UCSD CONNECT Investor's Hub

September 21, 2004

As a venture capitalist, Drew Senyei is delighted to see that the unbridled enthusiasm fueled by the sciences has been met with a big reality check - fiscal responsibility. Senyei, a physician-turned-entrepreneur-turned VC, says that after the atypical tech boom in the late 1990's, it's back to the future for venture capital, where building fundamental value for a company and its science and technology is tops.

When Senyei launched Adeza Biomedical in 1988, investors who funded the sciences were usually fueled by passion, he says. Today, investing in a biotech firm is much more financially driven, as it should be, Senyei says. "When I first started (in this industry), we would look for $3-$8 million from venture capitalists," he says. "Today, you have to raise $30-$50 million to get even part way through the FDA approval process."

Senyei says the sheer magnitude of the investment necessary to build a biotech firm requires much more focus on the financing than in the past, especially in light of the large number of early stage biotech companies competing for investment dollars. Investing in the life science sector is also very risky, given the length of time it takes to get a drug or medical device approved by the U.S. Food & Drug Administration. Still, the financial and societal rewards can be enormous, Senyei says. "If you get a drug approved, it's basically a 17-year window of patent exclusivity when you can reap the rewards of years of investment in R&D," says Senyei, now one of the country's preeminent life sciences VC's. "But getting that drug approved is extremely difficult."

Senyei's career began in medicine when he earned an M.D. from Northwestern University. After practicing medicine for several years, he ventured into business in 1979 with a consulting job for Eli Lilly & Co. Then, in 1980, he moved to San Diego to launch Molecular Biosystems. The company, which went public in 1983, developed an ultrasound contrast reagent and research tools. After leaving Molecular Biosystems, Senyei joined the faculty at UC Irvine as an assistant adjunct professor in the Department of Obstetrics and Gynecology. He is still involved in academia - Senyei is currently vice chairman of the Jacobs School of Engineering at UCSD, and he serves on UCSD's Health Sciences Advisory Board and the Department of Biology Board.

In 1987, Senyei became one of the first physicians to move from medical science and academia to the venture capital world. The trained obstetrician says the switch from birthing babies to birthing companies seemed like a logical transition, but it wasn't easy. "It was a huge risk because I was making a career change from something known and secure to a whole new world that was undefined, unexplored and untapped," he says. "But it was tremendously exciting to be a part of revolutionary new technologies and science that had the potential to change our world. I felt that the opportunity to participate in the birth of that kind of industry wouldn't come along too often."

It was even more thrilling to be in San Diego at the beginning of the tech boom, Senyei says. "Even back then it was clear that the biotech sector in San Diego was going to have tremendous growth potential, given the strength of our academic and research institutions and the receptive business environment," he says. "It was very fertile ground. I also have to credit CONNECT and CONNECT's founder, Bill Otterson. He was the cheerleader who made this industry happen in San Diego. As a result, I think San Diego's can-do, entrepreneurial spirit fostered a growth industry that other cities envy".

Senyei says the level of sophistication among today's tech and life science entrepreneurs has risen over the past few years, with many of them on their second and third start-up. "I do occasionally get entrepreneurs who haven't even checked our web site," he says. "I encourage entrepreneurs to do as much research on us as we do on them. Overall, if you can state your value proposition succinctly and in an executive summary that captures the problem and how you'll solve it, then that's the best way to get attention from an investor."

One of the biggest challenges for VC's, Senyei says, is the ability to judge people and to relate to people from various fields. After all, at the end of the day, it's the people who make it happen, not the product, he says. "This is a people business. We really don't bet on technology. We bet on people. Technologies fail and technologies change, so we need to find world-class scientists and managers who can execute and respond to those changes," he says.

So far, the odds have been in Senyei's favor. Since joining Enterprise Partners in 1987, he has helped propel the company as of one of the largest venture capital firms in the United States. Currently investing in its sixth fund, Enterprise has approximately $1 billion under management and a roster of 43 active companies in its portfolio. During his 17 years at Enterprise, Senyei has served on the boards of some of San Diego's most successful biotech and pharmaceutical companies, including NuVasive, Ligand Pharmaceuticals, Discovery Partners International, Nanogen Inc., and Targegen. NuVasive, a company Senyei funded and has served with since it's founding, had one of San Diego's most successful IPO's of 2004, raising $71.5 million.

Senyei and his partners didn't build their firm without taking some calculated risks. But risk taking is nothing new to Senyei. Born in Budapest, Hungary, Senyei and his family fled their country during the Hungarian Revolution in 1956. A then-six-year-old Senyei and his family evaded Russian soldiers to cross the Hungary-Austria border. "My parents took huge chances. I guess I got the risk-taking gene from them," Senyei says.

Senyei also received something else from his parents - a good education. After leaving Hungary, Senyei and his family relocated to the United States, where they lived for a short time in Cleveland, Ohio before settling in Hollywood, Calif. In 1968, Senyei was awarded one of four national Walt Disney Foundation Scholarships and attended Occidental College in Los Angeles, where he earned a B.A. in biology.

Senyei firmly believes in supporting education and the arts in San Diego. A long-standing board member of the San Diego Opera, Senyei will take over as president of the organization for the 2005-2006 season. As for the power of education, he calls it one of society's great equalizers. Four years ago, he created Entrepreneurs for Equity in Education, a program in which companies donate stock to underwrite scholarships at The Bishop's School in La Jolla for children who might otherwise not be able to afford a private school education. The program has raised several million dollars, and 20 percent of the private school's students now have scholarships. Senyei, a father of three who also sits on the board at Northwestern University, says educating our young people is essential for businesses and society. "Seeing the success of the kids we help - that's the best return on investment you can get."