By Lucy Parkinson, Director of Research, LSN
When speaking to life science companies about their financing progress, there’s often a sense of ‘grass-is-greener’ problems. Medtech CEOs think it’s easier to raise money in biotech; early-stage CEOs think it’s easier to raise money for later-stage companies with human proof of concept data; neurology companies think it’s easier to raise money in oncology or cardiology. We hear a lot of these stories at LSN and they often contradict each other! Realistically speaking, most of the investors that an entrepreneur will speak to will decide not to invest in their company. It’s therefore easy to read too much into a rejection note. This week, we’ll therefore take a look at the data in the LSN Company Platform on what’s really getting financed right now, and at what stage.
The LSN Company platform records a wide range of financings, but this article focuses on data on equity investments into privately held companies in biotech and medtech during 2016. Not all financing rounds are announced when they occur, and the platform only records financing rounds for which some data is available; that said, the platform includes data on about twice as many biotech financings as medtech financings. Financings in other sectors, including healthcare IT, instrumentation, industrial biotech and biotech R&D services were also recorded.
In some of the rounds it was possible to identify the stage of equity financing that occurred. This isn’t always cut and dried, as many life science companies raise bridge rounds or issue convertibles, and seed financing in the life sciences may come in the form of a grant rather than an equity investment. However we’ve found that where stage data is clear and available, most of the recorded financings occurred at the seed stage, with a drop-off that steepens beyond the second-stage (Series B) financings. This data covers equity rounds into privately held companies only, so those that obtained financing by other means (such as a major partnership, venture debt, or an IPO) aren’t included in this data set.
In biotech, we’re able to identify the indication areas in which the companies are operating. Many life science companies are working on assets in multiple indication areas, and some assets cut across multiple indication areas; for example, a company targeting HIV may be counted as both an infectious disease company and an immune disease company). The below chart shows the top indication areas: oncology remains the most financed area by far, followed by CNS, infectious disease and immunology.
Where are life science companies receiving equity investments in 2016? Looking solely at biotech, medtech and healthcare IT companies, we found that our dataset mostly consisted of financing rounds in the USA. However, biotech and medtech investment is occurring all over the world, with many companies getting funded throughout Europe and Asia. Here are all the countries in which we have data on more than one financing round in 2016:
While capital is more abundant in some areas than others, we see investment occurring worldwide in a wide range of life science technologies. We also see new names continue to surface in the fine print of these financing rounds, and by identifying the participants from the data, LSN can begin to build relationships with new investors in the space. Keeping an eye on financing round data is crucial for raising money in the life sciences – both to know the current landscape, and to keep your mind open to the potential investment sources out there.