INDIANAPOLIS – In an effort to begin to access business models that could prove revolutionary to the pharmaceuticals industry, Eli Lilly & Co. in mid-January announced the launch of e-Lilly, the company’s new venture fund, said Newt Crenshaw, vice president of e-Lilly. The new vehicle was actually up and running in the fourth quarter of 2000, Crenshaw added.
The $50 million fund will back companies developing e-business solutions to manage the risk associated with research and development of new drugs, as well as increasing the productivity of research, reducing the cost of clinical trials and developing new ways to connect with customers of Eli Lilly, Crenshaw said.
“We believe technology will change the way pharmaceuticals can enable people to lead longer, healthier lives,” he explained, adding now was a good time for Eli Lilly to launch the fund because of the current slow-down in the VC market place. “Because of the devaluation of the dotcom hype, we think we are now well-positioned to capitalize on the impact these new technologies will have on pharmaceuticals in the medium- and long-term,” he said.
The fund will back approximately 15 to 20 startup companies, he said. The vehicle will not necessarily have an average investment size, although Crenshaw added the fund’s sweet spot will be in the $3 million range. The vehicle will scout for deals worldwide, he added. The fund also has a Web site through which interested companies can submit applications for funding, he noted.
The fund will avoid angel and seed-rounds because of the risk associated with such developing companies, he noted. “But besides this we want to be as early as we can be, because we want strategic access to innovative business models,” he said. The purpose of the fund is to make investments that can be linked back to e-Lilly’s parent company, he said, adding this could mean integrating a portfolio company’s technology into Eli Lilly’s technology or building up a business model in a way that benefits both Eli Lilly and the portfolio company. Crenshaw said Eli Lilly may ultimately acquire some of e-Lilly’s portfolio companies.
Depending on the fund’s success, e-Lilly should receive additional capital commitments from Eli Lilly, he said. “We will look at this on an annual basis and put more or less in on seeing the returns generated by the fund to Eli Lilly,” he added. The vehicle is also exploring opening itself up to investments from outside limited partners, Crenshaw said, adding this is not something which will happen in the near term.
Crenshaw declined to say how many investments e-Lilly has made to date, beyond saying the fund will invest at a fairly aggressive pace. He declined to reveal the fund’s carried interest structure or management fee, saying as a division of a corporate entity e-Lilly has a different structure than a traditional VC vehicle.