With the UK’s Biotech industry being deemed the world’s 3rd largest growth hub by sector, it’s hardly surprising that investment into this industry – despite the economical uncertainty that looms – has been booming.
And it’s not quite that new.
During 2015, financing rounds involving corporate venture capital amounted to $647 million of $1033 million invested in unquoted UK life sciences companies (2016: $567m of $965m), according to the Association of British Pharmaceutical Industry research. In fact, UK companies closed 68% of European financing rounds involving CVC in 2016, up from about a fifth a decade ago.
Corporate Venture Capital, where organisations invest their own funds into new and emerging start-ups in order to expand their own reach and profitability, is now established as a key source of capital within the Biotech industry.
Despite this huge amount of growth, and the attractiveness of the UK as a biotech destination, it is surprising to see only a small number of corporate venturing investors have established a fixed investment office in the UK – meaning that any investment opportunities may become limited due to a lack of exposure of corporate venturing investors.
There may not be many of them – but they’re getting bigger
The investment rounds, we mean. TechCrunch recently reported that the corporate venture investments into the Biotech industry has been following the trend of general investment round trends in that they’re becoming bigger.
“Last year, the VCs on our shortlist participated in 117 funding rounds valued at $5.2 billion altogether. That works out to an average of $44 million per round — by far the highest average in the past five calendar years.
But round sizes may still have higher to go. So far, 2018 is off to an expensive start, with average round size of more than $60 million, thanks to recent funding rounds over $200 million for Celularity, in the placental stem cell space, and Helix, a provider of personal genome analysis”
As with many corporate investments of their type, the most active investors are those organisations within the sector that are considered the most valued public companies in the space. They are intent on becoming industry dominators and therefore have a drive to have the best, be the best – and do it all first, before anyone else does. They have deep pockets, sure, but they’re also under immense pressures from their leadership teams and shareholders to keep developing and keep commercialising new breakthroughs, new innovation. For many, their focus is on doing this in-house, but many have realised the potential held in the startup space, as new technologies and developments rise up overnight.
But there’s a warning.
For many investors – investing in something today, means that tomorrow, there will be something new on the horizon, and many critics of the Pharma corporate investment world suggest that Pharma changes its venture strategy every few years and, as a result, would result in these funds appearing somewhat unreliable. However, as things change, and new routes to market adapt, it’s also worth noting that GSK’s SROne (established in 1985) and J&J’s JJDC (1973) have been around longer as consistent investors than most independent venture firms.
So, why are they investing?
For the Biotech industry, as is the case with many other corporate venturing funds, investing in the startup world improves an organisation’s visibility into an emerging market – where they may not have the necessary knowledge and insight from behind their corporate doors. They want to tap into innovation potential and through investing into the heart of the sector means that they have enhanced access to all that is new, developing, innovative and fresh.
Yes. One could argue that these reasons are pretty standard, and general. But lets take that a step further. In fact, Bruce Booth (a Forbes contributor in the Pharma space) goes a step further to debunk myths around Biotech CV – and the reasoning, on many occasions, is sound. The chances of the Biotech-industry having front-row seats into the industry challenges, and competition, are pretty high – so is the value of investing in a smaller startup really of that much worth as what many are led to believe? Absolutely. They may be aware, but are they able to act? Probably not as quickly as they’d like. Flip that around – from a business perspective, it is critical for the health of the business ecosystem and the longevity of business sustainability, that new startups are being given the springboard they need to grow and mature – and change the world, as they do. Investment then becomes not just a way for the large corporate to get ahead, but rather, an imperative for new innovation to be given a chance to endure, and sustain and become the next corporate organisation to, in turn, invest into the next generation of business.
Needless to say – if you’re an organisation who is ready to find the next startup dream, or if you’re a high-growth business who is looking for a corporate investor – you will already pretty-much be aware of what you need, and where you want to be. You may just not know how to get there. Let us be your eyes and ears – let us be the scout you need to help close that gap. Contact us today to know more about how we can help you.