Venture Capital
and
Medical Product Companies
Michel Briejer

BioBusiness Summer School 2013

1
What is venture capital?

BioBusiness Summer School 2013

2
What is venture capital?
• Venture
–
–
–
–
–

High risk enterprise
Technology based
Relatively lengthy development traject...
Why venture capital
Bank loans
Subsidies, “soft loans”
Informal investors

Revenues from sales and partnering
Late stage V...
Venture capital and innovative companies
• Venture capital is an essential part of the innovation ecosystem

• Particularl...
Correlation # PE investments and # companies

Source: EVCA yearbook

BioBusiness Summer School 2013

6
Symbiosis between science parks and VCs
Top 9 US science parks

Main differentiators

• Boston

Metric

Top 9

Last 42

• ...
Types of VCs – by stage
• Seed/early stage
– Fund size € 10-50 mio
– Limited geographical focus
– Hands-on, active, assist...
How a VC makes money (ROI)
• Trade sale:
– Sale of shares to an external buyer
– Sale of part of, or entire, company in re...
How a venture capital fund gets its money (1)

BioBusiness Summer School 2013

10
How a venture capital fund gets its money (2)
Party

Drivers

Institutional investors (pension funds,
insurance companies,...
How a venture capital fund works
Venture
capital fund

Institutional
investors

Portfolio

Value

Return

creation

Exit

...
The work of the VC
Fundraising

Venture
capital fund

Institutional
investors

Selection

Portfolio

Active support

Value...
Venture capital - fund structure
Most funds have a similar set-up, typically:
• Closed end: fund ends after 10 years (+2)
...
The price of money
or: there is no such thing as a free lunch
External financing
Loans

Informals

VC

Subsidy

Independen...
VC money is difficult to obtain
PER YEAR

150+ new business plans

5-10 selected

1-2 new
Investments

BioBusiness Summer ...
The quest for return on investment
• A VC fund is successful if it generates a good return on investment
– Quick exit gene...
IRR and Money Multiple

BioBusiness Summer School 2013

18
A VC weighs the following characteristics
•

Proposition:
–
–
–
–
–

•

Fit to fund focus and strategy
Feasibility
Realist...
What to watch for in a VC
• Fund focus – fit of VC with proposition, in terms of experience, portfolio,
but also company s...
Investment process and support Thuja

Selection

Analysis

Negotiation

Due diligence

Active sourcing:

• Focus funds

• ...
Thuja Capital
• Management of three funds:
– AlpInvest Life Sciences portfolio
– Thuja Capital Healthcare Fund (TCHF)
– Th...
AlpInvest Portfolio

Active

Exited

BioBusiness Summer School 2013

23
Thuja Capital Healthcare (Seed) Fund - portfolio
Company (location)

Product Class

Status

ArGEN-X (NL/B)

Therapeutics

...
Thuja Capital Healthcare (Seed) Fund
• Geography
– The Netherlands and Belgium (mainly Flanders)

• Stage:
– Early stage: ...
Challenges
• Fundraising is THE key challenge for fund managers
– Poor financial climate does not stimulate appetite and m...
Contact information

Thuja Capital
Yalelaan 40
3584 CM Utrecht
Tel:
Mobile:
Email:

030 253 3849
06 2246 2927
mb@thujacapi...
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Presentatie ten behoeve van de BioBusiness Summer School 2013 over venture capital

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Thuja presentation bio business summer school 2013

  1. 1. Venture Capital and Medical Product Companies Michel Briejer BioBusiness Summer School 2013 1
  2. 2. What is venture capital? BioBusiness Summer School 2013 2
  3. 3. 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 BioBusiness Summer School 2013 3
  4. 4. Why venture capital Bank loans Subsidies, “soft loans” Informal investors Revenues from sales and partnering Late stage VCs University Capital need (mio Euro) Early stage VCs Life of company (years) BioBusiness Summer School 2013 4
  5. 5. 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 BioBusiness Summer School 2013 5
  6. 6. Correlation # PE investments and # companies Source: EVCA yearbook BioBusiness Summer School 2013 6
  7. 7. Symbiosis between science parks and VCs Top 9 US science parks Main differentiators • Boston Metric Top 9 Last 42 • New York NIH funding (mio US$) 812 104 • Los Angles Patents 2,641 263 • Research triangle (Raleigh) Venture Capital (mio US$) 957 27 • San Francisco R&D Alliances 1,089 11 • San Diego New companies 35 2.3 • Seattle Large companies 24 1.5 • Washington Source: The Brookings institute (2002 report) Thuja Capital analysis BioBusiness Summer School 2013 7
  8. 8. 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 BioBusiness Summer School 2013 8
  9. 9. 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 BioBusiness Summer School 2013 9
  10. 10. How a venture capital fund gets its money (1) BioBusiness Summer School 2013 10
  11. 11. How a venture capital fund gets its money (2) Party Drivers Institutional investors (pension funds, insurance companies, banks) Return Family offices high net worth individuals Return, philantropy (sometimes) Governments (TechnoPartner, European Investment Fund) Stimulate innovation climate Universities Stimulate spin-offs, return, “valorization” Companies Strategic motive BioBusiness Summer School 2013 11
  12. 12. How a venture capital fund works Venture capital fund Institutional investors Portfolio Value Return creation Exit BioBusiness Summer School 2013 12
  13. 13. The work of the VC Fundraising Venture capital fund Institutional investors Selection Portfolio Active support Value creation Return Exit BioBusiness Summer School 2013 Active support 13
  14. 14. 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 BioBusiness Summer School 2013 14
  15. 15. The price of money or: there is no such thing as a free lunch External financing Loans Informals VC Subsidy Independence Medium Low Low High Spread of risk Good Good Good Good Fiscal consequences Some Some Few Few Added value Little Medium Much Little Costs Low High High Low Repayment Yes Yes Yes No BioBusiness Summer School 2013 15
  16. 16. VC money is difficult to obtain PER YEAR 150+ new business plans 5-10 selected 1-2 new Investments BioBusiness Summer School 2013 16
  17. 17. 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? BioBusiness Summer School 2013 17
  18. 18. IRR and Money Multiple BioBusiness Summer School 2013 18
  19. 19. 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 BioBusiness Summer School 2013 19
  20. 20. 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 BioBusiness Summer School 2013 20
  21. 21. Investment process and support Thuja Selection Analysis Negotiation Due diligence Active sourcing: • Focus funds • Presentation(s) • Terms • Universities • Investment criteria • SWOT • Valuation • In-depth due diligence • Investment • Structuring • Field monitoring • Business plan refinement • Business plan • Meetings • Team • Structure • Legal documentation • Network Passive sourcing BioBusiness Summer School 2013 • Preliminary Investment Proposal • Capital need • Syndicate • Internal approval process Closing Source Support Term sheet Investment process Value creation • “Hands-on” support and guidance Exit • Support business development • Leverage network • Connect to exit parties • Supervisory Board • Active exit management • Connect to VCs and business partners 21
  22. 22. 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 BioBusiness Summer School 2013 22
  23. 23. AlpInvest Portfolio Active Exited BioBusiness Summer School 2013 23
  24. 24. 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 BioBusiness Summer School 2013 24
  25. 25. 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 BioBusiness Summer School 2013 25
  26. 26. 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 BioBusiness Summer School 2013 26
  27. 27. Contact information Thuja Capital Yalelaan 40 3584 CM Utrecht Tel: Mobile: Email: 030 253 3849 06 2246 2927 mb@thujacapital.com Web: Twitter: www.thujacapital.com @ThujaCapital 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. BioBusiness Summer School 2013 27
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