Raising biotech finance in Europe

Transcription

1 Raising biotech finance in Europe InvestorNet The sectoral approach Uffe Bundgaard-Jorgensen, Mermaid Ventures

2 InvestorNet - a sector approach! Uffe Bundgaard-Jørgensen, Ph.D. Paxis European Innovation Workshop 5 7 October 2005 Edinburgh page : 2

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4 InvestorNet Investor related activities Round Table Meetings Cluster Visits Other services activities Analysis dissemination of conclusions Good practice Investment pattern syndication Other analysis Development of online Business Plan Self Assessment Test page : 4

5 Observation Over the last 4 8 years a number of VC funds have moved from an investment stage focus to an industry/technology sector focus. Early stage players has found that financing of their portfolios series B, C D rounds depends on partnerships with later stage funds active in the same technology sector. Larger funds becomes vertically integrated with respect to investment stages. Small early stage funds need access to later stage financing in order to succeed with their investment strategy page : 5

6 Technology Sector Round table meetings user groups Information Technology Biotech/Health care Food & Nutrition technology Medical Devices Energy Technology page : 6 Wireless Communication ! Technology focused s ! Technology focused s ! Technology focused s Nanotechnology Normal sequential funding process from early stage fund to later stage funds Media & Communication

7 Investors meet investors! Participants in the RoundTables are sharing the same technology focus, but have different roles in the financing process: Early stage technology funds Later stage funds Corporate venture funds Corporations (Acquisition departments/r&d departments) Investment Bankers Business angels page : 7

8 Round Tables / Cluster visits Biotechnology Medical Devices Energy technology Wireless communication ICT Media, Design communication Food, nutrition Food technology Feb 9/10, 2004 (Antwerp) Nov 2/3, 2004 (Heidelberg) 29-30, September 2005 (Lyon) April 27/28, 2004 Antwerp December 9/10, 2004 (Cambridge) April, (Berlin) 8-9, December 2005, Lund June 24/25, 2004, Antwerpen 15-16,November 2005, Aberdeen October 7/ (Antwerp) June 16-17,2005, Barcelona October, 2005, Cambridge February, 2006 tbd 6-7 June, 2005 Antwerp January, 2006, Copenhagen page : 8

9 2005 focus The focus of all Round Tables, including those on Biotech, have been on primarily one issue: EXIT!!! The other main subject has been Lack of quality of deals offered! Results achieved Laid the ground for more cross border syndication page : 9

10 Syndication structure in the Biotech sector page :

11 Cross Border Syndication InvestorNet Canada Canada Denmark Denmark E ventures France Germany Germany Germany Germany Germany Germany Germany Germany Cross border syndication Biotech sector Germany Germany Germany Israel Norway Norway Sweden Sweden Switzerl Switzerl UK UK UK US UK S Canada 1 x Canada 2 x Denmark 3 1 x Denmark 4 1 x 1 1 Enjoy ventures 5 x France 6 x 1 1 Germany x Germany 8 x 1 Germany 9 1 x Germany 10 x Germany x 1 1 Germany 12 1 x Germany 13 x Germany x 1 Germany x 1 1 Germany 16 1 x 1 Germany x 1 Israel 18 1 x 1 1 Norway 19 1 x 1 Norway x 1 1 Sweden x Sweden 22 x Switzerl 23 x Switzerl x 1 1 UK x UK x 1 UK page 1 : 11 1 x 1 UK 28 1 x US x

12 Unsolicited deals 500 new deals/year Screening process 2 min/deal 250 selected deals 10 min/deal 150 selected deals 20 min/deal 50 analysed deals 5 Hours/deal 25 negotiation 10 Days/deal 490 rejected deals 5-10 investments page : 12 1 month/investment

13 Investor! page : 13

14 Lessons learned (an investor view!!!!) SMEs lack of knowledge of what VCs are, how they operate, what are their expectations Don t realise that VCs are not banks, but will become shareholders with all that implies Need to underst that VC invest on a business case that can show growth has been adequately prepared presented Often entrepreneurs expect capital but are reluctant to risk some of their own money Personal commitment is often an issue, particularly in the case of university spin-offs Transparency openness to scrutiny is fundamental during due diligence as after the investment There is no idea of what governance stards are requested by a VC All of the above leads to a fear of losing control of the unknown page : 14

15 Other problems (Investor view!!) No knowledge of the ABC of finance company laws Lack of knowledge on finance basics, to the point of even understing the difference between equity debt Lack of knowledge of even the basics of company law, for example of the protections that still can be had even if diluted to a minority stake. This clearly makes very difficult communication, understing negotiation page : 15

