At NEA, we see this widespread re-architecting as one of the greatest opportunities in tech. It’s the reason we’re so excited to partner with Kaazing, which powers secure, real-time communications for web and mobile applications. Specifically, Kaazing delivers real-time data through a standards-based software solution with unmatched features, performance, and scalability. Independent developers and enterprises alike can use Kaazing to quickly deploy and scale applications that perform in real-time, on all mobile devices and browsers.

True real-time interactivity is a huge step forward on the Web and mobile devices. Historically, it has been difficult to achieve real-time capabilities, since the Web has evolved under a request-response paradigm, which is asymmetric and half-duplex with short-lived connections (e.g., a user requests a web page and a server subsequently responds with the right data). A few legacy technologies such as Flash and long polling provided band-aid solutions, but generally these are insecure, bandwidth-intensive, and struggle to scale.

About five years ago, the team at Kaazing began creating a solution called WebSocket, a network protocol that would enable real-time web applications through persistent, full-duplex communication (rather than request-response). The WebSocket protocol became a core part of the HTML5 standard that is now reinventing the desktop and mobile web. Today, WebSocket is a universally adopted protocol that is available on every modern browser and compatible with every native app. It is also a key technology built into Kaazing’s high-performance, protocol-rich, gateway products.

The implications are tremendous – we’re watching Kaazing’s products bring enterprise applications to life across the entire Internet. For the Web and mobile, Kaazing delivers a modern and powerful way to serve any kind of real-time updates or user collaboration. Live data is now easily available to any application, including voting, auctions, trading, and more. Enterprises are seeing the potential to modernize their on-premise systems, such as business intelligence and network monitoring, for high performance deployment to the Web and mobile devices. Beyond extending enterprises’ internal data to the Web in real-time, Kaazing also enables real-time data to and between cloud networks, functioning as a powerful and elegant replacement for VPNs.

Kaazing’s Enterprise Gateway is bringing this revolution to enterprises, with a complete solution that works easily with existing systems, scales linearly, and securely handles every challenge arising from the hostile Web and demanding applications. Kaazing has ensured support for every major message-oriented and enterprise network protocol, so enterprises can extend their on-premise applications to the client. Importantly, Kaazing supports new and legacy browsers, so applications deployed with Kaazing can work with very old browsers such as IE6. Customers across demanding sectors, such as financial, media, logistics, and government, are universally astonished at how easy it is to deploy a Kaazing gateway, as well as how smoothly it integrates into existing systems. For these customers, Kaazing is not only enabling an entirely new class of application, but is also reducing latency and bandwidth use by 10x-100x.

Today’s technology is moving forward at breathtaking speed, and we believe Kaazing’s enterprise products are key to keeping pace with innovation in the mobile and cloud space. Just as banks, airlines, utilities, and tech companies have partnered with Kaazing to deliver mission-critical, high-performance applications, we’re thrilled to join the team that is powering the next generation of web and mobile apps.

Almost four hundred years ago, 102 English Pilgrims set sail westward toward an unknown land. They didn’t know whether they would survive their harsh journey, but they believed so strongly in their pursuit of freedom, and in their hopes for economic prosperity, that they dared to do what very few had done before. They became one of the first sets of immigrants to arrive at a frontier that would soon become the United States of America. Over time, the United States became a nation of immigrants—an eclectic cultural collage, a melting pot of ethnic groups, and a vibrant microcosm of the world.

Today, America embraces a full spectrum of heritages, from those whose families have been here for centuries to those who just recently immigrated. All of us, at essence, are immigrants. And increasingly it has been immigrants that have empowered our country’s founding promise and perhaps most cherished ideal: entrepreneurialism. America has let them innovate, and in return they have innovated for America. In 1784, the second-generation immigrant Benjamin Franklin invented bifocals; and in 2003, first-generation immigrant Elon Musk, who himself was born in South Africa, founded Tesla, building on the shoulders of thousands—if not millions— of inventions and companies launched by immigrants in between. Today, more than 40 percent of the Fortune 500 are companies founded by immigrants or their children. And myriad of America’s most iconic brands are the brainchildren of foreign-born, first-generation Americans. Consider merely Pfizer, Google, and Procter & Gamble as a few examples.

