The State of Investment Banks in Early Stage Life Science Investing

17 Apr

By Max Klietmann, VP of Research, LSN

As LSN has been tracking the shift in the investor landscape over the past year or so, an interesting trend has emerged among some boutique investment banks in the space. Traditionally, investment banks in the life science arena were more focused on institutional transactions, and buy-side & sell-side activity. However, as family offices have begun to play a more significant role in the space, some tactically-minded I-banks have reoriented their businesses to focus on serving these constituents.

This is not a trend among the bulge bracket banks for several reasons: first, there is too much separation between the investment banking and private wealth business areas. This lack of communication makes it hard to consistently source direct investment opportunities for family office clients with specific interests. Secondly, family offices want industry specialists to serve as navigators in the space – they are not merely looking for an investment advisor. Finally, the family offices tend to prefer the personal touch gained by working with a smaller, more flexible boutique partner – it is simply the nature of this investor group to look for long-term relationship potential.

The boutique banks that are doing this effectively are maintaining a custom-tailored approach – they are taking a family office’s interest in a specific disease area, and enhancing their search with institutional quality deal sourcing, a high level of industry & sector expertise, and high quality due diligence processes. This yields superior results for family offices that typically have a genuine desire to make allocations, but lack the technical insight to navigate the space on their own.

So what does this mean for the space? Beyond investment banks having a new prospective client base in the life sciences space, there are some other very interesting considerations to make: Entrepreneurs targeting capital should consider boutique, industry-specific investment banks as a source of potential investors. Family offices looking to enter the space should evaluate whether one of these entities might be the right partner with which to approach direct investment in life sciences. The sands are shifting, and those that adapt to these trends first will have the upper hand.

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