By Lucy Parkinson, Research Manager, LSN

While there are many potential financing options for a fundraising life science executive to consider, few are more intriguing than family offices.  In the hopes of understanding more about how these institutions seek opportunities in the life science sector, I’ve taken a look at the last 30 family office mandates gathered by LSN research team to get some insight into exactly what’s making them tick.

We’ve covered family offices extensively before, but just as a refresher: Family offices fall into two broad categories; single family offices (SFOs) that are responsible for investing the assets of one family (typically with net worth of over $100m), and multi-family offices (MFOs) which provide investment guidance to several families, typically those with significant assets but not enough to justify hiring their own dedicated investment team.

Beyond this initial distinction, family offices can orient themselves in any number of ways, especially when it comes to direct investment in life sciences. This variety is apparent in the range of investment styles and interests represented by the family offices tracked by LSN:  Some notable examples include structured angel vehicles that make dozens of sub-$250,000 placements every year, and families that have created evergreen PE funds which allocate over $50m to each company that they invest in.  This variability makes sense, because every family is different, and each chooses a strategy that fits their personal goals – whether it’s advancing treatment for diseases prevalent in their family, investing strategically to enhance a pre-existing family business, or making use of their own expertise to select companies in the field where they made their money.  As I mentioned in a recent article, family offices are notably more likely to be specific about which sector of the life science arena they’re seeking to invest in.  However, this tendency seems to dissipate as allocation sizes increase; family offices that allocate over $10m per investment generally consider a broad range of life science opportunities.

Another notable data point from our family office mandates; they’re more likely than other investors to be opportunistic about which phase of development they prefer to invest in.  A full third of these 30 family offices will consider investing in life sciences companies at stages ranging from preclinical development to products on the market.  This flexibility is a huge draw for life science companies raising capital, who need the support of an investor who will be interested in backing them for the long haul. Understanding what a family office wants in this context is the key to successfully courting them for capital. Before you talk to a family office, you’ll have to understand who they are and why they are committed to a particular investment strategy. Most importantly, you must consider whether the family’s goals are aligned with your own.

It’s easy to understand how the personal qualities of family offices make them attractive to fundraising executives.  We often get asked how best to get an investment from a family office. The short answer is that more than anything, it’s about fit. Careful research and a highly targeted approach are the first step towards starting a dialogue with a family office – just do some careful research, pick up the phone, and go outbound.

By Maximilian Klietmann, VP of Marketing, LSN

Licensing deals comprise one of the most important aspects of the life sciences industry. However, many entrepreneurs fail to properly research the trends around biotech licensing, despite how critical these trends are to anyone seeking partnershipsor capital from big pharma. LSN’s Licensing Deals Database curates publicly available licensing deal data from around the world. A search for information on the past three years yields approximately 100 licensing deals for each year (99 in 2011, 101 in 2012, and 100 in 2013). This allows us to get a sense of some of the trends surrounding big pharma licensing activity, and what the data could mean for emerging biotech executives in 2014.

Increasing Early Stage Focus:

One of the most immediate trends shown by the data is an increased early stage focus as a percentage of deals. This reflects the trend of big pharma relying more heavily on in-licensing to augment R&D pipelines that LSN discussed in late 2012, when it was first emerging. Given the data and conversations LSN Research has had with several big pharma search and evaluation groups, this trend will most likely continue over the course of 2014, as big pharma continues to look at in-licensing as a source of innovative science to shore up pipelines.

Oncology and Other Major Indications Remain Hot: 

When it comes to trends surrounding specific indications, oncology is by far the leader. This indication area has consistently represented about 30% of licensing deal activity for the last three years in a row. This is good news for early stage companies in the space, as big pharma isn’t showing any signs of decreasing activity in this disease area. One good angle of attack for emerging biotech companies may be to position themselves with non-traditional approaches to cancer (for example, the increased buzz surrounding immunotherapies for cancer). Runners up in indication popularity are CNS and infectious diseases.

So What Does It Mean?

For early stage companies, this trend is welcome news. Resources and capital that were formerly out of scope for an emerging entrepreneur are becoming tangibly accessible. Also, the consistency of indication focus over the past three years shows stable demand for certain products, giving entrepreneurs some predictable trends to watch. The key is finding the right strategy for targeting these investors, and beating the competition to the punch.

By Alejandro Zamorano, VP of Business Development, LSN

Every major pharmaceutical company has a business development team that is in charge of identifying new products and technologies to target for strategic relationships, in-licensing, or acquisition. We’ve discussed the increasing number of big pharma companies targeting earlier stage companies before, and we’ve noted how big pharma is allocating more dollars towards external R&D. These organizations can be extremely attractive to entrepreneurs because they offer a plethora of great resources including technical insight, market expertise, and fantastic infrastructure (not to mention highly sophisticated sales and marketing).

