' current structure, personnel, and investment portfolio. The interested reader can obtain more detailed information from the company's website at www.polarisventures.com.

Executive Interview

Terry McGuire is an easy man to like- this is someone that spent a year in Ireland, learning the art of storytelling. He's also a savvy investor with a demonstrated ability to generate internet-level returns on a biomedical portfolio. I had the opportunity to sit down with McGuire at Polaris' Waltham offices and speak with him about the partnership, its culture and practices, and the state of the venture capital industry. He describes the benefits of being a generalist and the value of Polaris' network of advisors and portfolio companies for alerting the firm to promising business plans and for evaluating new technologies. Through the lens of past investments, McGuire explains the qualities he looks for in budding entrepreneurs and the type of relationship he endeavors to build with them. The interview concludes with McGuire's optimistic forecast for the future of the biotech industry.

CV Summary

Name: Terrance G. McGuire
Title: Co-founder and General Partner
Age:   
Background: McGuire studied physics and economics at Hobart College. As a Watson Fellow, he then spent a year in county Donegal, Ireland, learning the art of storytelling. McGuire returned to the States to earn an MS in software engineering from Dartmouth and subsequently went to work at a software start-up linked to MIT and its Sloan School. He completed his formal education with an MBA from the Harvard Business School.

After HBS, McGuire took a position at Golder, Thoma and Cressey, a buy-out firm in Chicago, and later moved back to Boston to join Burr, Eagen, Deleage & Co, an early stage, medical and IT venture firm. In 1996, McGuire, Steve Arnold and John Flint formed Polaris Venture Partners and raised Polaris I, an $80M fund.

McGuire is the vice-chairman of deCode Genetics and sits on the Boards of Directors of Accordant Health Services, Acusphere, Akamai, Aspect Medical, CBS/StoreRunner.com, Microbia, mNemoscience Corporation, Paradigm Genetics, and Wrenchead.com. He is a founder of Advanced Inhalation Research and MicroCHIPS. McGuire is the first and only venture capitalist to be elected to the Boards of Directors at both the Massachusetts Biotechnology Council (the organization of Massachusetts biotech and pharmaceutical companies) and MassMedic (the organization of Massachusetts medical device manufacturers).
 

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Getting Started...

CR: Thanks for taking the time to meet with me. Can you talk a little bit about your background and how you broke into the venture capital industry?
TM: Well, I did undergraduate work in physics and economics at a small school called Hobart College in upstate NY. I then went to live in Ireland for a year as a Watson Fellow. Watson fellowships- Thomas Watson started IBM- essentially allowed people to do whatever they wanted to do so long as they left the country and didn't spend the fellowship on tuition. So I went to the west coast of Ireland to the pocket where Gaelic is still spoken and learned story telling, which is very relevant to venture capital (laughs). And then I came back and did an engineering degree at Dartmouth and focused on software. Then, I went to work for a software start-up that was spinning out of MIT and the Sloan School, which, for the first 18 months, was wonderfully successful and then, for the next 18 months, had a rough road and was then acquired.

I decided to go back to business school because I saw venture capitalists coming and talking to this company and I thought, "Hey that's the side of the table I want to sit on." So I went back to the HBS and after the HBS, went to join Golder, Thoma and Cressey, which is a venture capital firm in Chicago. GTC, at the time, was shifting from being a classic, early stage venture investor to more of a buy-out firm. In fact, GTC was really the innovator in the area of industry roll-ups. I worked there for a couple of years and then had an opportunity to come back to Boston to join an affiliate of Burr, Egan, Deleage, which was an early stage, medical and IT venture firm.

In 1996, two partners and I created Polaris, which was an 80 million dollar fund. In 1998, we raised Polaris II, which was a 180 million dollar fund, and in January of this year, we closed Polaris III, which is an 800 million dollar fund.

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Moving Into Biotech...

