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

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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