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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
ws
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