Trends Watch: Biohealth

EisnerAmper’s Trends Watch is a weekly entry to our Alternative Investments Intelligence blog, featuring the views and insights of executives from alternative investment firms. If you’re interested in being featured, please contact Elana Margulies-Snyderman.  

This week, Elana talks with Andrea Alms, Fund Manager, BioHealth Capital Fund.

What is your outlook for VC?

This question is not so easy to answer since VC comes in different flavors -- late, mid, early – and different sectors, -- real estate, tourism, biohealth and so on. Nevertheless, VC is one of the few financial instruments that create "alpha" in one's portfolio and home-run returns. Yes, it is high risk and high return; that's why our VC industry has such a good record of turning up "unicorns," since the one or two home run returns typically cover the rest of the portfolio losses.

What are the greatest opportunities you see and why?

Market disturbances stemming from COVID-19 present the greatest opportunities. By the sector, data, biohealth, health care, and technology are rife with opportunities. From the start of 2020 until August 2020, just in health care there were 52 IPOs; in tech, there were 18 IPOs. By far, the biohealth sector is the hottest investing market; those 52 health care IPOs generated 49% average returns. For ourselves, our BioHealth Innovation portfolio company, called "MockV," was sold in March 2020 at the height of the lockdown and yielded 165x return on investment (ROI).

In addition, COVID-19 created market disturbances in cash and access. With almost everyone virtual and at a computer, the allocators and limited partners are more accessible by e-meetings.  Everyone has learned how to do an e-meeting, since they cannot go into the office and must use this option. Now, they are motivated and willing to do e-meetings because the new normal of COVID-19 remote working is going to be with us for many months and maybe years.

What are the greatest challenges you face and why?

“Doing More with Less.” The U.S. alone has about 13.5 million people out of jobs and that means 8-10% unemployment. It can be debated we are in an 80% economy due to COVID-19 shutdowns.  

It is not just money, but also time management. Women have been hit harder by the economic crisis sparked by COVID-19: 11% of women over 20 are unemployed and that is 1% more than male. Unemployment for Black women is at 14%.  

Who cares and so what? For emerging managers themselves, it is harder; especially with kids at home and partners may or may not be employed. It’s also difficult for the portfolio companies and entrepreneurs we invested in.

Is there something that the industry could do that would be more supportive of emerging managers who are diverse, minority, women-owned firms?

Having mentors and apprenticeships is important; the venture capital world is truly an apprenticeship. Like a boutique restaurant: There can only be one head chef for one restaurant. A sous chef has to leave if they want their own restaurant. Like VC, there is one GP and if you want to be the GP, you have to spin out and raise your own fund. Another analogy: The VC is like a trade guild -- think of the Renaissance glassmaker, or silversmith.  You had to find a master trade guild to take you on as an apprentice, which typically was some kind of family member or church connection. Then, start at the bottom and spend years and years apprenticing.

What keeps you up at night?

This question reminds me of a conversation I had with the former CEO of Johnson & Johnson, who presided over the Tylenol scare.  He had hundreds of thousands employees working around the globe, 24 hours a day.  Most of his employees did their job and what they were supposed to do.  What kept him up at night was THAT employee who wasn't doing the right thing -- either for the company, themselves, their families, or the world. 

I have met scientists and entrepreneurs around the world who all care about saving lives.  Yet you and I have read the stories in the press of scientists designing genetic or other monsters that can wipe out a town, community, human race. Again, the majority are ethical, but, it is that one who isn't doing right thing and those investors who are backing this that keeps me up at night. 

The views and opinions expressed above are of the interviewee only, and do not/are not intended to reflect the views of EisnerAmper.