coronado venture forum clinton bybee arch venture partners september 16, 2004 santa fe, new mexico

Coronado Venture Forum

Clinton Bybee

ARCH Venture PartnersSeptember 16, 2004

Santa Fe, New Mexico

ARCH Venture Partners

I II III IV V VI

Vintage Year

Fund

$9M$42M

$149M

$329M

$709M

$1,059M

• ARCH Development Corp founded by University of Chicago in 1986

• 17+ years of venture capital investing

• Nationally recognized, nationally focused

• 110+ investments in seed and early-stage technology companies

• 38 IPOs and acquisitions

• 24 employees with 17 investment professionals

LifeSciences

PhysicalSciences

Information Technology

Portfolio Companies

LifeSciences Physical

Sciences

Information Technology

EnSemBle

ArtificiaArtificial l

MuscleMuscle

ARCH Technology Sources

National Scope

Portfolio Company Location

Technology Source ARCH Office: Chicago IL, New York NY, Austin TX, Seattle WA, Albuquerque NM

A

A

A

A

AA

Organization

• Founding Scientists

– Remain in Lab/Academic Institution or join the company?• Pros/Cons• Historical Data

– Ongoing role with the company?• Full Time• Consultant

– Compensation• Equity Stake• Cash

Organization

• Scientific Advisory Board / Other Scientific Contributors1. Augment Base of Technology

2. Additional Technical Contributors

3. Tie-up Key Inventors in the Field

4. Signaling Effect

• Compensation– Equity

– Cash

Organization

Management Team:

1. Done it Before

- Built successful company

2. Know it Cold

- Industry expert: 10+ years

- P&L/ management experience

- Successful track record

Building a Management Team

Done it Before

YN

Kno

ws

Indu

stry

Col

d

Y

N

Building a Team in New Mexico

• Scientific Founders Abound– How to best work with them?

• Management – Proven Management Talent is scarce

– Not a lot of local companies to recruit out of

– Hard and expensive to import that talent

– Start-up Infrastructure is developing but modest

– Customers are not local generally

– Corporate partners are not local

– Acquirers are not local (can be a good thing)

– Not a lot of examples of successes

Companies to Build in New Mexico

• Leverage Unique Infrastructure in NM

– SNL capabilities

– UNM capabilities

– LANL capabilities

– Other labs

– Positive Regulatory Environment (?)

Team: Larry Bock ----Calvin ChowWally Parce

Location: Cambridge ----Palo Alto

3 8

7

Genetic control of broad set of building blocks

Massive parallelism Nanoscale control of

positions, assembly, material composition

Other Examples

• Intelligent Reasoning Systems

• Illumina

• Commotion

• All biotech companies we have ever invested in

Compensation Structure

Equity Salary

CEO 5-10% 175-225

Sci Founder 1-20% 0-10K/mo

CTO 3-5% 125-175

VP-Engr 1-3% 140-180

VP-Sales 1-2% 125-175

Options

• Still a Good Tool?– FASB changes to require companies to expense options

– Expense hit to earnings is BIG problem for many public companies

– Potential of option expense overhang in M&A

– But…

• Still a great tool for private companies

Summary

• New Mexico is a great place to build the right company

• A+ Management is what really matters– Done it Before

– Knows industry Cold