Ian Jones took the helm of a lively panel debate at the Biotech and Money/Medtech and Money World Congress 2018 on the continued influence of venture capital on the sector and their appetite for growth and follow-on investment. Speaking on the panel were the following venture capital and corporate venturing investors, providing perspectives from different corners of the continent: Giovanni Mariggi, Principal at Medicxi; Deborah Harland, Partner at SR-One; Dirk Kersten, Managing Director at INKEF Capital; Patrick van Beneden, Partner at GIMV; Vanessa Malier, Managing Partner at Kurma Partners. The following article recaps their discussion.
The state of the market
While the European venture capital market has faced its fair share of headwinds, Clive Cookson, Science Editor at The Financial Times, said on a keynote panel at Biotech and Money/Medtech and Money World Congress 2018 that “Europe has never had it so good”. Biotech investment is also continuing to fare well, with money consistently flowing into the ecosystem.
For those companies at the start of their journey, seed and early stage investment up to around $5 million is typically much easier to secure. Raising larger amounts later ($20 million and above) is considerably harder, and therefore choosing the right investor to support the senior team throughout this process is vital. For those taking a longer-term view of a company’s life cycle, the IPO market in the UK is also weaker compared to the US – figures from Dealogic show that just $7 billion was raised in IPOs in London compared with $17.2 billion in 2015. For biotech start-ups in the UK, this is likely to mean that some will have fewer opportunities for exit and may even look for investment in the US that would offer them a route to IPO across the pond.
Furthermore, specific areas of biotech have their own challenges. For example, while investment in life sciences broadly remains strong, most VCs view aggrotech as notoriously challenging from a profitability perspective, as there are fewer potential acquirers beyond the ‘Big Four’. While there are some specialised aggrotech investors, it can be more difficult for start-ups in this area to raise funding.
Brexit and biotech investment
For some European VCs investing in UK-based companies, there will undoubtedly be an additional associated risk from currency fluctuations in the lead-up to Brexit, particularly during a transition period. While this won’t mean European VCs avoid investing in the UK, there will be an additional hurdle to jump. Funding is already being affected too. It is anticipated that following Brexit, the European Investment Bank – that has historically supported the UK’s venture capital industry – will pull up to €9 billion of investment from the UK technology sector. This would have an impact on all sectors, including life sciences.
Taking Switzerland as an example, it is likely that UK investment will remain strong after leaving the Union. Switzerland has outstripped many other European cities in biotech investment, and according to the Swiss Venture Capital Report it reached a record CHF 600 million in 2017. This leads us to ask what is driving the success of biotech start-ups in Switzerland? Is it a product of detachment from the EU, or the strength of its currency? Importantly, what can the UK learn from its neighbour as it enters the process of detachment from the Union?
Above all else, what has allowed the biotech sector to thrive in Switzerland is its high concentration of talent, an advantage the UK also has. Moreover, the UK has demonstrated its resilience to political setbacks and military challenges and will continue to do so as the country prepares to leave the European Union.