Nooman Haque, Director of Life Sciences, Silicon Valley Bank

1. Onestart Bootcamp, 4th February: Fundraising
Nooman Haque, SVB

2. !
425.4
801.7 764.2
1,174.0
1,343.0
1,182.6
1,355.2
1,541.8
1,252.4
1,112.0
1,354.71,380.9
42
51
70
82
105
93
107
126 126
115
141
98
0
20
40
60
80
100
120
140
160
0.0
200.0
400.0
600.0
800.0
1,000.0
1,200.0
1,400.0
1,600.0
1,800.0
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Source: PitchBook Data, Inc.
Total Capital Invested
Deal Count
Investment into life sciences from public, private and corporate sources
European Private US Private
US IPO Global M&A

3. !
New company formation aided by the growing importance of corporates
Biopharma investments by indication Device investments by indication

4. There exists a large range of funding options

5. Willingness to be diluted also likely to be an issue!
Your funding options will mainly depend on the solidity of your IP position
• Very early, IP may not be clearly defined; open collaboration with others
may be key to cementing the IP position
• Structure of investment funds – we’ll cover later
• Asymmetric information – difficulty of others validating truly pioneering
work

6. …Incubators & Clusters
• Biocat
• BioPmed
• Universities, e.g. Imperial, UCL,
Edinburgh
• Bioscience Catalyst
• Catapult/Biomedical Catalyst
• Horizon 2020
• Corporate Groups, e.g. J&JIC
• Foundations, e.g. Wellcome, Gates;
Michael J Fox, CRT/6th Element
Most firms exploit incubators and non-dilutive funding in the early stages
Why?
• Support services, e.g. legal
• Labs, knowledge
• Network of other early stage
companies
• Tax breaks
• Access to funds, e.g. Benelux
schemes proving selectively attractive
to UK firms
• Social aims
Consider an incubator’s relationship with next round of funding, support
and other advantages

7. Angels are a significant source of funding in many countries
• Private individuals, sometimes acting in concert with others
• May be linked to the sector; their involvement can provide some validation
to non-specialists
• Significant source of start-up capital, typically contributing rounds of
£200k up to £2-3m.
• Angel investors have different incentives and timelines when it comes to
continuing investment or realising exits and these are personal to each
individual
• Accessed through private connections; private banks, brokers; family
offices
• Notable groups: Angels4Life Sciences; London Business Angels Network

8. Venture Capital investment – Price & Control
VC Funds
• Structured with a life of around 10-12 years.
• typically make investments in the first 3-4 years
• Available funds are known.
• Multiple rounds of financing – your future tied up with fate of
other companies in the portfolio!
• Generalists and specialists
• Take a portfolio/gambling approach – 1-2 outsize exits; some write-
offs; some modest multiples
• Often syndicate with others; This can work well and provide
additional access to capital; or it leads to problems over valuation,
rights etc.
VC Fund structure
GP
LP
LP
LP
LP
Impact of time on VC returns
• Invest yr 1 - £10m
• Exit yr 5 - £30m
• Money return 3x
• IRR: 25%
• Invest yr 1 - £10m
• Exit yr 8 - £30m
• Money return 3x
• IRR: 15%
Entry & Exit economics are critical
Examples
• Advent
• MVM
• Forbion
• EdRip
• Abingworth
• Endeavour
• BB Biotech
• Wellington
• SVLS
Co Co Co Co Co

9. Quick worked example - simplified
Founder shares Series A shares Total shares
1m 200 1.2m
80% 20%
• VC invests £2m for 20% of the company…and therefore paid £8/share (2m/250k
• Pre money: £8m; post money £10m
• Assume Series B is an ‘up’ round; pre-money of £48m
• Series B Investment is £10m
• Post-money is £58m
Founder shares Series A shares Series B shares Total shares
1m 200k 250k 1.45m
68.96% 13.79% 17.2%
• Assume Series C is an ‘down’ round; pre-money of £35m
• Series B Investment is £10m
• Post-money is £45m
Founder shares Series A shares Series B Series C shares Total Shares
1m 200k 250k 414.25k 1.864m
53.8%% 10.7% 13.4% 22.2%
This example also illustrates potential pitfalls of adding ‘too much’ value
through non-dilutive sources, as it may limit returns to a VC

10. Corporate VCs -
• Open-ended/greenfield – typically permanent capital funds with a single LP – the
corporate parent
• Long-term support is possible as LP doesn’t usually demand cash realisation
• Access to internal networks & support may be possible
• Syndicate with conventional VCs
• Consider motivations: strategic v financial
• Relationships/experience with other corporates
• Market perception…
• Examples include, SROne, J&J, Pfizer Ventures and many others

11. Honourable mentions
• IPO…NOT an exit; just another fundraising; manage the newsflow
• Debt..??? Between 15%-30% of the VC market
• ‘Non-traditional’ corporates esp in digital health; industrials – same caveats apply
• Crossover funds, e.g. Invesco, Hargreaves: look for alignment with traditional
groups

12. A momentary digression: What is/drives value?
• No objective measure: context/use dependent, cf Nobel Prizes
• IP protection may be a necessary condition to obtain value, but
it’s not sufficient. Economic value of an IP asset/business can
become divorced from pure scientific value. Publishing does not
equate to $$$
• Health economics and the changing regulatory landscape

13. Key points
• Fundraising will be a dominant activity – get used to it!
• Investment is fungible; investors aren’t: remember the ‘control’ bit; it’s a partnership as well
• Do your homework!
• Sources like Cambridge Associates, Altius, Venturesource, CBInsights. can provide info on
fund/portfolio performance/gossip
• Accountability!
• Keep paperwork tight for future (acquirer) DD
• Reporting commitments
• Don’t obsess over value
• YOU have every right of grilling THEM!