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Waltzing with Bears

 
• By Melanie Senior and Roger Longman

Biotechs raising series C and D rounds, even those which have made their technology or commercial milestones, are finding that VCs aren't willing to give them a step-up in valuation from their previous round of financing. For management, the situation means more dilution, but VCs, even those who paid up in previous rounds, like the new prices, in part because they're confident that the IPO market will return soon.

In an odd way, bear markets are the best of times for venture capitalists, at least those who aren't raising money (the struggle of new funds to raise money—even those with highly experienced VCs leading them—is tougher than ever). The reason: without a public market to offer the prospect of near-term liquidity, private biotechs have to bring in capital for the long term—expensive for companies, cheap for investors.

Thus a number of companies looking for series C and D financing, even those who have made all promised milestones,...

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