CR: Yes, I've seen those startling numbers.  
TM: Yeah, they have moved up (laughs). Now, as to how I got into the medical area: Burr, Egan had a strong practice in the medical area, starting with John Deleage's investment in Genentech way, way, way back when. The firm had a strong reputation for being an early venture investor in Chiron and companies like that. But in 1993, there really wasn't anyone in the Boston office that was following medical so, even though I really describe myself as a generalist, I picked up the medical space and pursued it, and have been doing it ever since.

CR: Was it a hard transition to make from IT?
TM: Polaris is a fund that is focused on both IT and medical, but what is striking about the partners at Polaris is that we're generalists. And you know, of course, a generalist is a jack of all trades, master of none. The venture business, however, changes so quickly that, in fact, being generalists can be an advantage. I always use the analogy that if we had 10 endocrinologists as partners, we'd only do diabetes deals. Whether they were interesting deals or not, we'd only do diabetes deals because that's what we knew.

Being generalists allows us to adapt quickly; what it also means, though, is that we have to recognize what we don't know. So, we've surrounded ourselves with some great industry advisors. On the medical side they include: Dennis Ausiello, chief of medicine at MGH; Bob Langer, who holds more medical patents than anyone in history- and, in fact, we've started five companies with Bob; Peter Hutt, who was the chief counsel at the FDA; David Ellenbogen, threepeat successful entrepreneur [Hologic, Inc., Vivid Technologies]; and Rich Pops, CEO of Alkermes, which is an enormously successful drug delivery company.

And so, when I don't know something, I get in touch with those guys or any of our portfolio companies, to learn whether it's an important technology or not.

CR: It was interesting to hear some of the people you listed as Polaris advisors. I want to get into this a little bit later, but I'd like to talk about Advanced Inhalation Research (AIR) and Bob Langer. You also mentioned the CEO of Alkermes, Rich Pops [Alkermes recently bought AIR for $120 million]. That's kind of interesting.
TM: Yeah, although I should make the sequence clear. Bob, David Edwards, and I founded AIR. Previously Bob had been involved with a company called Enzytech which Alkermes acquired some years before. Bob was also on the board of Alkermes. When AIR looked like it was going to be a great success, Bob introduced the AIR idea to Rich Pops. I didn't know Rich prior to this. I then negotiated the deal with Rich to sell AIR to Alkermes and got to know Rich that way. Polaris ended up being a fairly large shareholder of Alkermes, as did Bob, as did David Edwards.

I was enormously impressed by Rich, who clearly understood not only the technical aspects, but also the financial aspects- the financial market aspects- of what he was doing. He's had a great tenure at Alkermes. It certainly is enjoying a great run-up, as many companies are, but I think well deserved in the case of Alkermes because it's just a great company. So, that was how we actually got Rich involved. Bob and I had seeded another company called Acusphere, which Bob was the founder of, and that's how I got to know Bob.

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Polaris 101...

CR: So, you've discussed a little bit about your background. Now, I'd like to talk some more about Polaris and what makes it different from its competitors. But first, I'd like to know how Polaris conducts its due diligence work- when you really roll up your sleeves and evaluate a new technology. Being generalists, I assume that might be a little difficult?
TM: Yes, we are generalists, but knowing the specific structure of certain proteins isn't going to be important to whether a business is successful or not- or knowing the finer points of PCR- there is technology and then there's technology. So, what we try to assess is the broad application of the technology; that's where we're focused. And also on the ability to defend and expand the technology.

When we were raising Polaris III, we were pitching that we were just at the beginning of another industrial revolution based on genomics and, it's interesting, we were talking about this before the recent run-up in genomics stocks. But, we knew what the technology was and the potential of the technology. We knew that the technology could be expandable, but also knew that there was a fundamental platform. And although we didn't know the fine points of the specific technology: about how one does sequencing or gene therapy or retroviral vectors- you know, I couldn't build a retroviral vector to save my life. But, I did know enough about the technology to know where its applications were and how the market might receive it.

