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Semaphore Forms Joint Venture with Topline Strategy

Semaphore Forms Joint Venture with Topline Strategy

to Provide Technology Due Diligence


As you may have read in our last S4 Reporter, Cris Miller, the founding director of our Technology Due Diligence Practice retired last Friday September 30th. With Cris’ departure, we decided to form a Joint Venture with Topline Strategy, a Boston-based provider of strategy consulting services to technology companies, in which Topline will take over day-to-day management of the practice.  It will operate under the name The Semaphore Technology Diligence Practice.

Over the last 5 years, we have formed a close partnership with Topline Strategy, working on dozens of engagements together. Together we’ve been able to provide our clients more complete answers to questions about their technologies and the markets for those technologies. 

With the retirement of Cris Miller, who was the driving force behind our Technology Due Diligence practice, we thought the best way to continue our commitment to clients as well as grow the practice was through a Joint Venture with Topline Strategy. Through our long partnership, the Topline team has demonstrated a true understanding of Technology Due Diligence as well as built strong relationships with our principal technologists and major clients. Having them take the business forward was a natural.  We have been working together on the creation of, and transition to this, Joint Venture for the last three months.

As part of the agreement Cris Miller will be joining Topline Strategy as an advisor and Topline Strategy will continue to work closely with our Private Equity Advisory group, providing both strategy consulting and technology due diligence services to Semaphore’s clients and portfolio companies.

As Topline Strategy will be the operating partner in our Joint Venture, going forward, please feel free to contact Jon Klein ( with any questions about Technology Diligence or visit its website Of course, you can also reach me ( if you have any questions.  I know you join us in wishing Cris well in his retirement as Topline and Semaphore  continue to fulfill our common promise and commitment to aiding investors and the M&A community with the right knowledge and correct solutions to ensure success.

Mark S. DiSalvo is the President and CEO of Sema4 Inc., dba Semaphore (, a leading global professional services provider of Private Equity funds-under-management. Semaphore currently holds fiduciary obligations as General Partner for seven Private Equity and Venture Capital funds, is a New Markets Tax Credit lender and advises General and Limited Partners as well as corporations around the world. Semaphore’s corporate offices are in Boston with principal offices in New York and London.

Topics: Technology Assessment, due diligence, private equity funds, Semaphore, technology diligence, business advisory, technology, diligence

Board Knowledge and Perspective

Posted by Cris Miller on Thursday, September 23, 2010 @ 10:45PM 

I field calls from GPs and CEOs all the time.  Invariably they are doing a deal, whether investment or acquisition, and need either verification that the technology and/or markets targeted are real or a product exists and someone wishes to buy it in the future.  Less often we get calls from Board of Directors.  Those calls are less exact as to what the caller requires.  A lot of it is because the Board member making the call carefully ensures that they have not lost confidence in the CEO (even if that is not the case) and are fulfilling independent diligence on the company itself, the markets or an acquisition opportunity.  

A while ago we had a call for help from the Board of Directors of a growth stage technology company.   After discussion, it was evident there was agreement that the firm needed to conduct both technology and market due diligence for their company.  Initially the request was for a technology review to determine the viability of commercializing the core platform technology upon which two successful products had been built. 

The CEO was a technology wizard while the Board was comprised of non-technologists and retired business people.  After Semaphore’s chief technologist had reviewed the platform product’s architecture, patent and documentation, we had a review session with the CEO.  The discussion immediately dropped into techno-jargon only the brightest geeks could comprehend and appreciate.  The conclusion was that the product was adequate for internal use but was deficient in form and substance for outside consumption.

The CEO reviewed the findings with the Board who had market/business questions about the size of the market for such a product, the competition for such a product and the value of the product.  Our market research/strategy group took the baton and came back with some interesting results that were presented directly to the Board.  It was intuitively obvious to the casual observer that:

  1. The product in its current condition was a non-starter
  2. The market for the product if it were “cleaned up” would have 5 world class competitors and 10 mid-market competitors
  3. The product in its new state would be woefully deficient in features, so much so  that its value would be difficult to sell at any price
  4. The effort should be scuttled

The lesson learned here was in order to get the correct answers, the Board needed to be educated to the best of its understanding.  To accomplish that education, independent technical and market due diligence was necessary.  The readily available technical answer alone was not sufficient since the product could have been improved.  It took the market diligence, in concert with an agreed technology product plan, to make the business case not to proceed with the questioned direction. 

