Ebb & Flow

Most of the private companies that raised money in the first half of 2000 - when the genomics "revolution" was driving super-high octane valuations - bought about a year-and-a-half of cash, which would put them in money-raising mode right about now. But with valuations falling, many could end up doing down rounds unless they can get existing investors to cooperate.

Michael Steinmetz, general partner at MPM Capital, already is detecting the squeeze. "We're seeing some companies who raised money in the first half of last year who are having some difficulty supporting their valuations, so we've seen some flat rounds and some down rounds," he said.

He suggested that companies "might want to do an internal round where you go back to your existing investors and do a small stepup - maybe 20%. But if the existing investors aren't willing to put in more money, you may have to accept a lower valuation because new investors will squeeze as much as they can."

Steinmetz suggested that most VCs would support the internal round concept because they are sitting on fresh capital.

Jonathan Leff, managing director at Warburg Pincus, also expects to see more down rounds and more M&A. On the latter front, he expects more public-to-private activity than private-to-private because many public companies have the resources to support two burn rates.

Leff pointed to the Pharmacopeia (PCOP) merger with privately held Eos as a model for future M&A for the biotech space (see Noteworthy, A6).

CIBC World Markets banker Peter Crowley noted that some of the

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