Once we make an assessment about a [business] plan, we try to reach one of our advisors or portfolio companies who might have special knowledge about the technology. If it's a genomics company, we'll get clearance from the company to call our friends in Iceland [deCode genetics] and have them look at it, or call the guys at Paradigm, which is an agricultural genomics company. If it's a medical technology company, I'll give Nassib [Chamoun] over at Aspect [Aspect Medical Systems] a call. Or, I'll give Rich [Pops] a call. And so, we're continually contacting our network to get an honest evaluation of the potential. It's a combination of technology, product, and market analysis and they're all done at the same time.

CR: Do you also have intellectual property people that you employ to evaluate patent positions?
TM: We do. When we think a technical area is particularly crowded, we will definitely do an extensive analysis. We'll either retain a firm, or we'll certainly make some additional calls to see if people say, "No, to my knowledge, there's really nothing around like this."

CR: How does a decision to invest get made? Do all the partners have to agree?
TM: We do. It's consensus decision making. This is a partnership based on trust. With each investment, one of our partners will champion a deal. They'll lead the due diligence process. They'll present the deal to the partnership. A number of the partners will meet the team. And then the partnership will essentially assess the company along a number of different dimensions and then we'll finally conclude whether we think it's a good investment or not. We actually don't vote- you can see at the meeting whether a deal is going to carry or not.

What it means is that our IT guys have to understand the medical space and vice versa. As an example, not only do I sit on the boards of 6 or 7 medical companies, but I also sit on the boards of 3 IT companies. Steve Arnold, one of the founding partners, sits on the board of a medical company. Jon [Flint] doesn't sit on a medical board, although Jon had been quite successful at investing in medical companies while we were at Burr, Egan, Dealeage. So, we try to do enough cross-fertilization within the partnership so that we don't just have separate groups.

We're one of the few VC firms left in these two areas; a lot of others have become very specialized. We think that cross-fertilization of business models is important. One of the reasons why I think we've had a very successful medical portfolio is because I've been able to watch the IT guys. I've watched how their world has been changing and have found ways to apply their lessons to the medical space. So, as a result, we've been pretty successful in medical investing.

CR: When you're evaluating a potential investment, how do you put a dollar value on a start-up?
TM: The valuations aren't based on one moment in time. The way we look at valuations is to look at the numerous capital-raising rounds that the company will require to get to product launch and product profitability. You would expect to provide a price step up in each round. If you actually work backwards, it almost comes out in a very natural sequence as to what the valuation should be at the beginning. It is also determined by your assessment of the ultimate exit value.

Now, one of the reasons why the IT valuations have grown is because it's quite common these days that an IT company will go public at greater than a billion dollar market cap. In the case of Akamai [a Polaris portfolio company], it was greater than a 10 billion dollar market cap. The medical space hasn't gotten there yet. Aspect is out trading and it's doing well and you're seeing some of the genomics companies with a billion plus in market cap. But, if you back up and say, "I think, at the end of the day, in 4 years, 5 years, 7 years, we can sell this company for X and we're going to need Y millions of dollars along the way," then you can almost build the valuation that you need to start at.

The valuation has to be attractive enough so that the investors get a reasonable return but we've never been a fan of thinking that the investors should get too much of the company. There's not enough in it for the management team. There's a delicate balance that you ultimately look at- and you must look at it over the full life of a venture- that brings you back to a good valuation.

CR: When you bring in new companies, do you look to complement the existing portfolio? Do you look for synergies between your portfolio companies? I know that in at least one case, two of them have merged.
TM: Right.

CR: Is that something you look for or encourage? Are there interactions between the portfolio companies?
TM: On one hand, we try to maintain the diversity. It would be crazy to be all genomics, even though genomics is an important part of it, or all med tech, etc. We begin by looking at the diversity in the portfolio. We are also sensitive to concentration because it can create conflicts. Some of our west coast brethren have the idea that if you like an area, start five companies in it, knowing full well that only one of them will succeed. And, if that one goes through the roof, you've done a good job. But you have to ask yourself the questions: "How do the other four entrepreneurs feel, when they can see their backer growing fonder and fonder of one of the other siblings? How do you feel about that?" That may be smart from a financing perspective but that's just not our style.

