Year-End Roundup: Investor Mandates

18 Dec

By Michael Quigley, Director of Research, LSN

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This year was by far LSN’s best for new and updated investor mandates. LSN curates information profiles on approximately 5000 global early stage investors. Thus far in 2014 we have been able to add an additional 650 new unique profiles gained through one on one interviews with life science investors.  These investors spanned 33 countries and all 10 investor categories. (See Figure 1.)

 

Mike Figure 1

Figure 1

 

As a result of LSN Research’s focus on early stage life science investors, the majority of the firms we spoke with in 2014 were making maximum allocations in a range of $5 million to $14.9 million. (See Figure 2.) However, it is also worth noting that many investors were seeking to make larger and smaller allocations. When seeking funding, understanding the potential investment size investors are looking to make in a given round is a huge factor regarding fit. You don’t want to waste your time chasing investors whose allocation size is way outside the range for your round.

 

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Figure 2

 

Also crucial to the determination of investor fit are the sectors that investors are looking for and that companies are working in. Consistent with our monthly mandate roundups, medical devices attracted the most interest during this year. (See Figure 3.) However, it is also worth noting that, and as we have discussed previously, 59% of the investors we have spoken with were open to investing in both medical devices as well as therapeutics and diagnostics. This overlap is a result of the many opportunistic investors who wish to cast a large net to ensure they get to see all the best possible opportunities in the life science ecosystem. Although oftentimes investors may not have domain mastery over your type of technology, they more than likely are well connected with people who do. These advisors work with investors to help them vet deal flow for scientific and commercial viability.

 

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Figure 3

 

Where your company is located is also a factor when determining investor fit. The U.S. garnered the majority of investment interest, followed by investors who were willing to invest globally. (See Figure 4.) Many investors now have multiple locations to help in securing deal flow from around the world, while others use their networks as well as LSN to gain access to deals beyond their backyard. We have noticed the globalization of the investment community for some time now; investors are increasingly realizing that location is not necessarily a proxy for commercially viable scientific innovation.

 

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Figure 4

 

Investors tend to be less opportunistic regarding the development stage of the product. Investors in both the therapeutic and diagnostic space as well as the medical-device sphere have had the highest level of combined interests in products with some clinical data. (See Figures 5 and 6.) This is likely a result of the massive inflection point that many products experience once they have viable in-human safety data and begin to develop human efficacy data. This can cause the large jumps in a company’s valuation that investors are so attracted to.

 

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Figure 5

 

Mike Figure 6

Figure 6

 

Notably, investors’ interest in indications showed approximately only a 6% difference between the most popular and least popular indications. (See Figure 7.) This is a likely result of the large number of venture capital and private equity investors we track in the space who tend to not be as focused on indications as investors in family offices, corporate venture capital firms, and foundations. Despite this fact, it is still intriguing to note variations, however slight, from indication to indication. Neoplasms, cancer, and oncology reign supreme in terms of investors’ interest, with their massively unmet medical needs representing a huge potential market, while pain and inflammation represent the lowest level of interest from investors given a more crowded market and often subjective clinical endpoints.

 

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Figure 7

 

The product phase of development, location, and technology type appear to be the largest determining factors of investor fit although all variables have merit. Of all the life science investors that we have spoken with over the course of 2014, these areas held the most variation.

We look forward to uncovering and keeping you abreast of the new mandates we uncover in 2015, and we wish you all a happy holiday season and a joyous new year!

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