To Get New Treatments Across the Finish Line, a Funder Fighting Blindness Turns to Investing

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Since its establishment in 1971 by a group of families affected by retinal disease, the Foundation Fighting Blindness has funded research into several of the most serious and common of these conditions, like macular degeneration and retinitis pigmentosa. The foundation grew to become the leading private funder of basic research into conditions that cause blindness and vision loss for more than 10 million Americans and millions more worldwide. In its 50 years in operation, the foundation has raised over $816 million to support research—including the identification of key genes linked to retinal diseases—that has enabled the launch of dozens of clinical trials to test possible treatments. All in all, a solid track record.

But clinical trials aren’t cures, and FFB leadership wasn’t satisfied with funding research that stopped short of creating actual treatments. So to accelerate the translation of research into approved treatments, the foundation opened its coffers to the marketplace. More accurately, FFB joined the venture philanthropy movement, launching a fund to invest in early-stage biotech companies working to take research results across the finish line and into the pharmacy. Established in 2018, the foundation’s Retinal Degeneration Fund (RD Fund) has invested $73 million in 10 companies to date.

This raises an interesting question for philanthropic supporters of medical research: When, if ever, does it make sense to divert resources from the traditional pathways of academic and medical research grantmaking and into the parallel world of startups and early-stage biotechs? For the retinal disease field, the answer was apparent, said CEO Benjamin Yerxa.

“Because we funded the field for decades, we’d helped build up a bolus of opportunities that were ready for translation,” said Yerxa. “So there’s a bunch of science now that’s actually moving from academia into early-stage biotechs. It made sense for us to follow that research investment into translation into the clinic and into biotechs.”

The only way to do that as a nonprofit is to set up a nonprofit investment structure. For the Foundation Fighting Blindness, Yerxa said, “Venture philanthropy was an evolution of our funding model.”

The foundation’s RD venture fund invests in companies with programs already in clinical testing  or that can be in testing in less than 24 months. Initial investments range from $2 million to $5 million. FFB is open to using multiple financial instruments, including convertible notes, equity and royalties. Because the RD Fund is managed by the foundation—Yerxa is also CEO of the fund—it can leverage all of the foundation’s institutional knowledge and resources, including its My Retina Tracker Registry, scientific advisory board, and clinical consortium.

And remember: Although FFB is a nonprofit, investing in companies is business, and in business, sometimes people make money. So the fund’s investments can lead to catalytic benefits in a couple of ways. First, its investment in a young company attracts other investors, sometimes to the tune of $5 to $7 dollars of venture money for every dollar the RD Fund puts in. Second, if an RD Fund company successfully exits, perhaps by selling to a larger pharma industry company, or if it goes public, any returns on the initial RD Fund investment go back to the RD Fund, where they can then be used to launch other new companies.

This happened in 2020, with the fund’s first successful company exit. The RD Fund had invested in a startup called Vedere Bio, which researched gene therapy to restore vision in patients who have lost photoreceptor cells in their retinas. Verdere was acquired by Novartis for $150 million up front, plus potential milestone payments, in a deal valued at about $280 million. The deal represented a four- to seven-fold return on RD Fund’s investment, depending on milestone payments. Not bad for a nonprofit.

You hear more about venture capital in the world of finance and investment professionals, but the notion of venture philanthropy has been around for quite some time, too—it’s said that John D. Rockefeller III first floated the idea back in 1969. But it appears to be growing more popular, along with the related field of impact investing.

One successful example of venture philanthropy was the Cystic Fibrosis Foundation, which had funded research to uncover a key gene for that condition. CFF’s first $40 million investment back in 2000 helped advance the development of a breakthrough drug that enables some CF patients’ lungs to function at near-normal levels, vastly improving and extending lives. Since then, the CFF has invested at least $425 million through its venture philanthropy.

Based on the success of its first retinal disease fund—RD Fund 1—the Foundation Fighting Blindness has started fundraising efforts for RD Fund 2. The second fund will be able to make investments in new companies and technologies, as well as follow-on investments in companies backed by the first fund.

As a public charity, FFB raises money for its grantmaking through a combination of events like dinners and walks, as well as receiving some larger individual donor gifts. But the RD Fund, says Yerxa, has demonstrated through the successful sale of Verdere its ability to pay for itself and perhaps keep growing indefinitely.

You can say this for venture philanthropy: The funder has a chance to get its investment back, and then some. Research grant dollars, meanwhile, important as they are, never come back to the grantmaker at any level of return.

“I think if we do it right, it could be evergreen,” said Yerxa. “Even if you don’t get a multiple, you can keep investing again and again.”