Our style is to get into very close partnerships with our entrepreneurs. On more than one occasion, that's meant that a deal has come to me and I've called an entrepreneur and said, within a paragraph, "This is what we're thinking. This is the company's project to do X, Y, and Z. Do you think it's a conflict?" And if they say, "Boy, that's a direct conflict," then I'm likely to pass. More often than not, they're much more reasonable than that.

We try to build a portfolio that's diversified. We really don't try to build a portfolio where two companies will ultimately combine. The more you get into one area, however, the more likely you are to find other deals in that area. We certainly encourage portfolio companies to work together.

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Working with Portfolio Companies...

CR: OK, I'd like to jump now to discussing two of your portfolio companies, starting with Advanced Inhalation Research. This venture was interesting to me because, first, it was a company that went through your incubator. It's a little hard for me to imagine a role for that kind of a service for a life science company because I'd imagine that you'd need a lot of equipment and infrastructure. So, that's one question: what's the role of the incubator? Second, I'm curious how AIR came together and how you came to be the CEO? And, was the plan to develop the technology and then sell it?
TM: We have a philosophy which says that we don't look to a specific exit scenario as a major factor in determining whether we want to invest in a company or not. We believe that if we build a company that is based on sound technology, that will create value-added products, and that can, ultimately, get to a business model that will lead them to positive cash flow, that there will be a number of options available: whether it is sale or public offering. And so, when we started AIR, we didn't say to ourselves, "Oh geez, its going to be a really great acquisition target." Because, in fact, I believe that if AIR were a stand-alone company, it might be a great public vehicle. I'm delighted that it ended up the way it did. I'm really happy to be an Alkermes shareholder.

Now, how did the company get together? Bob Langer who I've worked with on a number of companies, called me one day and said, "Hey, I'm working with a guy who's now at Penn State, Dave Edwards, who came out of my lab and he's doing some really interesting stuff with pulmonary drug delivery. Let's talk about it and see if we can do something here." I said great. I have enormous regard for Bob. I snooped around a little bit and initially I was sort of blasé. I looked around and saw there were a number of other pulmonary drug delivery companies: Inhale, Dura, Glaxo-Wellcome had its own program, etc. But, the more I looked at it, the more interested I became. Bob and David and I thought about a financing structure where we could seed the deal. In fact, we only put in a quarter of a million dollars on day one. We quickly got corporate interest and off we went.

Incubators often imply a physical space. That's not necessarily true. There are many things we can do to support a company without just providing space. For example, initially, we did the back-office work for AIR. All of the administration was done out of Polaris. David had set up a lab at Penn State and I acted as the interim CEO in the early days. David then chose to leave Penn State and come to Boston to set up shop. With that, he became the core management figure. David was the president and CEO of AIR when we sold to Alkermes.

[AIR] had labs in Cambridge. We had just announced that we had negotiated a couple of deals with both Lilly and Glaxo-Wellcome. I led those negotiations. I was the principal business development person for AIR. The company was growing nicely when Rich Pops approached us to inquire about a merger. AIR would allow Alkermes to expand its drug delivery platform in some unique ways and get exposed to some of the deals we had negotiated. Alkermes acquired AIR for what, at the time, had seemed like a high price- 120 million dollars. In March Alkermes announced two of the deals we negotiated.

CR: Did you enjoy the role of CEO?
TM: The most enjoyable dimension in the venture business is the intimate partnership that you form with the entrepreneur. I was complimented the other day when, at 10 O'clock in the evening, I got a call from Kari Stefansson, CEO of deCODE Genetics in Iceland. Now, it's 3 O'clock in the morning in Iceland- there was something on his mind and he wanted to talk and I was the guy he thought of. He didn't think anything about calling me. It's that kind of relationship that is the most pleasurable part of what we do.

