New $80M venture fund to back startups entering 'valley of death'

A venture group in Scotland is well on its way to piecing together a new $80 million fund for upstart life science companies. A trio of universities is joining hands with Scottish Enterprise and the European Investment Fund to back the Rock Spring Ventures fund, which plans to finance academic spinoffs and other startups as they begin their long and hazardous march through the valley of death.

"We believe early-stage life science and health technology companies in Scotland and the rest of the U.K. offer the potential for strong financial returns to our investors," co-manager Kyp Sirinakis tells the BBC. "We also believe that what we're now setting in motion will, in time, play an important part in further developing the commercial potential of early-stage life sciences research across the U.K."

Rock Spring has gained commitments on half of the $80 million fund, with the endowments of Aberdeen, Glasgow and Edinburgh universities providing a pooled commitment of £6 million ($9.5 million), reports the Financial Times. These new sources underscore a nontraditional approach to venture capital. Most VCs are focused primarily on later-stage biotechs when it comes to investing in the life sciences, which is the only sensible way to anticipate relatively quick returns on an investment. That approach has starved the early-stage field, though, leaving Big Pharma and other, much more patient, groups willing to back startups. 

"The equity funding gap in the U.K. has got wider and deeper," Rock Spring's Sinclair Dunlop told the FT. "We hope to support 'under-ventured' regions and act as a local champion as happens in the US and elsewhere in the EU. We would like to be a catalyst."

BioIndustry Association chief Steve Bates cheered the move. "Their £50 million investment, alongside government initiatives like the Biomedical Catalyst and changes to R&D tax credits and other recently launched venture funding initiatives, demonstrates that there is now an increasingly positive environment for start up life science firms in the UK," he noted.

- here's the release from Scottish Enterprise
- here's the story from the BBC
- here's the Financial Times report (sub. req.)

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