Life Sciences Outlook 2012 Dutch biotech companies ... - NautaDutilh

“The constant worries
over money are an
enormous distraction.”
Says one executive, echoing others
Towards a symbiotic relationship?
While the development of biotech companies
may primarily be a matter of ‘technology push’,
the ‘market pull’ factor is becoming increasingly
important. It has become common practice for
investors to identify, even before they make an
difference between European and US VCs is that
whereas American VCs invest in large chunks
and trust management to act in their mutual best
interest, European investors tend to “drip-feed” their
companies. This style of investing is usually attributed
to the smaller size of European funds, their lower
risk appetite and, as a consequence of that, their
tendency to give management limited leeway.
The view from the receiving end
The worry among entrepreneurs is that the current
scarcity of capital will exacerbate this practice of
drip-feeding and that investors will put them on an
even stricter regimen: “The constant worries over
investment, where exit opportunities lie within big
pharmaceutical companies. On the other hand, the
latter have a vital interest in contributing, inter alia in
the form of venture capital, to a healthy ecosystem in
which many early-stage biotech companies survive.
Big pharmaceutical companies are well aware of
developments in VCs’ portfolios (and may co-invest
through their own corporate VC arm) and approach
these VCs with “shopping lists” for innovations that
would fit their strategic goals. “Spurred by venture
capital investors, Big Pharma and biotech have
formed a true symbiotic relationship in which they
have become dependent on each other for survival,”
is how one interviewee describes this development.
money are an enormous distraction”, says one
executive, echoing others. “Investors just nod when
you talk to them about this, but they don’t really care.
Yet they underestimate the consequences. Every
new round of financing takes up a huge amount of
time and energy that we could otherwise have spent
on actually developing our business. This slows us
down and forces us to lower our ambition level.”
It may be premature to speak of symbiosis. However,
it certainly seems that there is a growing ecosystem
in which scientists, management, seed investors,
VCs and Big Pharma are communicating and
interacting more with each other, and becoming
more inter-linked. Each of these players may initially
be acting in its own self-interest, but ultimately the
development of this ecosystem will serve the greater
So while a lack of venture capital may lead to fewer
good of the industry.
but more promising start-ups, the start-ups that
manage to survive still suffer from the harsh climate.
To avoid being surprised by VC behaviour, some
interviewees from biotech and medtech companies
stress the importance of having a due diligence
investigation into the VC’s capabilities and exit
preferences, as well as its fund policies and horizon.
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