14 Apr 2014
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The Puzzle of Life

Andrew Farquharson brings a new
funding model to the life sciences industry.
by Julia Hanna

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"I think the human race is beginning to unravel what life is," says Andrew Farquharson (MBA 1999). "I find that intellectually fascinating." His interest, and a desire to make a difference, led Farquharson to the life sciences industry, first as an entrepreneur and most recently as a general partner with Silicon Valley–based InCube Ventures and Venture Health.

"When I came to HBS, I didn't know what venture capital meant," says Farquharson, a native of Jamaica who moved to the United States with his family at age 10. "People told me that HBS would change my life. I thought, what arrogance, really? It's just a school. But they were right. HBS didn't change who I am as a person, but it opened doors and showed me things that I didn't even know existed."

Farquharson explains that InCube Ventures follows the model of a typical venture capital fund, with general partners making all investment decisions. VentureHealth, on the other hand, is "something new under the sun," in that it allows accredited investors access to what Farquharson describes as "venture capital-quality deals." (In the United States, an accredited investor can include organizations such as banks, hospitals, or nonprofits, as well as individuals with an annual income of at least $200,000 or a net worth of at least $1 million, excluding the value of one's primary residence.)

"It's essentially a form of equity crowdfunding," says Farquharson. "We see deals that we believe are attractive investment opportunities and notify accredited investors who are signed up for VentureHealth. Those who want to invest do, and those who don't don't."

Demand has been strong; in its first round in April 2013,VentureHealth raised $875,000 in three weeks, then, in August, $2.6 million in 14 days. Of its six portfolio companies, three were acquired in 2013. From an investor perspective, a minimum investment might be $400,000 to $500,000 spread across 8 to 10 deals to minimize risk.

"If we can mobilize extra capital into really exciting life-science innovation—that is a big opportunity," Farquharson says. "That means we can capitalize companies that may not make sense for venture funds but do make sense for smart angels who have more patience than most VCs." Among those companies: Rani Therapeutics, an early-stage venture focused on making injectable biological drugs (like insulin) available in pill form; NFocus (acquired by Covidien), which uses a wire-mesh balloon technique to treat brain aneurysms; and Spinal Modulation, a company with a new, dramatically effective technique for blocking chronic pain at the source. (In June 2013, St. Jude Medical invested $40 million for the option to purchase the company.)

"Nothing is more exciting to me than the ongoing insights that the life-sciences industry is generating," Farquharson says of these and other discoveries that VentureHealth is funding. "In my lifetime, we will apply those insights in ways that will positively impact tens of millions of people. I love that."

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