Crossover Investors Supporting Private Placements

“In the past two years, we have seen the emergence of non-VC investors, particularly hedge funds, providing “top-up” financing to IPO-ready companies prior to entering the market,” Jonathan Norris, Kristina Peralta, “Trends in Healthcare Investments and Exits 2015”

“My estimate, based on discussions with a few bankers who track crossover activity, and an appreciation of Corporate Venture Capital (CVC) contributions, is that only around 50% of the $6B invested in private biotech’s came from “conventional” venture investors (meaning independent venture firms backed by groups of LPs)”

VC-Backed Biotech Funding - 10 Year View
VC-Backed Biotech Funding – 10 Year View

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Private Placements: Where is the Money Going?

Novel Drug Targets

Total Venture Funding of Drug R&A, 2004-2013
Total Venture Funding of Drug R&A, 2004-2013

“Over the past decade, nearly 80% of venture capital for therapeutics went toward “novel drug R&D” rather than improvements on existing drugs. This trend is in contrast to the rise of “low technical risk” spec pharma investment model of the 2001-2007 period.”

Series A Funding By Drug R&A Type
Series A Funding By Drug R&A Type

“Initial rounds of funding (Series A’s) for novel drug R&D reached their highest levels in a decade in 2013. the importance of “high innovation quotient” investment thesis to gather initial venture funding is clearly on the rise.”

Early Stage

Series A Venture Funding By Stage of Lead Asset
Series A Venture Funding By Stage of Lead Asset

“Most of the Series A funding of new startups has gone toward early-stage assets (drug discovery, preclinical, and Phase 1), and this has increased over the past five years. Further, the majority of the early-stage financings went to discovery/preclinical (~75%) vs. Phase 1.”

“On the early stage side, nearly one-third of all Series A funding comes from corporate venture capital (CVC) – and this has been increasing over time.”

Sources: Bruce Booth, “Where Does All That Biotech Venture Capital Go,” Forbes, 2/9/15 – Data Source: HBM; “Venture-Backed Biotech Today, Reflections on Exits, Funding, and Startup Formation,” 1/22/15

Active Corporate Venture Capitalists

  • LillyVentures
  • SR-One
  • Novartis Venture Funds
  • Pfizer Venture Investments

Source Alternative Investors via Financial Technology (FinTECH)

  • 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

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