The Dementia Discovery Fund (DDF) is a venture capital fund managed by the UK firm SV Health Investors. 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’s Dementia) . Through this lens, the DDF can be thought of less as a VC firm, and more as a massive, ongoing crowdsourcing competition. Private innovators in the dementia space are incentivized to bring their ideas to the DDF at any time. If their idea is deemed to be a “winner” they may receive much needed venture funding and world-class business guidance from the DDF. The fund structure also acts as a tool for ensuring financial discipline as the DDF selects and invests in these winning ideas.
Open innovation is crucial to the DDF’s management of product development. The fund, who’s capital comes from a combination of the UK government, several large pharma companies, and philanthropists such as Bill Gates , has a 15 year mandate to validate novel hypotheses and expand the breadth of targets and mechanisms in development for dementia . This strategy aims to create such a wide distribution of potential solutions that it increases the likelihood that at least one will be effective. 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 , 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.
As the DDF grows its portfolio of early-stage dementia drug candidates, its lack of diversity leaves it extremely exposed to risk. But at the same time, the fund is able to capitalize on the focus of its goal to begin to mitigate risk. 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 . None of these investments would be feasible at this scale for a single, early stage drug candidate. However, when they can be used by all companies in the DDF portfolio, the costs are spread out and the investment is more justifiable. In addition, access to these resources allow the portfolio companies to operate more efficiently, ultimately reducing risk to the DDF.
In the long term, the DDF implements open innovation responsibly by structuring themselves as a VC fund. The structure of individual investments is typically to seek an ROI gradually through milestone based incentives . By seeking an ROI from the “winners” of its open innovation, the fund extends the length of its sustainability, regenerating capital to invest in future ideas. The milestone incentives are important for de-risking as well, since they call for incremental returns before the riskiest validation studies are conducted.
The DDF seems to have a good strategy for sourcing and developing novel ideas for dementia medications through open innovation. However, a major drawback is still the immense risk. Assuming a diverse portfolio is not an option, there are still a few additional steps the fund can take to continue to reduce risk. One is focus on the next round of investors earlier on in the development cycle. 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. This option would allow the DDF to earn some returns up front and share the massive downside risk of a negative study. Another step would be to increase its push for fundraising via philanthropic routes. Private philanthropists have injected over $150M into Alzheimer’s research in the past year , . By building a consortium of dementia research resources, DDF is creating a sustainable competitive edge in the Alzheimer’s research market. 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.
As funding remains to be the main concern with the DDF’s open innovation strategy, one question that remains is whether there are more strategies to making this finance sustainable. Across the rest of the VC industry, one would imagine there are other sectors that achieve similar advantages in consolidation of resources. Are there learnings that could translate into the context of the DDF and allow them to remain sustainable, or even become profitable over time?
(WORD COUNT 785)
 About the Dementia Discovery Fund – Dementia Discovery Fund (https://theddfund.com/about/)
 Bill Gates donated $50M following father’s Alzheimer’s diagnosis (https://www.aarp.org/health/dementia/info-2018/bill-gates-alzheimers-early-detection-tool.html)
 Design Thinking: A Method for Creative Problem Solving – IDEA U (https://www.ideou.com/pages/design-thinking)
 Investors – Dementia Discovery Fund (https://theddfund.com/about/)
 Partnerships – Dementia Discovery Fund (https://theddfund.com/about/partnerships/)
 Philanthropists Step up with $109 Million for Alzheimer’s Research (https://www.prnewswire.com/news-releases/philanthropists-step-up-with-109-million-for-alzheimers-research-300684541.html)
 Portfolio – Dementia Discovery Fund (https://theddfund.com/portfolio/)