European Groups Set Up Venture Funds

Two European groups this month have created venture capital funds to support emerging biotech companies. Index Ventures in London has amassed $238 million, including contributions from Glaxo­SmithKline and Johnson & Johnson. And the Wellcome Trust, a London-based charitable foundation, has launched a $317 million fund.

The financing should help: The European slice of the global biotech funding pie has fallen by half, according to consulting firm Ernst & Young. Even in the relatively cash-rich U.S., backing for start-ups fell in 2011 to $369 million, or about half of the 2009 level, according to PricewaterhouseCoopers.

Focused primarily on Europe, the Index fund will invest in start-ups with just one or two projects, rather than those with multiple programs. The fund will support areas of unmet medical need and unique mechanisms of drug action. GSK and J&J will serve on the fund’s scientific advisory board.

Using money from its $22 billion endowment, Wellcome has created a business called Project Sigma, which will have a new name. It will invest in emerging life sciences firms and technologies.

Wellcome has already invested about $4.3 billion in venture and growth companies, but via third parties. Sigma intends to take direct ownership stakes to generate financial returns for Wellcome while advancing biomedical research.

The U.K. BioIndustry Association applauds Wellcome’s decision. “It is especially pleasing to see that the fund will take a long-term view and provide companies with the support they need to reach their full potential,” the association’s interim CEO, Glyn Edwards, says.