These are the companies, the entrepreneurs, the ideas that make America what it is: a beacon of bold innovation for millions across the globe—a city upon a hill—an inviting shore. And this is the reason I am so thrilled to announce the launch of Innovate for America, a nonprofit aimed at educating Americans about the staggering impact of immigrant entrepreneurs, by measuring the number of jobs they have created. My co-founders Scott Sandell, Carmen Chang, Chetan Puttagunta, and I reached out to a little over 35 of our friends who are building transformative companies as immigrant founders. These companies are now sharing the number of active U.S. employees they have hired across multiple locations. And we are aggregating this data and packaging it into a shareable widget that blazons the total number of jobs enabled by all companies participating.

As the IFA network grows to more companies, and companies hire additional employees, the total number of jobs IFA immigrants have created will continue to rise. Many of the participating companies, as well as non-immigrant-founded entities, have already begun to place this widget on their homepage. Incidentally, the Innovate for America widget, as well as its website, workflow, and back-end, were designed by a hard-working team at another immigrant-founded company, Bloomreach.

With the public launch of our effort, today marks the beginning of Innovate for America. Yet already we have mustered 38 venture-backed private companies hailing from over 20 countries, fueling more than 3700 jobs. This ship has just set sail. And we cannot wait to see how far it goes.

You can read about the launch here in a story covered by The Economist.

Atrial fibrillation (AF) is a difficult disease for patients and an expensive problem for our healthcare system. It is the most common heart rhythm disorder, characterized by a rapid and irregular heartbeat, causing heart palpitations, chronic fatigue, and debilitating pain as well as a 4-5 times increased risk of stroke. While anti-arrhythmic drugs may successfully control the disease and reduce risk factors of stroke in some patients, these drugs are often poorly tolerated and are frequently incapable of controlling disease symptoms.  As an alternative treatment strategy, minimally invasive catheter ablation has been steadily gaining increased support.  But despite the over 6 million patients affected by AF in the U.S., there were still only 130,000 ablations performed in the U.S. in 2012.

With such a large and growing unmet medical need, why so few cardiac ablations?  For starters, ablation is hard.  The current strategy for curing AF with catheter ablation relies on a procedure called pulmonary vein isolation (PVI) to block triggers that initiate AF.  Electrophysiologists who can do this well are true artists—PVI requires a painstaking process of linking together a series of point to point lesions inside the heart using a catheter in a procedure that can take anywhere from two to ten hours. Frequently patients must undergo a second procedure within months of their first because their AF was not improved or has subsequently recurred. When a patient’s AF is successfully terminated, it’s a remarkable cure. But unlike Sex Panther by Odeon, data from large clinical trials evaluating AF ablation outcomes indicate that less than 60% of the time, it works every time. In several large studies, nearly half of patients treated with a single PVI procedure see their AF recur within one year. This is frustrating for both patients and clinicians—many of whom, as a result, decline to incorporate ablation as part of their practice.

Over the last decade, dozens of medical device companies have attempted to make these “one size fits all” PVI procedures easier and more reliable with innovations around different catheter designs, energy sources, robotic catheter steering and large installations of sophisticated anatomic imaging systems. Large medical device companies like Johnson & Johnson, Medtronic and St. Jude have built huge franchises with these products. These innovations to improve PVI are valuable, but focusing only on isolating triggers as an AF ablation treatment strategy has overlooked another key component to these arrhythmias. Enter Topera Medical and the ability to identify and ablate previously unseen electric rotors and focal impulses that sustain the arrhythmias.

