Presentatie ten behoeve van de BioBusiness Summer School 2013 over venture capital

1. Venture Capital
and
Medical Product Companies
Michel Briejer
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2. What is venture capital?
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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
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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)
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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
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6. Correlation # PE investments and # companies
Source: EVCA yearbook
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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
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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
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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
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10. How a venture capital fund gets its money (1)
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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
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12. How a venture capital fund works
Venture
capital fund
Institutional
investors
Portfolio
Value
Return
creation
Exit
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13. The work of the VC
Fundraising
Venture
capital fund
Institutional
investors
Selection
Portfolio
Active support
Value
creation
Return
Exit
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Active support
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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
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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
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16. VC money is difficult to obtain
PER YEAR
150+ new business plans
5-10 selected
1-2 new
Investments
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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?
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18. IRR and Money Multiple
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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
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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
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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
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• 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
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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
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23. AlpInvest Portfolio
Active
Exited
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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
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25. Thuja Capital Healthcare (Seed) Fund
• Geography
– The Netherlands and Belgium (mainly Flanders)
• Stage:
– Early stage: Seed, Series A
• Technology focus: medical products
–
–
–
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Novel therapeutics, new formulations, novel applications
Medical devices, medical technology, diagnostics, biomarkers
Cross-over products
Medical foods
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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
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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.
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