In 2011, our leadership expanded the foundation’s program-related investment (PRI) initiative from $400 million to $1 billion. This expansion reflects our excitement for PRIs as a tool to support innovation in the foundation’s program areas of global health, global development, and US education. While the majority of the foundation’s activities will still be traditional grant-making, we believe PRIs can be a critical tool to stimulate private-sector innovation, encourage market-driven efficiencies, and attract external capital to support our partners and charitable priorities.
To date, the PRI initiative has been divided between support of large-scale structured finance facilities and guaranties ($750 million) and capital for equity investments and low-interest loans ($250 million). An example of our direct investment activity is last year’s Series C Preferred Equity investment in Liquidia. We are particularly excited about the opportunity to invest alongside venture capital investors in early-stage companies to harness the innovative capacity of the biotech industry for Global Health.
Recently, we have observed a downturn in early-stage biotech investment activity as investors have grown more risk-averse. We believe that increasing our PRI activity at this time presents a mutually beneficial opportunity for both the biotech industry and the foundation. Enabled by our investment, early stage, cutting-edge firms have an opportunity to demonstrate proof of concept by developing cost-effective treatments for the diseases that affect the world’s poorest countries and populations. Because the foundation’s investment activity is driven by charitable, rather than financial goals, we can actively invest in this high-risk period of capital constraint to ensure that great teams with great platform technologies —and potentially life-saving products— can pursue global health applications in areas aligned to our program priorities.
(Note: Production of income or appreciation of property is not a significant purpose of our investment activity. Though we invest using the kind of structures and rigorous diligence processes private investors would use, any profit made from PRI activity is returned to foundation programs to fund our charitable work.)
Like our counterparts at Wellcome Trust and other foundations, we are building our skills, capabilities, and relationships to partner effectively with biotech companies and their investors. Our team is growing and we are working closely with the venture capital community to bring in senior-level investment expertise on an advisory basis. We know that early-stage investing benefits from a large, diverse portfolio of companies. Over the next couple of years, we expect to scale-up our biotech investment activity in order to take advantage of opportunities to achieve the kind of transformative innovation that can allow us to provide millions of poor people with cost-effective, life-saving treatments. We are excited about the quality and diversity of opportunities in the sector—and the promise they bring in the fight against disease.