By Steve Chapple Special to the U-T
Saturday, June 23, 2012
La Jolla venture capitalist Kevin Kinsella: he’s happy, he’s not happy, he’s realistic.
He’s happy because Avalon Ventures, which he founded in 1983, has just turned a $5.3 million investment in Zynga, the game company that sits on the Facebook platform, into a $350 million profit.
He’s not happy because he feels the salad days of biotech — when you could take a promising therapeutic protein, and then build a company around it, and IPO that company, or hold on to it all the way to the bank — those days may be over. And Kinsella has an informed opinion on the matter because over the past 34 years he’s helped to bring 100-plus biotech and pharma companies to market, including Vertex and Onyx Pharmaceuticals along with several billion-dollar drugs for cancer and hepatitis.
Kinsella waxes realistic as well.
“I’m very skeptical of personalized medicine. We’re already bumping up against the physical age limits of homo sapiens. What more can you do to extend life? Most of the things that you can do, that far outweigh what you might get from a pill, are lifestyle, watching what you eat, getting enough sleep, enough exercise and avoiding stress.
“Yet people still smoke, and they drink to excess. They consume too many fats, too much sugar. Getting your complete genome sequenced, to find genotypic traits that are going to tell you more about your health? It won’t do us much good, and, frankly, I don’t think people really care. If they did, wouldn’t they just change their lifestyle?”
In 1978, Kinsella got in his Ford Pinto and drove out from Boston to San Diego. After graduating from MIT with a major in management and minors in electrical engineering and political science, he got a job at Solar Turbines, eventually handling all international joint ventures, the last time he worked for someone else.
“San Diego had a more interesting climate, a more interesting entrepreneurial community, less parochial than the East Coast,” he explains.
Why San Diego rather than Silicon Valley?
“I’d rather be a big fish in a small pond.”
Of course, less humbly, in America’s VC triangle of Menlo Park, La Jolla and Cambridge, Kinsella and Avalon are best seen as the bluefin tunas — fast, smart and tasty. Big fish, indeed.
Time for a tour of the offices, which are not like most offices. The walls are covered with one of the world’s finest collections of California plein-air, or landscape, art. The great room holds two Yamaha grand pianos — one, candy apple red, formerly owned by Elton John, and another, black, nine-foot, Disklavier (high-tech player), concert piano.
Upstairs is a trophy room dedicated to the musical “Jersey Boys,” which was launched from the La Jolla Playhouse. Kinsella was the lead investor.
That shouldn’t come as a surprise. Kinsella’s father was the Broadway and TV actor Walter Kinsella, a regular on “Alfred Hitchcock Presents” and “The Honeymooners.” Downstairs is the screening room (103-inch thin-screen Panasonic).
Across the hall is a 9,000-bottle wine cellar, temperature-controlled at 58 degrees. Kinsella Estates Winery makes a 95-point rated cabernet sauvignon, $100 a bottle (get it at Pamplemousse), and he’s flying up to Healdsburg in Sonoma County for a tasting later in the week, before Madrid, for the art, and London, to check on a new musical “Matilda,” back through New York, more shows. He’s a Tony voter.
The building used to be the Copley Library. Now it’s the Kinsella Library, and some might view this as a changing of the guard, from media empire to the new riches of biotech and social networking. The entrance foyer is still the same, floored with bricks from the Springfield railway station where Abraham Lincoln first boarded the train to Washington for his 1861 inaugural.
I ask how picking a future hit musical is like picking a winning startup. Kinsella has been answering this question most of his life. “For a variety of reasons, liking a musical is different than liking a social network company,” he says, “but at the end of the day it’s just your gut decision whether or not, at this point in time, are all the threads coming together and resonating with you? Is this something that you’re going to risk your money on or not?”
How do you compare biotech and tech investing?
“Nothing could be more expensive than getting a drug approved. Nothing could be cheaper than to start an Internet company. If you’re talking about therapeutics-based biotech, since that’s where all the money is, then every idea is a big idea.
“If you can cure even an orphan disease, like Meniere’s, Lou Gehrig’s or the lysosomal storage diseases, then there’s hundreds of millions, if not billions of dollars, of market value in solving the problem.
“If you’re talking the Internet, every idea is a small idea until proven otherwise,” and you scale from tens of thousands of users to tens of millions of users, “which must be done in an economically sensible way” — not like Groupon, he points out.
The life span of an average venture capital fund is 10 years. In the aggregate, Avalon’s several current funds hold $700 million.
“We invest, as soon as we close. We put all our money in the ground by three years and then by five or six years, we have to start looking for exits. We obviously need to return capital to our partners who are looking for an above-average multiple on their capital.
“So it’s a short time frame to accomplish things, and even if it’s a great idea, if we don’t think we can get significant inflection point of value appreciation within some limited period of time, let’s say, five years, with an investment of no more than $10 million to $15 million on our part, we are reluctant,” to invest.
Do you agree with the locals who say there’s a shortage of investment money in San Diego?
“People who have bad ideas, who can’t get funded, they think there’s a lack of capital. But if they’re truly insanely great ideas, they’ll get funded.”
Kinsella finishes the tour. “That’s my humble little abode.”
But then he pulls down an old gray picture, which may be the most impressive memento of all, to Kinsella. There he is, a 20-year-old kid suspended 3 feet off the ground, wearing an MIT jersey, the hoop 10 feet away, as the kid crashes in the basket.
The picture shows finesse and confidence, a nuanced aggression — and whoever thought of MIT as a basketball powerhouse?
“The three things I’m collaterally proud of about MIT,” says Kinsella, an alum and still a solid 6 feet 4 inches, are “no athletic scholarships, no honorary degrees and your daddy can’t buy you in. That was the last time we beat Harvard — my last game — 20 points and eight rebounds,” he says, smiling with satisfied finality.
Steve Chapple’s Intellectual Capital covers game-changing people, ideas and perspectives. He can be reached at intellectualcapitalchapple@gmail.com