Topera’s next generation 3-D electrophysiological mapping system is a breakthrough technology that is uniquely capable of mapping and visualizing electric rotors and focal impulses that sustain the irregular rhythms of AF, enabling electrophysiologists to provide more precise and appropriate therapy for their patients. Using this technology to identify the locations of rotors and focal impulses, which is often then followed by catheter ablation to eliminate them, clinicians across multiple labs have demonstrated the ability to achieve freedom from AF for significant numbers of their patients without recurrence of their symptoms.

Topera announced a $25 million round of financing today, and NEA is delighted to lead the round and partner with this pioneering company as it prepares to launch its RhythmView™ Workstation and FIRMap™ Catheter in the U.S. and Europe. While the company’s technology and outcomes seem almost revolutionary, it is important to note that their approach to the mapping of complex arrhythmias like AF is closely and elegantly linked to the way clinicians have historically approached cardiac ablation for simple arrhythmias. The key to successful treatment is to gain an understanding of the precise electrophysiology underlying each arrhythmia with an emphasis on identifying the critical circuits in the heart that sustain an arrhythmia. Simple arrhythmias have characteristic electrical patterns that have been easily resolved using traditional diagnostic mapping systems, and when their reentrant circuits are pinpointed and ablated, procedure success rates exceed 80-85%. For the chaotic electrical patterns of complex arrhythmias like AF, clinicians are now able to use Topera’s RhythmView™ System to pinpoint the focal impulse or electric rotor sustaining the arrhythmia. This identification allows them to more precisely target therapies such as catheter ablations and achieve success rates on par with those of simple arrhythmias.

To me, what’s equally impressive about Topera is the origin of its proprietary technology. This is in large part a credit to co-founder Sanjiv Narayan, M.D., Ph.D., Professor of Medicine at UCSD. (Stay classy, San Diego!) Dr. Narayan is a practicing cardiovascular electrophysiologist who also has a doctorate in neuroscience and a master’s degree in software engineering. He is that uniquely situated individual who, out of intellectual curiosity and compassion for his patients, committed to apply his years of postdoctoral study and insight into resolving the complex electrical signaling associated with EEGs of the brain to the complex and chaotic electrical patterns associated with atrial fibrillation in the heart.

Over the course of several years of collecting electrograms from his patients, he wrote and tested and rewrote and retested his own software code that analyzes complex rhythms of the heart and resolves them into 3-D representation of the dynamic, localized electrical activity of cardiac tissue. In addition, he undertook the process of demonstrating through rigorous clinical study that by performing conventional PVI plus targeting and ablating the rotors and focal impulses in the heart, single procedure AF ablation success rates could be dramatically to north of 80% as much as two years after the procedure compared to PVI alone, or double the success rate of the current standard of care today.

Since the first presentation of Dr. Narayan’s technology and seminal clinical results at the Heart Rhythm Society meeting in 2011, he has partnered with over a dozen other clinical investigators around the world to replicate his results and further refine Topera’s product. We have followed the team’s progress closely over that time, and recognize their commitment to leading the way in building the clinical and scientific evidence supporting a potential fundamental shift in how AF is diagnosed and treated. We’re thrilled to partner with Dr. Narayan and Topera’s management team—along with a new strategic corporate investor—to bring Topera’s technology to the market. As an investment, it is a rare occasion when we find an opportunity to apply a diagnostic technology—where its use in a procedure imparts very little incremental risk to the patient—that can have such a profound impact on improving the overall efficacy of a treatment in a growing market with a significant unmet clinical need.  More important, we’re proud to support Topera in its effort to dramatically improve the standard of care for diagnosing and treating complex arrhythmias for the benefit of clinicians, their patients and the healthcare system.

Since the late 1970s, NEA has invested in healthcare technology innovation as part of our Healthcare Services practice, with applications ranging from patient records to medication distribution to benefits administration. Yet almost without exception, all have focused on providing software or systems solutions within the healthcare ecosystem. Even WebMD was originally created for healthcare providers. In recent years we have invested in a number of services companies focused on direct-to-consumer, like Elements Behavioral Health, but have largely avoided the recent swell of “there’s an app for that” companies targeting individuals.

