Vector Fund Management - Investment Criteria

When evaluating the suitability of a prospective investment opportunity, Vector Fund Management emphasizes careful analysis and rigorous applications of investment disciplines on a case-by-case basis. The focal point of the investment selection strategy is to provide adequate funding to those companies that are developing or providing differentiable, proprietary, and cost-effective products or services that hold significant commercial promise in the life sciences and healthcare industries. Our investment analysis begins with a comprehensive review of a prospective portfolio company's management, technology, and the viability and market potential of commercial products and services emanating from the business effort. For the most promising opportunities, a more in-depth and thorough review will be completed with respect to specialized areas of inquiry, such as proprietary position, ongoing research and development requirements, clinical administration and regulatory affairs capabilities, manufacturing and marketing expertise, and future funding needs to assure commercial success. We utilize a number of evaluation criteria, including:

Strong Management. We believe that one of the most important factors in the success of a later-stage company is the quality of the management team. We look for companies managed by experienced life sciences industry professionals with expert knowledge of their business and the ability to work well together. The management team should also have the leadership ability to execute the exit strategies defined at the time of investment.

Cost-Effective Products or Services. Vector Fund Management focuses on companies seeking to develop more effective, less expensive products or services, which reduce the need for hospitalization or surgery and which provide higher quality healthcare at a lower cost.

Proprietary Position. We focus on companies developing innovative products with demonstrable competitive advantages. Such products should be based on proprietary technology or specialized service expertise and should meet significant market needs. In-depth review of patent portfolios is a standard part of our due diligence.

Competitive Advantage. The prospective portfolio company's products or services should have a competitive advantage in the marketplace. This requires thorough assessment of known products and products under development based on similar or competitive technologies. Comparative technology assessment is a critical focus of our due diligence.

Favorable Market. The prospective portfolio company's products or services should address a market characterized by favorable relationships among the variables of size, growth potential and competitive factors. The company's marketing strategy should be clearly defined and should be consistent with a large or rapidly developing market.

Attractive Investment Terms. The pricing and structure of the investment terms must allow Vector Fund Management to earn an attractive return on its investment. Each company is valued as an independent entity.

Appropriate Capitalization. The size of the investment round in which we participate must allow the company to implement its strategic plan. Too often, undercapitalization creates extraordinary risk for the investor.

Defined Exit Strategy. We define clear alternatives for the ultimate realization of investment returns prior to the time we make an investment in a portfolio company. Exit strategies may involve the sale of equity securities through initial public offerings, secondary public and private offerings, partial secondary sales in connection with strategic alliance/corporate partnering transactions, or merger and acquisition transactions.