It means being a good partner. That doesn't mean always agreeing with everything they say. It's being honest. It's this candor that creates good partnerships.

And usually, if there's a trust relationship that's created, egos don't get in the way. Because they know fundamentally- I really want them to be successful. I don't want to be critical; I want them to be successful. And so, to me, the thrill is when you get to build these relationships. These trust relationships are best built at the beginning of a company's life.

CR: Its nice to hear that kind of philosophy. From talking with friends and other people at the Longwood Medical Area who are thinking about starting companies, I know that they're approaching venture capitalists with a mixture of fear and awe. They're dreading how much they're going to lose; that they're going to be bled dry.
TM: Right, that they're going to be beat up at every board meeting...

CR: So, is Polaris distinct in this respect or is this just a common misconception about the VC community?
TM: Well, the promotional answer is that of course we're distinct (laughs). The real answer is that I can't answer that question for you. I think the only way to answer that question is to talk to people that we've worked with and who've worked with other venture capitalists. I would encourage you to call Bob Langer. He's worked with a lot of different firms and he can talk a little about how our style is different from other firms. The only thing I can tell you is that Bob continually wants to work with me on deals and I think it's because he has been able to develop a trust relationship with me and with Polaris. He knows that, at the end of the day, we're going to do the right thing for him. And, by the way, I know he's going to do the right thing for me. So, do other people get to that level? I'm sure some people do. But, some venture capitalists believe in the golden rule, which is that gold rules. We don't work like that.

CR: Great. The second company I wanted to discuss is Microbia. I saw these guys speak at Harvard Medical School and was so impressed because they were just four post-docs with a dream. So, the question there is that they had no business experience and yet one of them is actually running the company as the CEO.
TM: Yeah, he's doing a wonderful job.

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On People...

CR: So, you're willing to give an inexperienced person a shot? I know they had some board members with pedigrees. That was a major factor, I assume?
TM: Let me tell you why Peter [Hecht] is such an effective CEO and why it's been a pleasure to back him and why he will be successful. But let me put it in perspective. David Edwards (AIR) was an associate professor at Penn State and Kari Stefansson (deCode genetics) was the chief of neuropathology at the Beth Israel, so we're not afraid to back people who don't have a business pedigree. But by the time Peter had found his way to Polaris, he had raised money from very sophisticated angels. He had recruited a board that included Joe Cook as the chairman and Barry Bloom, who was a director and vice president for central research at Pfizer. Joe was an EVP at [Eli] Lilly and now is the CEO of Amylin and Joe, by the way, is also an investor in Polaris.

Joe called me and said, "You've got to meet Peter. He's a very impressive guy." And then I met Peter and Todd [Milne] and Eric [Summers] and Brian [Cali] and they were, across the board, impressive. Peter was the first guy to stand up and say, "I think I can do the job. But, if I don't do the job please be the first guy to tell me. Because I want to be successful, I want this company to be successful even if I'm the CEO from day one to day thirty and then we hire another CEO on top of me. If we need that, I'm happy to do it because I will have been a founder of a successful company. And the next time I start a company, I'll take it from day one to year thirty." There was this candor and honesty about what he knew and what he didn't know that was remarkable.

I think he's just done a spectacular job. He's continually defining new strategies, looking for licenses to additional technology. This is a guy who gave us a budget and a year and a half later he's off it by, maybe, 0.003%. He has done everything he said he was going to do. I can't imagine why you wouldn't let a guy keep going if he's doing everything he says he is going to do. And even though he didn't come out of Merck or Pfizer, the fact of the matter is that we've backed people who have had great pedigrees but have never been in start-ups and they don't always do well. Some do well but others don't because they're used to a large corporate structure.

