Eternal Youth Is the Next Big Bet for Singapore Venture Capitalist
Baidu Inc. is often referred to as China's Google with a market value of more than $60 billion. But in 2000, it was an upstart struggling to get any attention from investors—except from a guy named Finian Tan.
Tan, then head of Asia at DFJ Eplanet Ventures, began investing in the search engine, betting that 1.3 billion Chinese would eventually embrace the internet. When it went public five years later, Tan's firm emerged as the bigger beneficiary with a stake larger than the 22 percent held by Baidu co-founder, and now billionaire, Robin Li. He's making a similar bet on San Diego-based regenerative medicine company Samumed LLC, which is valued at $12 billion.
What attracted Tan was Samumed’s approach to treating arthritic knees, hair loss, scarring of the lungs and degenerative disc diseases. The company is pursuing novel therapies for those conditions and cancer with drugs that target a cell-signaling pathway that offers promise in reversing the biological processes of aging.
“Only twice in my life I have bet so big on day one,” says Tan, 54, a Singaporean who co-founded Vickers Venture Partners in 2005. “Samumed is going to make even more money for us.”
Samumed’s chief executive officer is Turkish-American entrepreneur Osman Kibar, who has managed to raise more than $300 million in private funding for the company he founded in 2008. Before that, Kibar was scientific founder of Genoptix Inc., an oncology diagnostics company that Novartis AG bought for $470 million in 2011.
Tan began investing in Samumed in 2012. Today, Vickers and its co-investors own about 11 percent, including 3.8 percent held by Vickers. Tan's company is the only VC firm backing Samumed with the rest of its funding coming primarily from institutional family offices, the startup said.
Investing in biotech startups is innately risky, with uncertainties over regulation and execution, according to Paul Santos, managing partner of Wavemaker Partners in Singapore.
``All of these things are beyond your control,'' he said. ``From a fund allocation standpoint, if you put so many eggs in one basket, you almost can't miss again. And there are many cases where people missed in a big way, like Theranos.''
Theranos Inc., a blood-testing startup that once commanded a $9 billion private valuation, has seen most of that evaporate amid regulatory battles and questions over its technology.
Samumed’s drug candidates are being tested in five patient studies, according to its website. It’s pursuing ways to repair or regenerate human tissues through drugs that target the complex system known as the Wnt pathway—a key process in regulating cell development, cell proliferation and tissue regeneration.
Scientific understanding of this biological activity represents a major breakthrough in tackling human diseases, according to Elizabeth Vincan, a senior medical scientist at the University of Melbourne, who convened the first international meeting held in Australia on Wnt in 2014.
“The Wnt pathway is one way that cells communicate, and the Wnt pathway tells the cells what they are, where they need to be and what they need to become,” she says. “It’s very important in diverse human diseases, so the Wnt pathway is possibly the most interrogated pathway now in drug development.” Vincan continues: “The aging process is really just cells getting tired, and if you can rejuvenate them, you can certainly reverse the process.”
The opportunity to invest in Samumed was presented by Tan’s partner Khalil Binebine, vice chairman of Vickers. Tan was immediately drawn to Samumed’s diverse pipeline of drugs covering multiple therapeutic areas.
Typically, his firm follows an unusual vetting process for making investments. Each of its five partners is required to get to know the founders of the companies they are considering backing. When they are ready to make a decision, each investment proposition is given a score from 1 (lowest) to 5 (highest). Number 3 isn’t allowed because Tan doesn’t want any fence-sitters.
If one partner loves a deal that everyone else hates, he or she is still allowed to invest as much as $1 million on the startup through the lifetime of a fund. “Unanimous deals tend to be the worst deals,” Tan says. “We are not afraid to be innovative.”
The probability of companies such as Samumed uncovering the fountain of youth isn’t good. Derek Lowe, a medicinal chemist who comments on drug discovery for a blog run by the publishers of the journal ``Science Translational Medicine,'' says the overall failure rate for medicines undergoing clinical trials is about 90 percent.
“I have not seen anything that makes me think that their chances will be higher than that average,” Lowe says. “If their investors think differently, they could be in for an unpleasant surprise. Clinical trials are mostly about unpleasant surprises, unfortunately.”
Tan's path to Vickers includes a variety of roles. He has a Ph.D. in engineering from Cambridge University and has worked at Goldman Sachs Group Inc. and Credit Suisse First Boston. During his brief stint as a senior public servant in Singapore, he also managed a $1 billion fund to develop science and technology in the city-state.
Yet many people attribute Tan’s success to his famous parties. The proficient networker entertains an average of 200 people a month in his home, combining business with pleasure to pull together connections to spot the best deals and talent in technology.
The same approach is applied to managing employees, whom he invites for a weekly lunch at his sprawling penthouse apartment overlooking Singapore’s Sentosa Cove.
On a sunny day in January, a dozen of them gathered around the dining table over crispy chicken, spring rolls, sauteed vegetables and the house specialty, beef noodle soup. New-hires from Credit Suisse and McKinsey & Co. joined the gathering.
“It’s not all science that we do,” Tan said. “A lot of it is art. And a lot of it is entertainment. There are VCs who give you an umbrella when it’s sunny, and they take it away when it’s raining. We have a different ethos.”
Vickers’ performance is posted on the company’s website. Assets raised under its four funds, including co-investments, total $363 million and have a combined value of $2.1 billion. The net value of its fourth fund has increased more than five times, making it the best performing among the venture capital funds that debuted in 2014, according to data compiled by Preqin at the end of June.
``Vickers understood and supported our need for flexibility to think and act for the long-term -- crucial aspects for the time-intensive process of developing a broad platform in tissue regeneration,'' Samumed's Kibar says.
Vickers is currently raising $250 million for a fifth fund that closes in July. Tan plans to invest more in Samumed, one of many startups Vickers is bankrolling globally.
More recently the firm has made investments in SiSaf, a Belfast-based biotech firm that aims to improve drug administration. In Singapore, it’s led a funding round in lifestyle and fitness startup GuavaPass. It's also backing digital payment service provider MatchMove Pay and Spark Systems, a foreign exchange platform.
Tan says about 28 percent of the ventures Vickers has backed have failed, compared with an average failure rate of more than 50 percent across the venture-capital industry. Of the deals that have succeeded, he says 36 percent have returned more than five times the initial investment.
“Most VCs play safe,” Tan says. “I’ve always been radical. For us, it’s all about home runs.”
To keep closer watch of his most important bet, Tan recently bought a house in San Diego to be near Kibar at Samumed.
As housemaids begin serving dessert at his Singapore home, prepared by his three chefs, Tan, dressed in blue jeans, white t-shirt and blazer, throws a question to his lunch guests: “If you are able to grow cells at will, what do you think is the age at which we will die?”
Then he draws an analogy with a car that can last forever if one can keep changing the worn-out parts. “It’s the same with the human body,” he says. “We will never die.”
Despite the odds, Tan isn’t giving up hope of bettering the spoils from his bet on Baidu.