Mobile, social, gaming, Software-as-a-Service and other technology trends, coupled with an increasingly empowered user population eager to adopt those new technologies, have spurred a massive wave of healthcare tools and applications aimed directly at consumers. From getting the best prices for medication to counting every step and calorie, many of these tools have the right idea—there’s no doubt that population health management through consumer engagement is an attractive potential market opportunity. But for several reasons, we have kept an eye on the tide without plunging into the ocean.

For starters, we have always been intensely focused on healthcare products and services that accomplish, at a minimum, these three objectives:  improve access, increase quality and reduce cost. These themes are consistent throughout our portfolio, and it makes for a high hurdle when considering consumer-facing technologies. For NEA to invest in a social platform or mobile application, it must not only engage consumers but also garner the support of the medical ecosystem—both are crucial for driving the kind of meaningful, sustained impact on patient behavior and/or quality of care that guides our investment thesis across the healthcare landscape.

With respect to the latter part of that equation, Welltok clearly gets it. Until now, no one has figured out how to satisfy the diverse needs of constituents (i.e., save the payors money, increase positive outcomes for the providers and improve quality care for the consumers). By combining the best in purpose-driven social, community, personalization and gaming technologies and by aligning incentives in a way that directly motivates positive behavioral and lifestyle changes, Welltok’s social health management strategy truly has the potential to translate into better quality of life for consumers while reducing overall healthcare expenditures.

Just as importantly, now is the right time. The healthcare system is increasingly open to exploring innovative consumer facing models to manage rising costs while consumers are looking for a solution that helps them better navigate their own health management.  Since its commercial launch in late 2011, WellTok’s CaféWell social health network has become the leading platform for health plans and other population managers, with two of the nation’s five largest health plan organizations among its customers. The company is currently contracted to serve nearly 10 million consumers on its flagship CaféWell platform and is looking to sign its tenth customer in the coming months.

I have personally known Jeff Margolis since he was the keynote speaker at the NEA Healthcare Services CEO Conference in 2009, and when it comes to consumer engagement, there is no one better equipped to navigate the complex system of payors, providers and consumers. (After all, he literally wrote the book—The Healthcare Cure: How Sharing Information Can Make the System Work Better). Across the rapidly growing landscape of consumer-focused healthcare technology companies, only a handful have the potential to effect the kind of change that will truly transform our healthcare system. We believe that Welltok represents the right approach at the right time with the right team.

Mohamad Makhzoumi is a Partner at NEA.

The answer to this integration problem was supposed to be solved with availability of APIs (Application Programming Interfaces). However, today, there are some 13,000 APIs available and the number is expected to double within the next twelve months. As large enterprises set out to design complex workflows within their infrastructure, their only option today is to create point-to-point integration using these APIs. Not only is it cumbersome and inefficient to maintain this infrastructure, it becomes exponentially harder as application vendors are continuously changing their APIs. This complex web of connectors is fragile and the cost of infrastructure breaking is enormous.

Enter MuleSoft, the only integration platform that is built for the world of diverging applications and infrastructure paradigms. Powered by an open source community of 150,000 developers, MuleSoft has the unique combination of both depth of functionality as well as ease of use. MuleSoft is now the fastest growing integration platform and is used by 3,500 companies worldwide including 35% of the Global 500.

Today we are delighted to announce our investment in MuleSoft. The $37 million in financing will power MuleSoft to continue its rapid growth trajectory by focusing intensely on its customers, expanding internationally and innovating on its industry defining product.

We get even more excited about MuleSoft when we think about the fact that the company is bringing automation and software to what is today a $500bn (that’s right $500bn) point-to-point integration market largely comprising services and consulting. We’ve been lucky to back category disrupting companies like Salesforce and Workday, and we are incredibly excited to have the chance to work with the world-class team at MuleSoft to help build another category defining company in integration.