16 Some possible solutions to address the above More activity needed by governments VC organisations to help the entrepreneurs preparing for dealing with VCs Need for success stories to communicate them Ad hoc programs for scouting coaching Need to organise more specific training (Quotation from Mr. Alberta Trombetta, Investment Manager, Finlombarda Gestioni SGR, Italy) page : 16

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22 Investment Decision phases From deal-flow to exit Access to good deal flow Selecting good deals Due Diligence Deal Structuring Negotiation closing Investment Management Board composition Project monitoring phases Getting to know the company work together Monitoring reporting General support development Market contact technology support Crisis in management or change of management Re-financing syndication Merger Acquisition Exit phases Analysis of exit routes Selection of exit strategy Preparing portfolio company for exit Implementing exit strategy Bridge financing / Merger & Acquisition Negotiation closing EXIT page : 22

23 Investment Decision phases Access to good deal flow Selecting good deals Due Diligence Deal Structuring Negotiation closing Investment Management Board composition Investors are only considering deals which fit their investment preferences. Tip: Get to know what the Investor preferences are, e.g by employing an advisor with this knowledge page : 23

24 Investment Decision phases Access to good deal flow Selecting good deals Due Diligence Deal Structuring Negotiation closing Investment Management Board composition When an investor is interested, then be ready to answer his questions NOW not tomorrow! Too many deals go south because the entrepreneur is not ready to supply the investor with requested information at short notice. TIP: Make servicing the investor requirement a priority for the whole organization. Treat the investor like you treat your most valuable customer! page : 24

25 Investment Decision phases Access to good deal flow Selecting good deals Due Diligence Deal Structuring Negotiation closing Investment Management Board composition Too many deals go south because of unrealistic pre-money valuation of the investment target! TIP: Be realistic about the share price you will offer! If the investor do not think he can make a lot of money why should he invest? page : 25

26 Investment Decision phases Access to good deal flow Selecting good deals Due Diligence Deal Structuring Negotiation closing Investment Management Board composition If a new professional investor invest in your company then he will want to have strong board position. TIP: You should appoint your own board representatives so they match the ones appointed by the investor. Sound Board decisions are being taken through argumentation, not through voting!! page : 26

27 Project monitoring phases Getting to know the company work together Monitoring reporting General support development Market Crisis contact management or technology change of support management Re-financing syndication Merger Acquisition The first 6 month after investment is the trust building phase. TIP: Make sure that you can deliver promised results, at least during this first phase page : 27

28 Project monitoring phases Getting to know the company work together Monitoring reporting General support development Market Crisis contact management or technology change of support management Re-financing syndication Merger Acquisition Disappointments will come, there will be a need for adjustments to the business plan TIP: Disappointments should never come as a surprise to the investor! page : 28

29 Project monitoring phases Getting to know the company work together Monitoring reporting General support development Market Crisis contact management or technology change of support management Re-financing syndication Merger Acquisition If a crisis occur there is a need for structural or organizational changes, the investors priority is to safeguard his investment not your interest! TIP: Be ahead of the situation, be the one who propose the actions which will re-establish confidence page : 29

30 Project monitoring phases Getting to know the company work together Monitoring reporting General support development Market Crisis contact management or technology change of support management Re-financing syndication Merger Acquisition In many cases there is a need for additional financing or merger or acquisitions in order the secure the growth or survival of the company. TIP: Be proactive for such initiatives, if you resist, the decision will be taken even against your own will! page : 30

31 Exit phases Analysis of exit routes Selection of exit strategy Preparing portfolio company for exit Implementing exit strategy Bridge financing / Merger & Acquisition Negotiation closing EXIT Investors first priority is to exit from the investment as early as possible at the highest possible price. TIP: Be proactive support the exit process if not, you get the investor against you not a good idea! page : 31

32 Exit phases Analysis of exit routes Selection of exit strategy Preparing portfolio company for exit Implementing exit strategy Bridge financing / Merger & Acquisition Negotiation closing EXIT The exit process (if not IPO) might create uncertainty in your organization. TIP: Make sure that not only you the investor makes a profit from the exit process. Distribute the gains to your organization also! page : 32

33 Exit phases Analysis of exit routes Selection of exit strategy Preparing portfolio company for exit Implementing exit strategy Bridge financing / Merger & Acquisition Negotiation closing EXIT Remember an exit is not completed before the money is in the bank! TIP: Have a strategy ready if the chosen exit route is a dead end. Be open discuss alternatives with the investor up front! page : 33

34 InvestorNet Address : SCION-DTU Diplomvej 381 DK 2800 Kongens Lyngby DENMARK Phone: (+45) Fax : (+45) Mobile: (+45) ubj@gate2growth.com page : 34