The Dementia Discovery Fund (DDF) is a venture capital fund managed by the UK firm SV Health Investors.\u00a0 However, the DDF differs from other VC funds in that generating returns is a secondary goal; its primary aim is to create meaningful new medicines for dementia (in particular, Alzheimer\u2019s Dementia) [1]. \u00a0Through this lens, the DDF can be thought of less as a VC firm, and more as a massive, ongoing crowdsourcing competition.\u00a0 Private innovators in the dementia space are incentivized to bring their ideas to the DDF at any time.\u00a0 If their idea is deemed to be a \u201cwinner\u201d they may receive much needed venture funding and world-class business guidance from the DDF.\u00a0 The fund structure also \u00a0acts as a tool for ensuring financial discipline as the DDF selects and invests in these winning ideas.<\/p>\n
Open innovation is crucial to the DDF\u2019s management of product development.\u00a0 The fund, who\u2019s capital comes from a combination of the UK government, several large pharma companies, and philanthropists such as Bill Gates [4], has a 15 year mandate to validate novel hypotheses and expand the breadth of targets and mechanisms in development for dementia [1].\u00a0 This strategy aims to create such a wide distribution of potential solutions that it increases the likelihood that at least one will be effective.\u00a0 This is in line with the core values of the famous IDEO design thinking; sourcing a wide range of ideas helps lead to breakthrough solutions [3], Intuitively it makes sense that accepting ideas from the widest range of sources will lead to the largest possible distribution of ideas, so open innovation is a great solution.<\/p>\n
As the DDF grows its portfolio of early-stage dementia drug candidates, its lack of diversity leaves it extremely exposed to risk.\u00a0 But at the same time, the fund is able to capitalize on the focus of its goal to begin to mitigate risk.\u00a0 In the short term, the DDF is able to invest in more resources upfront, such as establishing important relationships with healthcare professionals, assembling a world-class scientific advisory board, and purchasing a CNS small molecule library [5].\u00a0 None of these investments would be feasible at this scale for a single, early stage drug candidate.\u00a0 However, when they can be used by all companies in the DDF portfolio, the costs are spread out and the investment is more justifiable.\u00a0 In addition, access to these resources allow the portfolio companies to operate more efficiently, ultimately reducing risk to the DDF.<\/p>\n
In the long term, the DDF implements open innovation responsibly by structuring themselves as a VC fund.\u00a0 The structure of individual investments is typically to seek an ROI gradually through milestone based incentives [7].\u00a0 By seeking an ROI from the \u201cwinners\u201d of its open innovation, the fund extends the length of its sustainability, regenerating capital to invest in future ideas.\u00a0 The milestone incentives are important for de-risking as well, since they call for incremental returns before the riskiest validation studies are conducted.<\/p>\n
The DDF seems to have a good strategy for sourcing and developing novel ideas for dementia medications through open innovation.\u00a0 However, a major drawback is still the immense risk.\u00a0 Assuming a diverse portfolio is not an option, there are still a few additional steps the fund can take to continue to reduce risk.\u00a0 One is focus on the next round of investors earlier on in the development cycle.\u00a0 If a large VC firm is poised to invest in a DDF asset after a validation study, the DDF could try to sell that firm an option to invest before the study takes place.\u00a0 This option would allow the DDF to earn some returns up front and share the massive downside risk of a negative study.\u00a0 Another step would be to increase its push for fundraising via philanthropic routes.\u00a0 Private philanthropists have injected over $150M into Alzheimer\u2019s research in the past year [2], [6].\u00a0 By building a consortium of dementia research resources, DDF is creating a sustainable competitive edge in the Alzheimer\u2019s research market.\u00a0 It follows that they should be able to convince philanthropists that their money will have the greatest chance of leading to new treatments if it is donated to the DDF, ultimately allowing them to sustain funding in the future despite the extreme volatility of their fund.<\/p>\n
As funding remains to be the main concern with the DDF\u2019s open innovation strategy, one question that remains is whether there are more strategies to making this finance sustainable.\u00a0 Across the rest of the VC industry, one would imagine there are other sectors that achieve similar advantages in consolidation of resources.\u00a0 Are there learnings that could translate into the context of the DDF and allow them to remain sustainable, or even become profitable over time?<\/p>\n
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(WORD COUNT 785)<\/em><\/p>\n <\/p>\n Citations:<\/p>\n [1] About the Dementia Discovery Fund \u2013 Dementia Discovery Fund (https:\/\/theddfund.com\/about\/<\/a>)<\/p>\n [2] Bill Gates donated $50M following father\u2019s Alzheimer\u2019s diagnosis (https:\/\/www.aarp.org\/health\/dementia\/info-2018\/bill-gates-alzheimers-early-detection-tool.html<\/a>)<\/p>\n [3] Design Thinking: A Method for Creative Problem Solving \u2013 IDEA U (https:\/\/www.ideou.com\/pages\/design-thinking<\/a>)<\/p>\n [4] Investors \u2013 Dementia Discovery Fund (https:\/\/theddfund.com\/about\/<\/a>)<\/p>\n [5] Partnerships \u2013 Dementia Discovery Fund (https:\/\/theddfund.com\/about\/partnerships\/<\/a>)<\/p>\n [6] Philanthropists Step up with $109 Million for Alzheimer\u2019s Research (https:\/\/www.prnewswire.com\/news-releases\/philanthropists-step-up-with-109-million-for-alzheimers-research-300684541.html<\/a>)<\/p>\n