5 questions with Mark Brooks

This week, Mark Brooks, managing director of Scale Venture Partners, expects to be a busy venture capitalist at the 28th annual J.P. Morgan Healthcare Conference in San Francisco. Brooks says the event is “the biggest conference of the year. We’ll be spending three-and-a-half days networking with investors and meeting with companies that are looking for funding.”

However, Brooks founds time last week to chat with PE Week Managing Editor Alastair Goldfisher.

Q: Did you make any New Year’s resolutions?A: I believe there’s a crying need for health products and services. And some of the companies out there right now are looking for capital. And some of those will succeed. So I guess my resolution is to find them and invest in them.

Q: How likely are you to invest in a company you meet at the J.P. Morgan conference?

We have a history of backing companies we’ve met at the conference, but I don’t know the exact number. Most of the companies use this occasion to launch their fund-raising drive, or maybe they started in December. But for most, the conference kicks off the due diligence process. I’d say that by the end of the first quarter, you’ll see many of the presenters will have announced funding.

Q: What are you looking for in an investment?

Scale is unusual in that we focus on unmet clinical needs in medical devices, drug developers and health care services. Most firms are backers of drugs and devices or services. We do all of the above. What’s important is whether the company we back is creating an impact on the health care system. Can it save money for the industry and will it provide clinical benefits?

We’re interested in a lot, however. We look at cardiology, but nothing related to stents. From a clinical need, we think diabetes and related diseases will be a huge area. Scale is also looking at soft tissue, although we haven’t invested in that area yet.

Also, we’re typically not the first money in a company. We’ll invest in a startup that’s raising its first institutional round if it has that has an advanced product development. We’re not the initial product development backers.

Q: One of your portfolio companies, Alimera Sciences, is currently in registration for an IPO. Alimera previously filed for an IPO and withdrew it. What’s different now?

: It used to be that biotech companies going IPO were just entering or about to enter phase 3 clinical trials. Alimera now has the data, which was positive. That’s the trend we’re seeing. More companies that would have been IPO candidates already are doing more testing. It will be interesting to see if that translates into a rush of companies, like Alimera, that have advanced clinical data, testing the IPO market. The IPO market depends on a lot of different factors. But we’re optimistic about the IPO market.

Q: How is health care reform affecting investors like yourself?

Health care reform will be passed eventually and it’s important to note that there’s not enough tax to change what we do day-to-day. The amount of proposed health care tax spending, factored out over years, will not affect us much.

We need to take a 10-year view. We need to ask ourselves, ‘Will the drugs and devices that we’re looking at backing now have a clear clinical impact?’ And, ‘Will that clinical impact save money?’ All of us are more cognizant of that long-term impact, whether the investments we make now have a clear cost-benefit.