Inevitably, somewhere between euphoric inception and long-awaited realization, the shine begins to look a bit tarnished. (Remember when no one thought commerce would work on the web?) But there is always a tipping point, and I believe we’ve reached it with cloud computing.

One by one, the barriers to cloud adoption have crumbled. Bandwidth and storage are no longer bottlenecks. The wireless internet is pervasive, spurred by the rise of tablets and smart phones and skyrocketing mobile adoption rates. Software-as-a-service (SaaS) applications are proliferating, enterprise adoption of cloud-based infrastructure is increasing, and there is an ever-growing menu of APIs for point-to-point integration.

Furthermore, wireless devices plus cloud-based applications wreak havoc on traditional models for security, networking and just about everything else in the enterprise data center—including getting all those moving parts to work together. With this explosion of endpoints, integration is an immense opportunity in enterprise technology today—not just integration between cloud applications, but between cloud and on-premise applications and systems as well. Enter MuleSoft—the integration platform that brings it all together.

APIs are the driving force behind MuleSoft’s new Anypoint™ Platform, in response to the sheer volume of APIs and the connectivity requirements that encompass both cloud and on-premise architecture. The number of open APIs has doubled in volume every year—from just a handful in 2005 to more than 13,000 today, with hundreds of thousands projected in just a few years. Seamless business processes between applications, data sources and APIs is critical, and MuleSoft is positioned to meet and scale with the demand.

Incumbents, once the backbone of the enterprise data center, are frankly not positioned to lead this wave of next-generation architecture. In most cases, it would be detrimental to their business model even if they could adapt their antiquated technology to a modern cloud architecture–something most experts think is nearly impossible. And, of course, the action in the enterprise infrastructure space is in the cloud, not the data center. CIOs are recognizing that the cure is no longer worse than the disease, and the result is a whole new class of customers and a whole new class of startups. Among MuleSoft’s customers are companies that are helping to shape these seismic shifts in consumer and enterprise technology, like Box, along with corporate giants like WalMart and MasterCard. This reimagining of data center architecture, which began at Internet companies like Google and Amazon, is now taking root across every type of enterprise, from cutting edge to common thread.

Late last year we brought together about 50 companies, many from within our portfolio, for a Service Provider Summit. The idea was to bring together players in this new ecosystem and get them connected, especially where they overlap or are working toward a common goal. It’s these companies who will create the “New Enterprise” and I’m excited about the role MuleSoft can play in delivering on the long-awaited (but never overstated) promise of cloud computing.

Conversely, networking infrastructure has lagged in the area of virtualization. Network planning has traditionally meant overprovisioning—i.e. deploying equipment capable of handling the highest possible traffic that could pass through that network node. Yet in today’s highly dynamic, cost-conscious and rapidly expanding data center environment, there is a great need to cost-effectively and intelligently utilize networking devices.

The buzz on software-defined networking (SDN) as the solution, with its central coordination aspects and potential to dramatically re-architect the networking landscape has reached an all-time high. However, adoption volumes remain relatively modest. Why is this?

SDN Landscape
To start, let’s get a sense of the SDN landscape. Broadly defined, it’s an industry-wide effort to separate and centralize control plane elements from distributed data-plane elements in networking equipment. The purpose is to enable flexible and dynamic provisioning of the data-plane to adapt to varying traffic with proper security, virtualization and quality of service (QoS) across multiple tenants and applications in a cost effective manner. A significant number of vendors have rallied towards use of the OpenFlow specification for SDN, which describes functionality in the data-plane (switch) and an interface between a centralized controller and the data-plane. The growing SDN ecosystem now includes switches (Pluribus), virtual switches (VMware), L3-L7 services (Embrane), orchestration products (NetCitadel), routers and access points from a range of vendors.

A parallel but complementary effort, network function virtualization (NFV) initiated by 13 major carriers is driving a shift towards virtual software appliances rather than purpose-built hardware networking appliances that have been popular over the last two decades. NFV enables these virtual SW appliances to run on powerful multi-core, commodity server hardware.

