Post on 13-Sep-2014
description
BioBusiness Summer School 2013
Venture Capitaland
Medical Product Companies
Michel Briejer
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BioBusiness Summer School 2013
What is venture capital?
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BioBusiness Summer School 2013
What is venture capital?
• Venture– High risk enterprise– Technology based– Relatively lengthy development trajectory– Much money needed (millions of Euros)– No short-term profitability or positive cash flow
• Capital– Financing in return for an equity stake (shares: co-ownership)
• Sub-category of private equity– Investments in private (non-public) companies
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BioBusiness Summer School 2013
Why venture capital
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Life of company (years)
Capi
tal n
eed
(mio
Eur
o)
University Late stage VCs
Informal investors Revenues from sales and partnering
Subsidies, “soft loans”
Early stage VCs
Bank loans
BioBusiness Summer School 2013
Venture capital and innovative companies
• Venture capital is an essential part of the innovation ecosystem
• Particularly important to enable transition of technological inventions towards commercially viable products
• Almost all successful high-growth technology companies have had venture capital at their basis to fund product development
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BioBusiness Summer School 2013
Correlation # PE investments and # companies
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Source: EVCA yearbook
BioBusiness Summer School 2013
Symbiosis between science parks and VCs
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• Boston
• New York
• Los Angles
• Research triangle (Raleigh)
• San Francisco
• San Diego
• Seattle
• Washington
Top 9 US science parks
Source: The Brookings institute (2002 report) Thuja Capital analysis
Metric Top 9 Last 42
NIH funding (mio US$) 812 104
Patents 2,641 263
Venture Capital (mio US$) 957 27
R&D Alliances 1,089 11
New companies 35 2.3
Large companies 24 1.5
Main differentiators
BioBusiness Summer School 2013
Types of VCs – by stage
• Seed/early stage– Fund size € 10-50 mio– Limited geographical focus– Hands-on, active, assistance in setting up and building company and further
fund raising– Seed capital, series A-B funding
• Mid/late stage– Fund size € 50-250 mio and beyond– Continental or even WW focus– Mature companies, experienced management– Supervision from a distance– Series B-E funding
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BioBusiness Summer School 2013
How a VC makes money (ROI)
• Trade sale: – Sale of shares to an external buyer– Sale of part of, or entire, company in return for cash
• IPO– Sale and trade of shares at a stock exchange (public trading)– In recent years the IPO route has not been an option
• Dividends (profit share)– Do not provide the return on investment pursued, poorly compatible with
pursued financial dynamics
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BioBusiness Summer School 2013
How a venture capital fund gets its money (1)
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BioBusiness Summer School 2013
How a venture capital fund gets its money (2)
Party
Institutional investors (pension funds, insurance companies, banks)
Family officeshigh net worth individuals
Governments (TechnoPartner,European Investment Fund)
Universities
Companies
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Drivers
Return
Return, philantropy (sometimes)
Stimulate innovation climate
Stimulate spin-offs, return, “valorization”
Strategic motive
BioBusiness Summer School 2013
How a venture capital fund works
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Venture capital fund
Portfolio
Valuecreation
Exit
Return
Institutional investors
BioBusiness Summer School 2013
The work of the VC
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Venture capital fund
Portfolio
Value creation
Exit
Return
Institutional investors
Fundraising Selection
Active support
Active support
BioBusiness Summer School 2013
Venture capital - fund structure
Most funds have a similar set-up, typically:
• Closed end: fund ends after 10 years (+2)
• Fund investors (limited partners) commit money, and money is called pro rata for each investment/round
• Fund management co-invests in fund (1%) – and hence also benefits from a good fund performance
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BioBusiness Summer School 2013
The price of moneyor: there is no such thing as a free lunch
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Independence
Spread of risk
Fiscal consequences
Added value
Costs
Repayment
External financing
Loans Informals VC Subsidy
Medium
Good
Some
Little
Low
Yes
Low
Good
Some
Medium
High
Yes
Low
Good
Few
Much
High
Yes
High
Good
Few
Little
Low
No
BioBusiness Summer School 2013
VC money is difficult to obtain
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150+ new business plans
5-10 selected
1-2 new Investm
entsPER YEAR
BioBusiness Summer School 2013
The quest for return on investment
• A VC fund is successful if it generates a good return on investment
– Quick exit generates better return than exit after long period (IRR)
– Overall fund money multiple of >3x (or better: IRR >30%)
– Per fund portfolio of 10-12 companies 3-4 companies need to be exited with multiple of 5-10x
• How to select high-potential propositions with a prospective for good return on investment?
