At least no one can accuse OVP Venture Partners of having a herd mentality. The Kirkland, Wash.-based venture capital firm, which has funded high-profile companies in biotech and medical devices for nearly two decades, is exiting the life sciences sector to focus on wireless applications, outsourced services and enterprise software.
The decision by OVP to leave perhaps the hottest sector in private equity was first by reported by the Seattle Post-Intelligencer, and goes against the current strategy of many venture capital firms. But after wrestling with the decision, the partners at OVP felt they could achieve better returns in software over the long run.
Therefore, OVP’s sixth fund of $160 million, will focus only on software. It is expected to close in June.
OVP helped build some of the Northwest region’s most recognizable biotech and medical device companies during the past 19 years. OVP was an early investor in Corixa (CRXA), Rosetta Inpharmatics (RSTA acquired by Merck) Seattle Genetics (SGEN), CellPro (CPRO), and Cardima (CRDM). CellPro, an early OVP biotech investment that was hit with a patent-infringement lawsuit that caused its demise in 1998, brought the firm 12 times its original $4 million investment. More recently, OVP cashed out when Merck purchased Rosetta Inpharmatics in a $620 million deal.
The decision to abandon biotechnology and healthcare companies was not easy, according to the company. The five partners debated the issue for hours during a two-day meeting. “We have had a phenomenal string of some very successful investments in that area,” says Managing Partner Chad Waite.
In the end, the partners maintain that while life sciences companies have done well and the internal rate of return is very good – the return in network security, communications and software is much better.
Contact Ken Ryan at: Kenneth.Ryan@tfn.com