Crispin Miller is the head of the Diligence Practice at Sema4 Inc., dba Semaphore (, a leading global professional services provider of Technology and Marketing diligence, and Private Equity funds-under-management services.  Semaphore currently holds fiduciary obligations as General Partner for seven Private Equity and Venture Capital funds, a New Markets Tax Credit lender and advises General and Limited Partners as well as corporations around the world. Semaphore’s corporate offices are in Boston with principal offices in New York and London.

Topics: Technology Assessment, due diligence, Semaphore, technology diligence, technology, diligence, investment, market diligence

A New Biotech Funding Model is Critical to Survival of the Industry?

Posted by Richard Gabriel on Thursday, March 25, 2010 @ 2:00PM

By Richard Gabriel

So what's wrong with Biotech financing today? What will it take to bring the Biotech market out of the doldrums and back into action? If you are having trouble finding financing for your next greatest idea then the only comforting news is that you are not alone.

Venture capital technology assessments, which are advisory diagnostics we perform frequently, have revealed some interesting information. Unfortunately, when the biotech bubble first burst, right around the 9-11 time period, there were already a bunch of troubled venture capital funds. Most of these funds became challenged because the time horizon for their investment to mature is too short for the drug development cycle. Too many of these firms believed that the capital market was an exit strategy.  True, for some it was the best thing to do, and to a point it made sense for both company and investor - but not today. Following the market collapse and then the near fatal blow that the biotech market received along with the rest of the market, venture capital in the bio tech sector was and continues to be in a state of disarray. There are, however, a few funds that actually know how to make money in the biotech world.  The problem is they too are having trouble raising capital for their next funds. Overall the VC market is a nightmare for biotech with lots of rationalization expressed - too early, too late, not enough differentiation, to expensive, too long to market.  When all boiled down it shapes up as too many people that don't know how to develop a drug controlling the capital to one of America's brightest economic and social stars - medicine.

The trend for finding later stage products is so rapacious right now that VC funds are having deal flow problems. Everyone wants to jump on the band wagon, leaving the start up holding the ‘your too early for us' bag of hot air. Ask Pfizer what they think of late stage drug investment? They just dropped $215MM on a drug from Russia that showed great clinical efficacy in Alzheimer's patients in Russia and the surrounding areas and has been in use for over 10 years, and guess what? Bring it to the U.S. for clinical trials and it shows absolutely NO clinical efficacy against the placebo! Who said late stage drug development was lower risk? Somebody tell the Pfizer board.

For $215MM and some savvy investment types, Pfizer management could have invested in 10 start-up's at $5.0MM a pop and reserved $15MM each as the investments hit their milestones. Now granted the chances of a drug start up reaching the market is pretty low, but come on folks, $215MM will buy you a lot of entrepreneurial grease, commitment and energy as well as some damn good technology. In my book, I like the odds of the new technology over slumping something just because it is in Phase 2 clinical trials or worse as Pfizer found out. So much for due diligence. But why take the chance and invest in the ‘too early' crowd of drugs and technologies?

The new drugs being developed today are smarter because they will be tied to diagnostics to help physicians decide who should get the drug and who shouldn't. This new combination technology approach to drug approval could be a decidedly better approach to drug development then what most investors are doing today with their ‘closer to market' picks. Why is that the case? The FDA likes this approach, tie a diagnostic to a drug, prove the efficacy, and your going to get approved!

The long and the short of it is that in the biotech world the ‘valley of death' extends from Boston to San Diego and swings up to San Francisco and bounces its way across the globe to the Far East, Europe and the UK. The only people who seem to be getting all the money are the people in India, China and other places that are trying to eat the pharmaceutical and biotech industries' lunch in Europe and the U.S. with generics, biogenerics and more cut rate manufacturing suites than you can shake a stick at. Nothing wrong with that but hardly any one is paying attention to new technology.

Isn't it time we looked for a better financing model for Biotech products? We think so. Got any ideas? Let us know what you think might be a better way to fund Biotech!


Richard Gabriel is head of the Life Science practice at Sema4 Inc., dba Semaphore (, a leading global professional services provider of Private Equity funds-under-management and technology diligence services. Semaphore currently holds fiduciary obligations as General Partner for six Private Equity and Venture Capital funds and advises General and Limited Partners as well as Corporations around the world. Semaphore's corporate offices are in Boston with principal offices in New York and London.

Topics: Biotech, Venture Capital, Technology Assessment, due diligence, valley of death

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