CR: OK, but if the same Peter Hecht had come to you without Joe Cook, would you still have gone with him? Do you need someone there, in the end, who really has experience?
TM: As venture capitalists- and, fortunately, with the success of Polaris- we see thousands, tens of thousands of [business] plans. And I know its frustrating for people- often times they send their plans to a venture capitalist and it falls into a black hole. The simple fact of the matter is that of those plans, we pay the most attention to those that come through someone we know and trust.

If Bob Langer calls or Dennis Ausiello calls or Peter Hutt calls and says, "This is a company you've really got to spend some time with," we spend some time with them. Not because we're just doing Bob or Dennis or Peter a favor, but because they've developed a filter, themselves. They see lots of plans and they don't call us on each. So, if Joe Cook had called and said, "I'm busy at Amylin (which he is), but this is a good company. I'm going to put a little of my own money in." Would I have met with Peter? Yeah.

But one of Peter's distinguishing characteristics is that he was able to recruit Joe to become chairman and he was able to recruit Barry to become a director. I sat on the Cubist [Pharmaceuticals] board with Barry and I have just enormous regard for him. Let's face it, part of being a CEO of a start-up company is selling. Selling because you have an idea and you're going to try to convince people with enormous capabilities that they should spend time helping you out. So, would I have looked at it? Yeah. Did it help that Joe not only said that he was going to invest in the company but that he was going to be chairman of the board? Yeah, that certainly helped me to say, "Boy, Joe spent the time, Barry spent the time, Gerry Fink spent the time, Jim Gaither [a corporate attorney at Cooley Godward] spent the time...You know, this thing has legs to it." And so far, it really does.

CR: OK, I see your point that one of the roles of the CEO is to recruit the right people before approaching VCs.
TM: Yeah. Or, the CEO has a demonstrated ability to do that. I'll give you a couple of examples. We met with Stig Leschly who was a Harvard MBA/JD. If you simply looked at his background, there was nothing in his background that said that he'd be a great entrepreneur. But he was quite passionate about the idea that you could take vertical markets like rare books or music or coins or stamps and that you could create little eBays, essentially, but with a lot more information than eBay would have. When we backed Exchange [Exchange.com] it was as much because we believed Stig had the ability to run a company and also had the ability to recruit good talent; which is what he did. And then seven months later, we sold it Amazon for 200 million dollars. It was an enormous win for us and it was an enormous win for Stig.

Now, we have another example of a woman named Jennifer Floren, who doesn't have an advanced degree- she's a Dartmouth undergrad. But she started up her own business in education and recruiting content [Ivy Productions]- that's probably the one you referenced earlier because that merged with Crimson, those were our two portfolio companies that merged. But, you know, as far as we're all concerned, this woman is an incredible winner. She knows how to recruit, she's been able to recruit great talent, she has a vision and she can sell her vision.

So if I look at Peter the same way: he knew what he wanted to do, he knew what he didn't know, and he knew how to sell it. He also knew how to create an infrastructure, a technical infrastructure, which he is delivering. So you've got to pull all that together and I'd rather have that then some person who has a great pedigree but who doesn't have vision, or can't sell it.

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VC: What it Takes...

CR: Ok, I'd like to switch to addressing more directly the concerns of our members who are interested in VC as a career. And most of our members are grad students: Ph.D.'s or M.D.'s. What qualities besides raw intelligence and a great memory for names, which you obviously have, are important for being a good VC?
TM: I think it's the memory for names that's most important (laughs).

CR: What would you recommend as a path into venture capital?
TM: That really is the most important but also most frequently asked and hardest to answer question. Any way into the industry is a good way into the industry. There are more jobs now in venture capital then there were fifteen years ago, when I started. But, I think just getting around start-ups is a good place to start. Some people think that getting into an operating role is a great way to get into venture capital. I don't think that's true but it's better than having no new venture experience.

