Venture Capital for Scientific Research
VENTURE CAPITAL FOR SCIENTIFIC RESEARCH 5
VentureCapital for Scientific Research
Thecase study is a manifestation of how the commercialization of geneticengineering became a resounding success story that points at theimportance of venture capital in making investments in biotechnology.Great ideas can be turned into commercial giant ventures througheffective mechanisms that allow entrepreneurs to partner withscientists to transform knowledge into life-changing solutions tohuman challenges. The main point of the case study is to provide arational highlight of stages that great enterprises such Genentech gothrough to reach the level they are today. Analysing the challengesfaced by its initial promoters provides the basis upon which futureand present scientists and investors can partner to create solutionsto human kind. It implies that science alone cannot yield the desiredresults if investors do not commit capital to enhance it throughcommercialization(Powell&Brantley, 2002).They key actors in his case study, Kleiner-Perkins and Swanson. Thethree are specialists in different fields in science that made it areality to commercialize genetic engineering that led to one of thegreatest breakthroughs in diabetes treatment. The partnership ledproduction of insulin from the laboratory through the manipulation ofgene material.
Itwould vital to analyse the steps that the partnership had to gothrough to get enough financing that would allow them to acquireinfrastructure, hire more scientists, finance lad processes, buyspecimen, and commercialize the ides into the empire that existstoday. The success of Genentech shows just how possible science canbe turned into a high return investment like any other business.
Thethree deliberated about the commercial potential of their geneticresearch and discoveries. Even as they searched for venturecapitalists to provide seed capital, they had to convince them byindicating how the venture could make viable returns. Swanson andBoyer met Perkins to explain how it is possible the venture couldguarantee of his capital. The three agreed to contribute a stake inthe venture and sub-contract the rest to other institution that wouldbe interested in doing so.
Sub-contractingis therefore another issue that comes up in the discussion.Scientific research is a costly affair and therefore subcontractingis the best option of seeking venture capital especially onintellectual property rights in science(Rind, 2001).For instance, Swanson, Perkins, and Boyer could not raise all theneeded capital they had to subcontract part of it to the Universityof San Francisco and another private research and hospital in Duarte,in Los Angles, and Caltech. Each of the sub-contracted institutionsplayed a specific role in the partnership. Boyer’s lab specializedin gene splicing because that is what Boyer had skills in. Whenworking there, Boyer developed a good network of scientists becauseof his great work in research. Boyer worked at San Francisco’slaboratories. The institution was capable of carrying out genesynthesis experiments. He worked with two specialists: Arthur Riggsand Keiichi Itakura while using the Caltech as the first ever testingmachine as they began their work. The sub-contracts and thepartnerships between the institutions and the three scientists didnot yield the most desirable results at first. They made losses. Theyactually made a loss of about $88, 601 in 1976 on assets valued at$88,421.
Howresearch consortiums such as this can thrive in the wake of losses
Thebest medicine for the continued survival of a research organizationwith losses at first is to make scientific breakthroughs (Zider,2008).Genentech thrived on the first scientific breakthrough it made duringthe first days of its investments. The first breakthrough was thedevelopment and commercialization of somatostatin. The breakthroughremoved the risk from the entire business venture. Researchorganizations count on the value of intellectual property rights andtherefore more breakthroughs provide an avenue for research articlesin journals. Articles on research show that the organization iscommitted to quality research. Research breakthroughs determine theconfidence of investors because it is the core source oforganizational value. This points out why Perkin had the confidencewen addressing shareholders in 1978. He used the success researchwork they ad began two years earlier to instil the same confidence inshareholders. They had made about $515, 000 after producingsomatostatin human hormone. The amount was made in the firstdemonstration of how the hormone works before it was officiallycommercialized.
Buildinginvestor and shareholders confidence enabled the partnership toadvance their discoveries to another level that they were targetingto reach. Investor and shareholder confidence is vital in availingthe needed funds to carry out research. It is through this confidencethat Genentech was able to build infrastructure and hire morescientists that contributed to the discovery of insulin. Geneticengineering research made it possible for Genentech to discoverinsulin that as saved millions of lives by treating diabetes.
Itis imperative that investors and venture capitalists and thegovernment take advantage of the huge growth of the credit market toinvest in scientific research. Considering that it is very expensiveto hire scientists buy equipment, and build partnerships withreputable institutions, more money should be availed to developmentof technologies in medicine and other spheres of life.
Powell,W. W., & Brantley, P. (2002). Competitive cooperation inbiotechnology: Learning through networks. Networksand organizations,366-394.
Rind,K. W. (2001).The role of venture capital in corporatedevelopment.StrategicManagement Journal, 2(2),169-180.
Zider,B. (2008). How venture capital works. Harvardbusiness review, 76(6),131-139.