However, for many emerging biotech entrepreneurs, the challenge of navigating a big pharma to find the appropriate contacts is daunting and can be discouraging if approached blindly. This article is intended to share some insight into how to approach these organizations and how to navigate your way through to the right people.

So how should a fundraising executive begin thinking about a big pharma strategy? The first thing to understand is that business development teams are interested in talking to great innovative companies. However, in order to be effective, you must first find all of the big pharmas that are a fit. Often, big pharma sees the world on the basis of indication areas (e.g. an oncology program, or a CNS program), so a focus on a specific indication is typically a good starting point. To find out this information, take a look at press releases, announcements, news articles and of course the company website. With this information in hand, you can narrow down which companies are actively likely to be seeking to in-license or invest in products like yours.

Your next step is identifying the right people in the organization. Big pharmaceutical companies can have tens of thousands of employees around the world, so it’s up to you to do your homework on who to target. Sometimes you can quickly identify the right target on the company website, but usually a little more digging is required. Searching through linkedin or Zoominfo can be helpful in identifying the right people. Try using combinations such as “search & evaluation,” “business development,” or “asset licensing.” A little creativity and patience can go a long way. Aim for a list of at least 20 or so target individuals.

This is where email your email skills come in. We’ve covered the nuances of email marketing previously, but we’ll briefly cover the concept here. The goal of your first email should be used to initiate dialogue, identify the right person to speak with, and hopefully arrange an introductory meeting. Some best practices are keeping your message clear and succinct and clearly state that you have done your research and believe there may be a fit. Be sure to make it clear you’d like a meeting with the appropriate person, and offer some available times.

If all has gone well, you’ll probably get a handful of responses or referrals to other people in the organization. However, don’t forget about those that didn’t reply – you can come back to these with “second attempt” or “final attempt” emails later to create a sense of urgency. The first person you hear back from will often be either a gatekeeper or an information gatherer. These parties will take a first pass on whether or not the conversation should continue. Clearly explain what research you’ve done, confirm your findings, and why you think you are a fit. Big pharma usually has a clear idea of what they are looking for, so explaining why you match their interests is crucial.

If the conversation goes well, you’ll likely be passed on to a navigator (someone who will help guide you through the evaluation process) or an evaluator. The evaluator(s) will examine your data and will ask you questions about your asset to determine whether it should be passed up the chain of command. If your product matches what the company is looking for and has passed the evaluation criteria, you will be recommended to the decision maker. This can be a single person or a group of senior executives. They are the ones with the final authority to get a deal done and write you a check.

Here are few concluding thoughts to help your efforts: First, make sure you are proactive and do not let things sit idle: Always find out what the next steps are and how to get to the next person in the chain. I’ve heard countless stories of entrepreneurs losing focus and letting the conversation go silent. This is almost always the kiss of death, so remember that it is your responsibility to move things forward. Second, do some research on other companies that recently struck a deal with one of your target pharmas. Asking for guidance or insight from them may help you be more prepared. Keep these items in mind and you’ll significantly improve your odds when approaching big pharma.

By Mengwei Hu, Marketing Manager, LSN

LSN’s marketing team is proud to release a digital demonstration of the LSN Investor Database! For those in our readership who are unfamiliar, the LSN Investor Database is a web-based matching platform for companies seeking to raise capital in the life science arena.

LSN tracks 5,000 life science investors globally. These investor profiles are maintained by LSN’s research staff, who update these investor profiles through 1-on-1 investor interviews every 90 days. Using LSN’s proprietary search ontology, emerging therapeutic, diagnostic, and medical device companies can quickly target investors that may be a fit for their offering.

Click the video below to see how the LSN Investor Database may be able to help your fundraising efforts.

By Jack Fuller, Business Development, LSN

Many of the people we talk to here at LSN are convinced that a pre-existing relationship or a referral from a close associate are the only ways to engage potential investors.  LSN has gone to great lengths to dispel this deeply engrained myth in the life sciences.  However, helping an entrepreneur to grasp the significant advantage of approaching investors based on fit is not nearly as difficult as convincing them to actually do it. All too often, fundraising executives agree that the principle of “fit vs. referral” makes absolute sense, yet they exclusively reach out to people within their network to source a new round of capital.

The universal problem facing all startups is that every day is critical.  When it comes to fundraising, the result is binary – either you secure funding, or you don’t and have to start over.  This fear keeps fundraising executives awake at night, as the ability to raise capital can be the difference between bringing a life saving device or therapy to market, or squandering a great technology. Veteran entrepreneurs understand this through and through, yet the question persists: When should I go outbound?