The promise of SDN & NFV concepts is significant, with the following benefits for customers, similar to what has been achieved by compute virtualization:

1)    Lower capital expenditures and operating costs through sharing of equipment across multiple tenants and applications
2)    Flexible and dynamic deployment of networking resources with security and QoS
3)    Ability for users, applications or networking services to scale performance up or down elastically based on demand
4)    Modular and standard software architecture and APIs enabling multi-vendor solutions and a rich ecosystem of third party solutions
5)    Fault and diagnostic capabilities not available in existing networks
6)    Greater feature velocity and innovation

(Source: NFV White Paper authored by Network Operators, Oct 2012)

SDN: Major hurdles to overcome
While the vision of SDN is very attractive, it faces several challenges that could slow or hinder widespread adoption:

1)    Networking Industry Incumbents: Today, major vendors provide a complete stack of networking hardware and software. While their products interoperate at the network packet level, the management and provisioning of their devices plus certain services are proprietary, enabling higher margins and customer stickiness for the vendors. The leading market share vendors, for obvious reasons, don’t like a significant industry transition that could negatively impact their share or profits, and are doing their best to cautiously steer it in their favor.

2)    Interoperability with legacy, deployed equipment: To achieve widespread adoption, new networking equipment needs to work well in existing networks. If the full promise of SDN requires forklift upgrades, that is not going to happen! Companies like Nicira (acquired by VMware) recognized this and provided a compelling overlay solution that is compatible with existing infrastructure. However, more work is required to fully exploit all the capabilities in current and upcoming SDN-enabled equipment, such as network virtualization, security and QoS features in various data-plane nodes.

3)    Incompatible, different standards and the business goal to differentiate hardware: The OpenFlow switching specification has done an excellent job with data-plane standards and southbound interfaces between the centralized controller and the data-plane. However, different vendors are adding proprietary extensions to OpenFlow to differentiate their solutions, which could limit multi-vendor deployments. Additionally OpenFlow itself may evolve and unless all equipment is future-proof upgradeable, different OpenFlow versions will co-exist in the network. Finally, standardization for northbound interfaces, between the centralized controller and the application or management services, is still in its early stages.

4)    Confusion and lack of compelling value for new customers: While network and server administrators are excited about SDN’s vision and are monitoring this trend, their first job is to support existing networks and businesses. Without a compelling near-term value proposition in cost, performance or manageability, they are unlikely to quickly and widely adopt SDN.

Widespread SDN adoption: Learning from other platform successes
Consider platforms that have achieved widespread industry adoption, like the x86 PC/Server or iPhone/Android smartphones or, in the networking space, Ethernet’s win over Token Ring and other proprietary connectivity solutions. Ultimately, each evolved into a stunningly successful platform with well-defined interfaces, a thriving ecosystem, rapid innovation and broad adoption.

However, in each of these cases, the initial product did not emphasize the platform or ecosystem as the primary value proposition. Instead, the focus was on the product’s tremendous benefit. The PC democratized computing by providing low-cost access to businesses and consumers. The iPhone delivered a huge leap in smart-phones through touch interface, larger screen and a complete browser. Its initial version did not even support third party applications. Both classes of devices fit into existing infrastructures without forklift upgrades. With Ethernet, it adapted to the inexpensive and ubiquitous twisted pair wiring and provided compelling advantages in cost and usability.

In sharp contrast are platform- or framework-focused initiatives that flickered but failed to ignite. Remember OpenWave HDML/WML, which shipped in large volumes in handsets but were never widely adopted? Or Taligent’s object-oriented Pink OS for PCs? In the enterprise, DCE and Corba both tried and failed. Considering the hurdles to SDN adoption—industry incumbents, legacy equipment, compatibility challenges, and a tough sell when it comes to near-term value—these examples seem particularly instructive.

