> if the VC are good, they help the entrepreneurs shape their business plan).

They could do it if they had time. I think that’s the business of the fund raiser team and not the job of VC.

Another information:

I recently heard a VC on the radio saying that VC funds does have plenty of money. The problem is the low number of good quality projects. Thus, they can’t focus on a single field.

But ok, here are some of my theories.

The software market is getting more competitive/less attractive and the biotech-market more. Why the latter, because struggling pharmaceuticals, with patents running out are buying start-ups like candy. So a. I think it is just a very attractive industry to invest in for software-people with excess money.

b. The VC business is largely a people-business. Sure, you have to know how to do valuations and such, but you are investing money into ventures that are still in the vapourware-phase.

And people-wise, I don’t think the software and biotech-industries are that different. They are both filled with scientist who lack money—ok, less for software—but they also lack the other values a VC typically provides: business-knowhow and -contacts. So there is a people-match also.

Just some thoughts..

As said Daya, most of VC have two teams specialised in both sector. In conclusion, I would be confident in that kind of fund.

In fact, I realised that pure biotech VC are not very common. I actually know only two pure-player funds.

Alex cannot stop talking about you these days (saying only great things, I can assure you). Welcome on Tech IT Easy!

My opinion is that your argument is not valid. Say you’re an institutional investor. Rather than investing in a diversified fund (software and biotech), I’d rather select the best software VC on the one hand, and the best biotech VC on the other hand – instead of selecting venture capitalists not certain enough of their capability and flair to make good returns on their picks.

The link you provide us with is great. I didn’t know this blogger Xavier Quillet before, but he looks learnt on biotech issues (a field I don’t know well, as you would have understood by yourself Laurent ). A shame he blogs in French. Anyway, a very interesting comparison and idea.

There are different kinds of biotech companies. I will only focus on Biotech developing medicines.

I think that the main reason why VC invest in both biotech and soft firms is a way to balance the risk of their investment.

Investing in a successful biotech company can probably provide a higher ROI than software firms. However, Biotech is a very risky activity maybe riskier than software firms. I would say that issue of a biotech company is binary: success or failure, only depending on the properties of the molecule. I don’t really think that a Biotech-specialised VC firm would be viable!

I would add that many current R&D biotech companies have developed an original technology allowing them to provide a service activity in addition to R&D activity. As you will see here (http://www.quilliet.net/index.php/2006/09/comparaison-entre-une-ssii-et-une-srsc-societe-de-recherche-sous-contrat/), soft and biotech-service business are not so different.

You’re totally right. But I still don’t understand why these guys trade under the same name. To lower support costs? (fax, secretary, etc.) I bet not. Any idea anybody?

And had our intention been to analyze risk profiles, we would’ve had to take a deep look at the debt burden, company by company.

Maybe I didn’t understand well your remark though.

Olivier> That’s for sure, on the condition that the VCs are good and understand well the market growth potential as much as the executive abilities of the management team. For instance, although theoretically a niche software may sell high, bad execution (eg never-ending implementation projects, etc.) may damage the company’s reputation and lower mid-run margins. The same would go if market growth was badly assessed initially: the company couldn’t reach breakeven fast and treasury management would be too imbalanced.

What if the biotech firm doesn’t actually find anything? I see biotech as a much riskier business than software (although expected exits are huge, IF something big is found in the R&D dept.).