20VC Why Process is Everything In Good Venture Firms, Why GPs Should Have More Empathy For LPs and Lessons from 32 Years In VC, Chairing Over 25 Boards with Peter Parker, Managing Partner @ Bioinnovation Capital

Summary Notes


In the latest episode of "20 Minutes VC," host Harry Stebbings interviews Peter Parker, the managing partner at Bioinnovation Capital, a $130 million fund dedicated to transforming life science investing by backing companies in shared labs across major U.S. cities. Parker, a venture industry veteran, shares insights from his extensive career, starting with Ampersand Ventures in 1986, and later co-founding Lab Central, a shared biolab space for startups. He discusses the evolution of the venture ecosystem, the importance of clear goal-setting for startups, and the unique challenges and strategies of investing in life sciences. Parker emphasizes the significance of LP relationships, the art of pitching, and the necessity of process and alignment within venture firms. He also highlights a recent investment in GraphWear, a company developing a wearable glucose sensor, showcasing his continued passion for supporting innovative solutions in biotech.

Summary Notes

Introduction to the Episode

  • Harry Stebbings expresses gratitude for the support received over the past week.
  • Harry Stebbings introduces the guest, Peter Parker, a veteran in the venture capital industry.
  • Peter Parker is highlighted as the managing partner at Bioinnovation Capital and a significant figure in life sciences investing.

"It has been a huge thank you to everyone for your support over the last week. It really has meant so much to me."

"Now our guest today is simply incredible. He's a true veteran of the venture industry."

"He started in VC ten years before I was born. Just last year, 32 years into his time in VC, he raised his latest $130,000,000 fund."

These quotes show appreciation for the audience's support and set the stage for introducing Peter Parker, emphasizing his long-standing and successful career in venture capital.

Peter Parker's Background

  • Peter Parker has been in the VC industry for over three decades.
  • He began his venture career with Ampersand Ventures' Life Sciences platform in 1986.
  • Peter has been instrumental as an institutional capital provider and director for numerous life sciences startups.
  • He co-founded Lab Central, a shared facility aiding biotech startups.

"For the past three decades, Peter's devoted his life to venture and startups, starting in 1986 with his establishing Ampersand Ventures Life sciences platform, which he managed until 2006."

This quote summarizes Peter Parker's extensive experience and contributions to the venture capital and life sciences sectors, highlighting his early start and long-term dedication.

Peter Parker's Entry into Venture Capital

  • Peter Parker transitioned from a corporate R&D role to venture capital.
  • His realization about the importance of teams in innovation led to his focus on entrepreneurs.
  • He created internal ventures within a large firm before joining a venture capital firm associated with MIT.

"And I realized that all the research had been done on innovation by teams... That really energized me. And ever since then I've been very, very focused on entrepreneurs in any way I could be."

This quote explains Peter Parker's epiphany about the significance of team-driven innovation and his subsequent pivot towards entrepreneurship and venture capital.

Evolution of the Venture Ecosystem

  • The venture ecosystem has grown from a few hundred firms to a vast, specialized industry.
  • Specialization has increased, with more firms focusing on specific sectors like life sciences.
  • Peter Parker was part of the early wave of specialization with Ampersand Ventures.

"You could almost know everyone in the industry. So you fast forward to today. I mean, there's just so much money, so many more firms, and what I think has changed a lot is specialization."

This quote reflects on the dramatic growth and transformation of the venture capital industry, from a small, interconnected community to a diverse and specialized landscape.

Founding of Venture Firms

  • Peter Parker discusses the challenges and experiences of founding two different venture firms.
  • He contrasts the difficulty of raising funds for his first firm with the more straightforward experience with his second firm due to a unique lab platform model.
  • The lab platform model revolutionized life sciences by providing accessible lab space and resources.

"The reason I came back to it because I saw an opportunity to do something in life sciences that has never been done before... It's become such a powerful model that I felt it was just a lot easier to form this firm, go out and fundraise for it."

This quote describes Peter Parker's innovative approach to life sciences investing and the creation of a new model that made his second venture firm's fundraising process more effective.

Partnership Dynamics

  • Peter Parker shares insights on the partnership dynamics of his venture firms.
  • He notes that the number of partners remained the same from his first to his second firm, although the individuals involved changed.
  • Parker reflects on the evolution of his career and the different contexts in which he formed each firm.

"Not so much. It's actually interesting. We have exactly the same number of partners, five that we had at the time we formed fund one."

This quote provides a glimpse into the continuity and changes in partnership structure between Peter Parker's venture firms, indicating a consistent approach to team size while acknowledging the different circumstances under which each firm was established.## Venture Fund Experience and Process

  • Harry Stebbings discusses the notion of a "first time fund" and the importance of process in venture firms.
  • Mentoring younger partners and providing structure is easier with experience.
  • Detailed processes underpin successful venture firms, despite apparent chaos.
  • Shared values and vision are crucial for investment decisions.

"I think process is almost everything in good venture firms. If you get under the hood of any firm that you really respect, I think you'll find a very, very detailed process, even though it looks chaotic."