The lesson? Companies should develop SDN products that deliver huge near-term value to the customer with ease of deployment, while conforming to the overall SDN frameworks and specifications. Such products have the ability to ship significant volumes, which in turn will attract third party developers. Interestingly, there are opportunities for multiple products and companies to create platforms at different levels, ranging from L1-L3 products (e.g. Pluribus) to virtualization/control layers all the way up to intelligent provisioning of the data-plane elements (e.g. Embrane). Companies that do this first will be major winners, while others will end up supporting them as part of the overall ecosystem build-out.

Rajiv Khemani is an Executive-in-Residence with NEA.

As a past product designer, I have to admit I’m biased to pay special attention to designers. I believe it’s the perspective of these entrepreneurs that leads to real changes in consumer behavior; the type of change that introduces the groundwork for new web, mobile or interactive platforms to be built in the consumer (and increasingly, the enterprise) spaces. We’re interested in encouraging these designer founders to start companies that can change the world, and we want to help as they start thinking about putting their plans in place.

The NEA Studio is a place where designer founders can take their prototype to product and more importantly, their nascent idea to a grand vision. The exact format and details can be found here. Each week, we’ll have various advisors meet with the entrepreneurs. They will also receive dedicated weekly attention of investors at NEA who are willing to open their networks and to devote expertise and attention to the designers’ projects.

This is a new effort for NEA. This is the first time we’ve created a program to work with entrepreneurs in a formal way before they raised seed or series A capital, and we’re excited to start the NEA Studio for this reason. We’re starting this in NYC because this is where we heard the most from designer founders, but we’re open to considering other cities in the future. We’re experimenting and having a great time doing so thus far.

*Interested candidates can apply here through April 5.
**Special thanks to the new coworking space in Union Square, work-bench, for dedicating an area for the NEA Studio.

Coupled with an unstable economic environment and a widespread aversion to capital-intensive projects, the hurdles to bringing new treatments and therapies to patients seem higher than ever, and the threat of an innovation bottleneck (with grave consequences for human health) looms large. Clearly the industry must redirect the flow or find new sources of capital to survive.

This transformation underway in life sciences is a core focus of the upcoming CED Life Science Conference, where participants will discuss the broader funding landscape, dynamics within the venture capital industry, and emerging opportunities to pursue less traditional sources of capital. The flow of capital will certainly be a key topic for discussion at CED and throughout 2013, and we can expect several key shifts to emerge or become more firmly rooted during the course of the year.

A New Role for Big Pharma

What has begun to unfold in the life sciences industry is a massive paradigm shift of the role “big pharma” plays in the startup ecosystem. As more and more VCs pull away from the early-stage biotechnology and medical device sectors, many big pharmaceutical and biotech companies have stepped in and supplied an influx of much-needed corporate cash. Why now?

Historically, big pharma has honed in on products as they enter late-stage development, seeking low-risk opportunities to close the gap on existing pipelines. Previously, the corporate venture groups participated in financings—fast forward to now, and we see more pharma-led financings. Ironically, at the same time, pharma is also cutting back on R&D budgets, and exiting certain therapeutic areas.

This crisis has delivered a wake-up call for big pharma in recognizing the importance of platform-oriented companies, which are focused on creating new, disruptive, and broadly-applicable technologies rather than a specific therapeutic product. Structured to foster innovation, these types of companies are uniquely positioned to make technical and scientific advancements that will fuel the next generation of therapeutics. Large pharmaceutical and biotech companies depend upon a thriving life sciences ecosystem, and platform-focused companies are an increasingly important factor in that equation.

Corporate R&D “Going to Where the Science Is”

Corporate R&D, equally important to the ecosystem, has increasingly made “going to where the science is” central to its strategy. Large corporations are increasingly collaborative, partnership-focused, and are cultivating hubs for innovation.

