CROs turning to Private Investors for Deal Flow

19 Jul

By Max Klietmann, VP of Research, LSN

I recently had the opportunity to speak with a CRO business development executive who wanted to know more about the emerging investor categories outside of venture capital that LSN tracks. I asked if his firm was seeking financing, and he told me that they weren’t; like many others in his field, rather, the CRO was seeking strategic sources of future business for his firm. Many service providers in the life sciences are increasingly becoming aware of the critical importance of including investors as a key group in their business development activities on an ongoing basis.

Historically, a few major CROs maintained relationships with the big life science venture firms as a source of business by way of portfolio companies. However, in recent history, as many of the established VCs have ceased to invest early (where it’s easy for a CRO to establish a position with a biotech), this source of business has dried up. Savvy CROs have recognized that in order to maintain a competitive edge, they need to seek out the new categories of investors that have emerged to fill this gap. Strategic partnerships with hedge funds, family offices, foundations, and venture philanthropy groups can all be highly productive sources of CRO deal flow. These organizations all recognize strong CRO partners as a means to help portfolio companies and grant recipients be more capital-efficient by getting product to market faster, so why aren’t CRO’s across the board taking advantage of this opportunity?

Basically, it comes down to a question of finding the right partners and building a relationship. In an industry that is defined by fit, it is critical for service providers to know who is actively investing in companies reflecting their area of expertise. LSN is specialized in sourcing these emerging opportunities, and increasingly, CROs are showing an interest in tracking this information. Forging alliances with the right investors early is the straightest route to sustained future business, and identifying those entities will define the winners (and losers) in the CRO space in the future.


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