This quote emphasizes the significance of having a well-defined process within venture capital firms, which is a key determinant of their success and is often not visible from the outside.

Decision Making in Partnerships

  • Peter Parker reflects on his time with Rick Sharpie at Ampersand Capital and the importance of unanimous decisions in partnerships.
  • Unanimous decisions help ensure all partners are aligned, especially when companies face challenges.
  • The practice of passing on deals if one partner has serious reservations is maintained at Bioinnovation Capital.

"So it's hard. You've got five partners and they have very different points of view. Often on investments. It's a lot easier down the road, because it's not a question of whether these companies are going to get into trouble, it's just a question of when and when they get into trouble. You have to be all pulling in the same direction..."

Peter Parker explains that unanimous decision-making is difficult due to differing opinions but is beneficial in the long run when companies inevitably face difficulties, as it ensures unity among partners.

Consensus and Outliers

  • Consensus decision-making can be challenging, but it is manageable if the partnership works well together.
  • Bioinnovation Capital, as a startup, is open to experimenting with investment concepts.
  • Flexibility in the investment approach, such as offering smaller initial investments, has been considered and sometimes implemented.

"We're also tolerant. We're a new fund pioneering a new platform. We're very much a startup, too."

Peter Parker describes the fund's approach as tolerant and open to new ideas, likening the fund itself to a startup, which allows for flexibility in their investment decisions.

Relationship with Limited Partners (LPs)

  • The role of venture capitalists is seen as middlemen managing LPs' capital.
  • Transparency and clarity with LPs are essential for facilitating their investment decisions.
  • Showing potential weaknesses early on can build trust with LPs.
  • The commitment from an LP is seen as a long-term contract, emphasizing the importance of their role.

"My view of the world is we're middlemen, it's their capital, and we're finding great places to put it."

Peter Parker shares his perspective on the relationship with LPs, highlighting the venture capitalist's role as a steward of the LPs' capital and the importance of placing it effectively.

Fundraising and Pitching LPs

  • Peter Parker discusses the experience of raising a $130 million seed fund at 65 years old.
  • Demonstrating enthusiasm and a successful track record is key to convincing LPs.
  • The evolution of pitching style over time, from nervous beginnings to confident, concise presentations.
  • Fewer slides and a clear narrative improve the effectiveness of pitches.

"I think my age was probably a bit of a concern to some of the people we pitch, but actually a very small minority of people mentioned it."

This quote addresses concerns some LPs may have had about Peter Parker's age during fundraising but also indicates that his enthusiasm and track record were convincing.

Effective Pitch Meetings

  • Successful pitch meetings involve multiple partners, each playing a role.
  • Engaging LPs in conversation and addressing their questions is critical.
  • Showcasing the firm's unique platform, such as lab spaces, can be highly persuasive.
  • Having LPs visit the firm's facilities often leads to investment commitment.

"The more we can get into that Q A, the better it is."

Peter Parker explains that interactive and engaging pitch meetings with LPs, where they ask questions and show interest, are indicative of a successful pitch.

Board Experience

  • Peter Parker has extensive experience sitting on and chairing boards.
  • The conversation hints at his vast experience but is cut off before details are provided.

"And you've sat on countless boards, and from my memory of our past conversation, you've even chaired over 25."

Harry Stebbings acknowledges Peter Parker's significant board experience, which suggests a depth of knowledge in governance and strategic oversight.## Evolution as a Board Member

  • Peter Parker reflects on his growth from his early days as a board member to now, with a focus on setting clear, quantifiable goals.
  • He emphasizes the importance of asking companies about their goals and how to follow up on them.
  • The shift from evaluating companies based on elaborate yearly plans to prioritizing a maximum of ten quantifiable objectives.
  • This approach has simplified board meetings and made assessing progress and accountability more straightforward.

"Well, I would say the biggest thing I can point to is a realization that my partners and I came to in the mid nineties, and that is how to ask companies what their goals are and then how to sort of follow up on that."

This quote encapsulates Peter Parker's realization about the importance of goal-setting and follow-up in board management, marking a significant shift from his early days as a board member.

Goal-Setting and Board Dynamics

  • Companies are now asked to present five prioritized, quantifiable goals for the year, without the need to discuss market or competition, which the board is already familiar with.
  • The board meetings focus on the progress towards these goals, which simplifies the discussion and decision-making process.
  • This method also ties into performance evaluations and bonus determinations.

"We actually decided we couldn't judge a company based on that at the end of the year. And we finally moved to a metric where we say, just tell us the five things you're going to do for this, this year."

Peter Parker describes the transition from judging companies on comprehensive yearly plans to focusing on five key, measurable goals, which has streamlined the board's evaluation process.

Accountability and Performance

  • There's an initial negotiation over goals at the beginning of the year, which Peter Parker finds healthy as it involves both the board and the company team.
  • Failing to meet the top objectives necessitates a serious evaluation of the company's direction and leadership.
  • Peter Parker has experience in making difficult CEO changes when they do not meet their objectives.

"If companies aren't hitting their top two or three objectives, and if they're reasonable objectives, yeah, something's wrong."

This quote highlights the critical nature of meeting set objectives and the implications of failing to do so, which can lead to significant changes within the company's leadership.

