Staff Writer

BOSTON - Early stage financing for young biotech companies may be waning, but that doesn't mean investors have fallen completely out of love with the industry.

In fact, some venture capital groups make it a point to look at a broad spectrum of biotech companies including start-ups, said investors at the BIO National Venture Conference.

They shared what they look for in a biotech and offered a few pointers on how to attract the right investor.

Heather Preston, managing director at TPG Biotech, a large private equity fund, said her firm takes an "agnostic" approach when it comes to investing in companies. That's good news for the early stage biotech who may be feeling like the ugly girl at the dance.

TPG, which has financed personalized diagnostics, clean technology and clinical research organizations, does not limit itself to certain types of companies, therapeutic areas or geographic regions, Preston explained. TPG has funded private as well as public companies, and has provided seed investments as well as typical financing rounds, she said.

Although TPG's last biotech investment was earlier in 2008, when the financial climate was better, the fund is still "actively looking at a number of opportunities that are early stage," Preston said. And despite the slide in the economy, she said, there has been "no major shift in our strategy."

So many biotechs are looking for funding right now that it has created quite a bit of activity at firms like Polaris Venture Partners where Amir Nashat, general partner in the firm's Boston office, said that that he has been spending quite a bit of time reviewing opportunities. He also said that when the market tanked, it "raised the bar" for the criteria it looks for in companies, such as the need to bring revenue in faster.

Just like in the dating world, investors may act interested but they just don't know a nice way to say, "No thanks." Some investors may not have the necessary expertise to get a deal done, and others may be overly polite and not give a straight answer about their level of interest, Nashat said.

But these days, he said, "We try to be more direct than we used to be in saying, 'That just doesn't fit.'"

Brian Dixon, president and CEO of BioRelix Inc. and a conference panelist, said, "I'd like to have the 'no' quick and move on."

If you're having problems getting investors to take a second look, check out your data department, the audience was told.

Stephen Tregay, founder, president and CEO of Forma Therapeutics Inc., said that some investors want to know when the next data are due and may not wait around until they arrive. Some investors, he said, are "looking for what you have accomplished in Series A."

A little advice from a company that has had investors falling head over heels: If you can advance a technology even before starting a company, that could be a sign to an investor that you are ready for "prime time," Tregay said.

Forma, a young biotech that managed to raise a sizeable sum of money this year in a Series A financing round, is the exception rather than the norm these days. Cambridge, Mass-based Forma raised $25 million in a Series A round, with Novartis AG as a major partner.

Forma hit the ground running when it was founded in late 2007. Just over a year old, the company has secured three partnerships and has implemented some capital efficiencies that made it more attractive than the average start-up.

Capital efficiencies, Tregay said, aren't "you know, saving a little money on a copier." For example, Forma has developed assays in weeks vs. months, he noted.

Surviving this downturn is key, the audience was told, and that also goes for investors. As Nashat put it, "Flat is the new up. I think everyone just wants to just get through this period."

For start-up biotechs, there are just too few investors looking for a relationship right now. Private biotechs are seeing investors holding back on early stage funding compared to years past, two biotech investors told conference participants.

"It appears there's a movement away from some of the earlier-stage investment," said Scott Sarazen, global biotechnology markets leader at Ernst & Young.

He noted that the amount of venture capital money flowing to biotech firms was just under $200 billion in 2007, but that amount fell to $800 million in 2008.

Stephen Knight, managing partner at Fidelity Biosciences, agreed that "there has been a pulling back" from early stage investments. But he added, "I think that this is only going to last so long."

The conference ended Wednesday.