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BioBusiness Summer School 2013
IRR and Money Multiple
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BioBusiness Summer School 2013
A VC weighs the following characteristics
• Proposition:– Fit to fund focus and strategy– Feasibility– Realistic plan, timelines, costs– Commercial potential– Risks
• Team:– Experience, capability and credibility– Chemistry, trust and added value between team – VC
• ROI:– Pre-money valuation: number of shares obtained for investment– Investment round size, use of proceeds, value creation– Exit possibilities, exit horizon, capital need toward horizon
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BioBusiness Summer School 2013
What to watch for in a VC
• Fund focus – fit of VC with proposition, in terms of experience, portfolio, but also company stage
• Network- does the VC have an interesting and relevant network?
• Know how and experience – are fund managers of potential value to the company?
• Chemistry – ability of building fruitful relationship during the long-term commitment
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BioBusiness Summer School 2013
Investment process and support Thuja
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Source
Clos
ing
Selection Analysis
Active sourcing:• Universities• Network• Field monitoring• Meetings
Passive sourcing
• Focus funds• Investment
criteria
• Presentation(s)• SWOT• Business plan
refinement• Team• Preliminary
Investment Proposal
Negotiation
Term
shee
t
Value creationDue diligence
• In-depth due diligence
• Structuring• Legal
documentation• Internal approval
process
• Terms• Valuation• Investment• Business plan• Structure• Capital need• Syndicate
Exit
• “Hands-on” support and guidance
• Leverage network• Supervisory
Board• Connect to VCs
and business partners
• Support business development
• Connect to exit parties
• Active exit management
Investment process Support
BioBusiness Summer School 2013
Thuja Capital
• Management of three funds:– AlpInvest Life Sciences portfolio– Thuja Capital Healthcare Fund (TCHF)– Thuja Capital Healthcare Seed Fund (TCHSF)
• Fund managers:– Harrold van Barlingen (founder)– Michel Briejer
• Office: Utrecht Science Park
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BioBusiness Summer School 2013
AlpInvest Portfolio
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Active
Exited
BioBusiness Summer School 2013
Thuja Capital Healthcare (Seed) Fund - portfolio
Company (location) Product Class Status
ArGEN-X (NL/B) Therapeutics Participation since 2008
Bioceros (NL) Therapeutics Sold in 2011
Cavadis (NL) Medical devices (diagnostics) Participation since 2010
Cristal Therapeutics (NL) Therapeutics Participation since 2012
DCPrime (NL) Therapeutics Participation since 2010
Fabpulous (NL) Medical devices (diagnostics) Participation since 2009
Hemics (NL) Medical devices (diagnostics) Participation since 2011
Mellon Medical (NL) Medical devices Participation since 2013
NightBalance (NL) Medical devices Participation since 2011
Okapi Sciences (B) Therapeutics Participation since 2008
TheraSolve (B) Medical devices Participation since 2011
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BioBusiness Summer School 2013
Thuja Capital Healthcare (Seed) Fund
• Geography– The Netherlands and Belgium (mainly Flanders)
• Stage:– Early stage: Seed, Series A
• Technology focus: medical products– Novel therapeutics, new formulations, novel applications– Medical devices, medical technology, diagnostics, biomarkers– Cross-over products– Medical foods
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BioBusiness Summer School 2013
Challenges
• Fundraising is THE key challenge for fund managers– Poor financial climate does not stimulate appetite and makes investors risk
averse– Banks are faced with Basle-3, insurance companies with Solvency-2 rules
which reduces their ability to invest– Pension funds are rethinking their investment strategy
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BioBusiness Summer School 2013
Contact information
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This document neither contains an invitation or offering of securities, nor should it be regarded as an investment advice. This document may not be reproduced or (re)distributed in whole or in part in any form or by any means without the prior written consent of Thuja Capital. The information contained in this document , including the additional oral and written information has been compiled from sources Thuja Capital believes to be reliable. Thuja Capital will not assume nor accept any responsibility in relation thereto. This information may be changed or updated by Thuja Capital without notice.
Thuja CapitalYalelaan 403584 CM Utrecht
Tel: 030 253 3849Mobile: 06 2246 2927Email: mb@thujacapital.com
Web: www.thujacapital.comTwitter: @ThujaCapital