LSN’s emphatic answer: YESTERDAY!

While this may seem cliché, the logic is very simple and powerful: If you only raise capital from your network, you will either be successful or fail.  Once your network is exhausted, you may then go outbound. However, valuable time has been wasted in the process (potentially dooming your prospects). Those individuals who pursue both an internal effort within their network, as well as an outbound campaign with a global target list of qualified investors, have significantly more shots on goal and are not running the risk of relying solely on one method. Anecdotally, one of LSN’s clients was able to increase his number of meetings with qualified investors several times over in just a few weeks using a well-constructed global taget list (GTL) and an outbound strategy!

Every biotech and medtech CEO faces the same problem of limited time and (even more) limited capital.  At the end of the day, fundraising tends to be the most vexing problem in a life science company.  Trusting the fate of the company to a small group of prior relationships is idealistic at best, and can put an organization at risk.  Pragmatic fundraising today requires utilizing every available lead, and the drive and commitment to develop a tactical approach to raising capital.

By Maximilian Klietmann, VP of Marketing, LSN

As we enter 2014, LSN has compiled some insight into three of the hottest subsectors being targeted by investors in the medical technology space. As new technologies emerge, the healthcare sector is undergoing profound shifts that spell change for entrepreneurs, investors, and patients alike. LSN has identified three critical trends in the marketplace that we are likely to see unfold over the coming months. These are increased corporate venture activity in the medical device space, a massive increase in the funding of digital health solutions, and continued interest in mobile-enabled implantable devices.

Corporate Venture Capital Activity:

Medical technology continues to gain an increasing amount of attention from corporate venture capital. However, unlike the biotech therapeutics space, where corporate venture activity is largely being generated by big pharma venture arms, medical technology is getting attention from a broad range of corporate entities. Most interestingly, many consumer electronics corporate venture firms are getting into what could become a major profit driver down the road. Google’s recently announced glucose-monitoring contact lens is only the most recent instance of electronics players moving deeper into the healthcare space.¹ Wearable biosensor companies received over $140 million in the last twelve months², (heavily from corporate entities), and are another example of an increasing health focus by a number of household electronics companies. The good news here is that there will likely continue to be an influx of capital for early stage biotech companies to take advantage of. The key for fundraising companies will be identifying relevant corporate entities that constitute a fit.

Funding for Digital health

Digital health encompasses the intersection between medical technology and information technology. This includes healthcare IT solutions such as electronic health records, big data analytics, and cloud-enabled devices. This subsector is responsible for a disproportionate amount of the growth that has taken place in the medical technology space in the last year: Investment has doubled in 2013 to almost $2 billion in annual investments relative to 2011 levels. More interestingly, there is an increasing focus on early stage players in this piece of the market: Series A deals constituted 51% of financings in 2013, relative to only 39% in 2012². Due to the “multi-industry crossover” represented by digital health, this subsector stands to profit from the aforementioned corporate venture interest, not to mention other investor categories seeking to join in the trend.

Mobile-Enabled Active Implantable Devices

Active electronic implants enabled with mobile technologies will continue to gain momentum within the device space. The FDA issued preliminary guidelines on this subject in the second half of 2013 in anticipation of increasing focus in this area.³ A number of devices in this category – such as diabetic and cardiac monitoring systems with wireless capabilities – are already being successfully used in patients. These can compile extensive patient data, which can be helpful not only for treatment personalization, but a number of other tasks, such as complex trial data capture.

Early stage medical technology companies should watch these trends and seek opportunities to capitalize on them. Moreover, the influx of new investors into the healthcare space via these technologies constitutes a shift that savvy entrepreneurs should be aware of. Keep your eyes peeled as LSN continues to follow these investor trends as they evolve over the coming year.

1. http://www.medicalnewstoday.com/articles/271389.php
2. http://www.slideshare.net/RockHealth/digital-health-funding-2013-year-in-review-by-rockhealth
3. http://www.fda.gov/MedicalDevices/DeviceRegulationandGuidance/GuidanceDocuments/ucm077210.htm

By Dennis Ford, CEO, LSN & Barbara Nelsen, Founder, Nelsen Biomedical

LSN is officially announcing the release of “Beyond Venture Capital” in the January 8th edition of Nature Bioentrepreneur! This piece, appearing in the current issue of Nature, is an in-depth analysis of the new life sciences fundraising environment, detailing what caused the paradigm shift in the investor landscape, who is active, and how fundraising executives should adapt. This is a must-read piece for anyone involved in the early stage life sciences arena, and an excellent primer for newcomers to the Redefining Early Stage Investments Conference.