BRANFORD, Conn. – Scheer & Co. Inc., a financial advising firm that helps large pharmaceutical companies spin off or license medical technologies, is raising its first venture fund targeted at $50 million.
The fund, likely to be called Scheer Venture Partners, will back new companies resulting from such divestitures, said David Scheer, who founded the advisory firm 17 years ago. As the fund’s sole general partner, Mr. Scheer will be assisted by two vice presidents from within his firm, Virginia Herndon and Prakash Patel. Dr. Herndon joined Scheer eight years ago and Dr. Patel three years ago; neither has experience as a full-time professional at a venture firm, but they have knowledge of the industry, and Mr. Scheer plans to syndicate all deals.
Mr. Scheer’s advising practice expanded as VCs began outsourcing work on more complicated deals, and he decided to raise his own fund after watching the venture industry back away from early-stage deals.
Scheer is expected to back some six to eight companies in the next two years, concentrating on those that wish to license medical technologies. Sheer saves time and effort by focusing on developments that are approaching or already in clinical trials, giving the firm time to build a management company and a product development strategy around a somewhat proven technology, Mr. Scheer explained.
Following the vehicle’s launch last summer, the firm would ideally prefer to wrap fund raising in the first quarter, although it is still uncertain how many rolling closes will take place, he said. Scheer began circulating a term sheet to several potential limited partners in mid-December, but none had committed by press time.
Mr. Scheer has been marketing the vehicle to university endowments and funds-of-funds, as well as to potential strategic corporate investors and entrepreneurs with which his firm has worked. Oak Investment Partners, an eight-year investor with Scheer & Co., is assisting with the fund raising. Oak could not be reached for comment.
Potential investors find Scheer an “attractive story,” but they have the standard first-time-fund worries, Mr. Scheer acknowledged. Also, returns in health care lag far behind those in the information technology sector, a disadvantage to firms such as Scheer that are raising health-care-only funds. Nevertheless, the vehicle is not using a placement agent.
Management fees and the carried-interest split still were being negotiated as of mid-December.
Scheer will consider investment opportunities both in the United States and abroad, although Mr. Scheer said he had better business contacts and more experience in Europe and North America than in Asia.
Scheer & Co. has helped companies through its advising work including Pennsylvania-based OraPharma Inc., which recently attracted $16 million in venture backing (story page 40), Espirion Therapeutics of Michigan and ViroPharma Inc. of Pennsylvania.