On Nov. 17th, 2015, Scott Jordan participated on a panel discussion, “Access to Capital Markets,” at the 4th Oncology Partnering & Deal Making conference in San Francisco. The presentation highlights capital flows in the biotech sector and an overview of “Direct” Investing (Limited Partners co-investing alongside “Lead” investors).
Healthcare venture capital fundraising and investment activity is at historical levels. Bolstered by robust IPO, business development and Mergers and Acquisitions (M&A) activity, unprecedented amounts of capital are being raised/deployed into healthcare companies and distributed to General Partners (GPs) generating consistent, positive returns for investors.
While researching and analyzing the key players and drivers underpinning the digital investment landscape, the DealIndex team uncovered a whole ecosystem of players that have transitioned into the online investment space. We realized that these players and how they interrelate with one another have not been covered before in a comprehensive manner. As such, we have attempted to capture the interlinkages between the swarm of players in the alternative finance space with this report.
- Business development, private investing, and M&A are moving “online” – while alternative finance started off as seed stage endeavor, more recently platforms have begun to emerge at different stages in the funding cycle, disrupting traditional institutions
- Online global investing reached $16.4B in 2014 – over 1,250 crowdfunding platforms worldwide
- Alternative finance is drawing more established issuers – Originally seen as a solution to the long-standing funding gap for early stage companies that appeared in the wake of the 2008 financial crisis, the ability for issuers to raise capital more quickly and at a lower cost than would otherwise be possible at traditional institutions
- Alternative finance is removing information barriers and information inefficiencies that exist in the private market, opening funding conduits an channeling global liquidity
New financial asset classes (Crowdfunding – Donation, Equity, Reward; P2P) are emerging fueled by investor demand for premium deal flow (Equity Crowdfunding –HealthiosXchange), lower fees (borrowers refinancing high cost consumer debt via Marketplace Lending – Prosper), philanthropic motivations (“Impact the World” via micro-finance – Kiva), desires to prepay for innovative products (Reward-Based Crowdfunding platforms – Kickstarter), and legislation (the JOBS Act). Are Marketplace Lending/Crowdfunding new asset classes? The stats say Yes! (Source: Massolution)
Growth rates accelerating
- Market grew 81% from 2011-2012 exceeding 64% growth from 2010-2011
- Funds raised via Equity Crowdfunding projected to increase from 4% (in 2013; 200MM) to 8% (in 2014; $800MM) of total capital raised in the sector
- Limited Partners going direct – Sensitivity to high fees as demonstration by Calpers recent decision to eliminate hedge funds from their portfolios and retail properties
Financial Technology (FinTech) is revolutionizing the financial services industry, including the way investors participate in alternative investing. From Ally (online banking) to eTrade (online discount brokerage) to Prosper (peer-to-peer lending), to HealthiosXchange (equity crowdfunding), technology is redefining the way we bank, trade stocks, lend money, and invest in companies. Fueling the transition to online marketplaces are tech-savvy Millennials who find visiting banks and participating in offline investment groups an inefficient use of resources/time and more costly than online alternatives.