Approach to Leadership Changes

  • The process of replacing a CEO is based on empathy and clear, objective data.
  • The goals of the CEO and the company are aligned, making it straightforward to evaluate performance.
  • Peter Parker has not faced opposition from CEOs when they are replaced due to not meeting their goals.

"I think the more clear cut data you're bringing to the table, the easier it can be."

Peter Parker stresses the importance of having clear and objective data when discussing performance issues with CEOs, which makes the conversation more straightforward.

Differences Between Tech and Bio Investments

  • The main difference between tech and biotech investments is that biotech has a predefined market with diseases needing treatment, whereas tech is about finding a market for the technology.
  • Biotech is about enabling breakthrough science, while tech is about achieving market uptake.
  • In biotech, there are many strategic investors who are potential buyers, unlike in tech where the market is dominated by a few major players.
  • Biotech venture creation involves assembling intellectual property and experienced executives to create companies with significant initial funding.

"In biotech, there's a market, there are people with disease. And so if you have a technology that can make an impact on any disease, you will have pretty ready path to either an exit or a much larger company."

Peter Parker outlines the fundamental difference between tech and bio sectors, emphasizing that biotech has a clear market in the form of diseases needing cures, which offers a more straightforward path to company growth or exit.

Strategic Investment in Biotech

  • Pharma companies require new drugs to maintain their pipeline and have shifted from internal research to external R&D.
  • Venture funds in biotech have adapted to this need, and there have been significant exits from series A rounds.
  • The trend of pharma companies acquiring technology early has led to venture-backed successes and the creation of new companies.

"They used to have a reliance on their own research people to fill that pipeline. If you look at the last ten years, the research headcount in pharma has gone down by five or six percentage points per annum."

Peter Parker discusses the shift in the pharmaceutical industry from internal research to external acquisitions, which has shaped the strategy of biotech venture funds and led to successful exits and new company formations.## Venture Investment Landscape Evolution

  • The venture investment landscape, particularly in life sciences, has changed dramatically in the last ten years.
  • Harry Stebbings notes that these are exciting times for venture investors like Peter Parker due to the field's dynamic nature.
  • Peter Parker expresses enthusiasm for being part of the life sciences sector's evolution.

"This is all very new, Harry. I mean, I couldn't have told you this story in 2006. This is all within the last ten years."

This quote highlights the novelty and rapid change within the venture investment landscape, particularly in the last decade.

Lifecycle Funding Challenges in Life Sciences

  • Life sciences companies often struggle with lifecycle funding, which can require initial investors to support them for extended periods without clear benchmarks.
  • Peter Parker acknowledges the problem and emphasizes the need for life sciences companies to reach an exit before $50 million of venture money is invested.
  • Companies that consume significant funding without clear clinical trial results face difficult prospects, but assets can often be sold, albeit at a loss.
  • Peter Parker prefers investing in companies with early positive signals and is willing to sell companies before they reach full potential to ensure a portfolio with a majority of successful investments.

"So we like to say the companies have to be able to exit by the time $50 million of venture money has gone in."

This quote summarizes the investment strategy Peter Parker advocates for, which involves setting a clear financial threshold for when a life sciences company should be positioned to exit.

Personal Preferences and Experiences

  • Peter Parker's favorite book is "Barbarian Days: A Surfing Life" by William Finnegan, which he finds captivating as an autobiography and a coming-of-age story.
  • He recounts a memorable LP meeting with a heavily intoxicated individual, highlighting the unpredictability and challenges of fundraising.
  • Peter Parker reflects on a saying he finds true in venture investing: making money in winners but making friends in losers.
  • He wishes the venture industry would be more vocal on social issues, reflecting a desire for greater industry engagement in broader societal conversations.
  • Peter Parker wishes he had known the importance of aligning objectives at board meetings earlier in his career, emphasizing the steep learning curve in venture capital.

"Well, here's one you probably haven't heard of but it's called Barbarian Days. It's subtitled a Surfing Life."

This quote introduces Peter Parker's favorite book and suggests that it has had a significant impact on him, indicating the personal value he places on storytelling and life experiences.

Industry Insights and Future Directions

  • Peter Parker would like the venture industry to be more outspoken on important social issues.
  • He reflects on the importance of process and alignment in board meetings and wishes he had learned this lesson sooner in his venture career.
  • Peter Parker's most recent investment is in GraphWear, a company developing a wearable graphene sensor for non-invasive blood glucose monitoring, which he found compelling due to the innovative team and technology.

"I'd like to see us all be a little more vocal."

This quote represents Peter Parker's call to action for the venture industry to use its voice to address social issues.

Acknowledgments and Networking

  • Harry Stebbings expresses gratitude to Peter Parker for his support and insight, highlighting the value of learning from experienced venture investors.
  • The introduction to Peter Parker was facilitated by his son, Andrew Parker, demonstrating the importance of networking and personal connections in the venture industry.

"What an incredible guest Peter was to have on the show there."

Harry Stebbings's quote is an acknowledgment of Peter Parker's valuable contribution to the podcast and the insights he provided.

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