A proposal written by Washington attorney Leslie Platt that up to $50 billion of TARP money be invested in biotech and other innovation industries was based, in part, on Germany's BioRegio contest in 1996, which awarded government money to support biotech startups. But while the German plan resulted in too much money chasing too many companies with too little due diligence, Platt maintains there would be significant differences this time around.
Platt is an attorney at Pillsbury Winthrop Shaw Pittman. Previously, he was chief of operations at NIH and also was HHS deputy general counsel.
His white paper, called "Addressing the Financing Crisis in America's R&D Innovation Sector: Creating an Innovation Sector TARP Program," has been presented to both the Obama administration and members of Congress. It proposes to co-invest federal funds from the Troubled Asset Relief Program with "a significant amount and percentage of private sector financing" from banks, VCs or fund managers.
Under the proposed plan, investments would only occur if there were a minimum of a 20% co-investment from private sector sources
The money would go to public or private companies in the "innovation sector," including biotech, nanotech, IT, cleantech and alternative energy.
"The material difference versus what happened in Germany is that these companies already exist and have proven their stripes," Platt told Ebb & Flow. "It's not that there isn't a market or potential customers for their technology," which he said was the case with some of the German startups.
Platt thinks another difference between his scheme and the BioRegio experience is that due diligence would not decline in the face of government co-investment.
"I've asked every venture capital fund, hedge fund manager and investment banker that I've spoken with whether this plan would make them less careful," he said. "Right now,