April 9, 2018

CI's biggest flop

For Connecticut Innovations, 2017 had many positives.

But in the venture capital business, investors will typically stake more losers than winners.

CI CEO Matthew McCooe said he assumes 80 percent of investments won't yield a positive return.

But what's been CI's biggest flop in recent years? A $5 million investment in New Haven Pharmaceuticals Inc. stands out in his mind.

The company won Food & Drug Administration approval in 2015 for its extended time-release aspirin, had raised over $25 million and was headed into its first year with a commercial product.

CI knew the management team and previously made money with them.

McCooe recalls telling his board of directors something that he now views as a jinx.

"We went to the board and said 'New Haven Pharma is going to be one of the top three or four best-performing companies in our portfolio,' " McCooe said. "We thought it was going to be a screamer."

But just months after the drug launched, it wasn't selling as well as hoped; the company ceased operations in 2017.

Lenders were calling the company's loans and VCs didn't want to invest more money and get stuck in line behind them. The lesson McCooe took away from the experience is to be cautious about taking on too much debt, which he said New Haven Pharmaceuticals did.

"I was sort of shocked and appalled by the whole thing because I felt that with a different capital structure and more time, the product certainly could have been successful," he said.

Read more about CT Innovations.

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