When I graduated from HBS, there were 800 people in my class. There were also 800 people in the venture capital club, which I was the president of that year, and eight of us got jobs in venture. It was a really small number and a lot of people gave up really early on because it looked like it was mission impossible. And I could have told you the ones that were going to get jobs in venture because they simply kept at it; they uncovered every rock. Of course, that's the exact same thing you do as a venture capitalist; you're always looking for the new, best deal and you have to find ways to expose them. So, there is no set way to get into venture capital. It's developing contacts that you know who can, in turn, reference you to someone who's in the venture business and say, "Hey, take a look at so-and-so." You've got to look at the timing of the funds, when they've raised certain funds. Everyone wants to be in a partnership, but you have to consider alternatives like, corporate venture arms. Banks also have great venture programs and that's a way to get in. So, one has to explore all those options and then find the one that's the best at the moment. But definitely get in when you can get in because any way in is good. How's that for a non-answer?

CR: Not bad (laughs). I've read a bit about the Kauffman Fellows program [an internship for experienced business people that want to get into VC]. Is that something that's working well?
TM: Yeah, I think its working really well. A significant number of Kauffman fellows end up staying in the business. In fact, a really significant number stay with the firms that they join as Kaufmann fellows because the venture business is a sort personal relationship business. It's crazy, for example, for Polaris to take on a Kauffman fellow and not to assume that they're going to stay on for a long time, partly because there's no reason for us to train a competitor. So, I think that Kauffman fellows is a great program. The Kauffman Foundation is also a really well run organization. If someone can get a Kauffman fellowship, I would encourage them to do that.

CR: Has Polaris taken on a fellow?
TM: No, we haven't. We went one year, a couple of years ago. I think the conclusion we came to was that there were a lot of great candidates there, but all of us went- we were only four people at the time- and we view the recruiting process, as inviting someone to join the firm forever, so we had this incredibly high standard. There were a lot of great candidates there but no one that really fit the specific slot that we were trying to fill. But, I think it's an excellent program.

(*author's note: The Kauffman Fellows program has since been discontinued. For more information, please see www.kauffmanfellows.org)

CR: Does Polaris employ interns for the short term?
TM: We don't. I think we took someone for a summer once. When someone's here for ten weeks it's a little hard to find something for them to do. I remember that, for my first six months in the venture business, I didn't do anything; at least I felt like I didn't do anything. It's because you're not close enough to anyone in the companies or anyone's projects. So, it turns out to be harder to make it a fulfilling experience. The money isn't the important issue but you don't want someone to come in, that you're going to spend a lot of time with, just to have them walk out the door ten weeks later.

To Topic Index

Looking Ahead...

CR: Ok, last question: the future? Within the VC community, are the life sciences going to start getting...
TM: More respect? (laughs)

CR: Yes (laughs).
TM: I think they will. I think there's an industrial revolution taking place in life sciences, as there was one in IT starting in the '50's. Now, all the advances, whether they be in genomics or tissue engineering, drug delivery or molecular biology are going to cause a revolution that's really going to be implemented over our lifetimes. And, that's going to create huge opportunities for venture capitalists. I think we will continue to see new innovation, the technology is unrelenting and those of us that invest in that space will take advantage of it.

Do I think it'll get like IT? No, I think one of the things about IT is that it's easier to understand- eToys, yeah Ok, I get it! You can't say the same thing about proteomics. Public investors need a level of sophistication to understand what's going on there. So, I don't think it'll ever be quite as wild in the venture business as it's been on the IT side. But those of us who choose to stay in this space will do well. In fact, some of us have done really well. We've generated internet-level returns from our medical portfolio, and plan to invest in this space for a long time to come.

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About the Author
Carlo Rizzuto is a post-doctoral fellow in the Department of Neurobiology at Harvard Medical School and a director of the GSAS Harvard Biotechnology Club. In his "free time," he plays a decent game of rollerhockey and enjoys growing prize-winning vegetables in his community garden plot. Carlo lives in Cambridge with his wife, Rita, and their cat, Sweetie. He didn't name the cat.  Carlo can be reached at:  carlo@thebiotechclub.org

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