For example, Johnson & Johnson recently announced the launch of four research centers in prominent life sciences communities, including Boston, California, China and London.  Merck established the California Institute for Biomedical Research in San Diego to conduct early-stage drug research. Bayer partnered with the University of California, San Francisco, to establish an innovation center focused on helping basic research discoveries progress to the drug development stage. Pfizer has also announced several academic relationships, all with a goal of early access to cutting edge technology and relationships with academic leaders in their fields. We can expect to see more of this in 2013.

Casting a Wider Net

Clearly, reviving the flow of capital to life sciences cannot (and should not) be fueled by big pharma alone, and there is still considerable room for growth in developing new strategies for funding. A successful future for the life sciences industry will require medical startups to think outside of the box to bring in fresh capital, and they have already begun to do so.

During the last few years, the concept of alternate funding sources appears to be gaining traction in life sciences. Liquidia Technologies received a $10 million equity investment from the Bill & Melinda Gates Foundation in support of their development and commercialization of safe and more effective vaccines.  Hedge funds in Boston and San Francisco are the latest backers of Intarcia Therapeutics, which is developing a potential treatment for type-2 diabetes.

Pharma-backed VC funds companies are also beginning to flow significantly more money into deals, proving their willingness to elevate their role from simply strategic investor to financing leader in this space. As life sciences startups lay the bricks for alternate roads to funding, we’re likely to see increased momentum when it comes to finding new sources of capital and, longer-term, a much more diverse life sciences ecosystem.

The Seeds Are Planted

Although the life sciences sector is struggling right now, it appears that the seed has been planted for new survival strategies. As the VC capital channels to life sciences continue to shrink, the industry must become much more flexible and innovative in their fundraising process through big pharma’s increased support of platform and product-oriented companies as well as medical startups’ exploration of new avenues to fresh capital. The evolution of the psyche of the life sciences investment ecosystem only stands to continue in 2013 and, for the sake of all of our health, let’s hope it does.

This post was also published on the CED blog Start Something. Ed Mathers is one of three CED Life Science Conference 2013 Co-Chairs, and has authored this post on life science financing ahead of the conference on February 27-28, 2013, where these topics and predictions will be discussed in keynote addresses, on the conference floor, and in expert panel discussions with investors and life science leaders. For more information and to register, visit the CED Life Science Conference website.

NEA’s commitment to championing education is a central part of our organizational culture, and it’s demonstrated through our investing strategy, our sponsorships and mentoring activities, and our deep affiliations with numerous academic institutions. We embrace the chance to interact with student groups, and when NEA’s Chairman and Co-Founder Dick Kramlich recently had an opportunity to host an extraordinary group of students from The University of California, Berkeley, he jumped at the chance. (Well, figuratively jumped since he is currently recovering from a tennis-induced injury!)

Last Friday, Mr. Kramlich spent an afternoon with the prestigious group of 2012 HULA Scholars and their Silicon Valley tour guide Aaron Mendelson, a Haas School of Business alum and Director at Credit Suisse.  HULA (HAN-SF Undergraduate Leadership Award) is a merit-based scholarship program awarded annually by HAN (Haas Alumni Network) to recognize top Haas students who’ve demonstrated remarkable leadership achievements. As part of the HULA program, the enthusiastic group spent time touring VC firms and Silicon Valley businesses.

At the final stop of their field trip, the HULA Scholars were afforded an intimate look into the workings of the VC world. Mr. Kramlich offered a personal account of his storied career, the evolution of venture capital, and the history of NEA.

Participant Sandy Diao, a senior studying business administration, said, “We were not only inspired by his achievements, but by his humble and giving nature. He shared words of wisdom that I’ve hand copied into my daily planner: Respect failure. Don’t be afraid of it.”

A number of students expressed feeling motivated and inspired by their time at NEA. As Mr. Kramlich and other NEA partners noted following the HULA Scholars’ visit, we owe them our thanks, as they have motivated and inspired us as well.

NEA Chairman & Co-Founder Dick Kramlich and UC Berkeley HULA Scholars

To find out more about HULA and see the 2012 scholarship recipients, please visit: http://sf.haasalumni.org/category/hula/