In 2012, when many venture capital (VC) investors shifted over to tech investing, some stayed grounded in the biotech industry. Today, some of these same VCs have impressive portfolios and help to catapult life science companies into the future. In this post, we review some of the most prominent investment firms, funding tips, and how life science companies can stay relevant in the market.
Top VC Firms Investing in Life Sciences Companies
The life sciences industry has a four-part family tree, consisting of biotech, pharmaceuticals, dietary, and health tech. VC funding in this industry has surged significantly over the past couple of years. This trend has driven employment growth and new construction. Plus, it’s increased plenty of attention from investors, as well. Here’s a breakdown of several leading VC firms in the life sciences industry.
The Column Group (TCG) – With Dave Goebbal at the head, TCG has an insatiable appetite for cutting-edge science.
Google Ventures (GV) – Although no one shouts it from the rooftops, GV is savvy in biotech investing. The firm has sealed several significant deals in the life sciences industry recently and doesn’t expect to stop anytime soon.
Atlas Ventures – With 707 investments and 319 exits under its belt, Atlas doesn’t shy away from a challenge.
Arch Venture Partners – Lead by visionary Bob Nelsen and chemist-by-training Kristina Burow, Arch has its fingertips on some of the most massive platform companies in the industry.
Vivo Capital – Often syndicated with OrbiMed Advisors, Vivo currently has over $2B under management.
Pfitzer Ventures – It’s nearly a household name, mostly because it’s a massive corporate venture program keeping a pulse on the life sciences innovative ecosystem.
Alexandria Venture Investment – Alexandria is a real estate company that serves the life sciences industry, as well.
Y Combinator – This company works as an accelerator, investing a small amount of money into many startups and prepping them to pitch to more significant investors.
SOSV – Like Y Combinator, SOSV runs several accelerator programs. Also, it provides seed, venture, and growth-stage investment.
Fifty Years – Founded by two Y Combinator alumni, Fifty Years is a Silicon Valley VC making a splash in the life sciences industry. Plus, it’s trying to save the world in the meantime.
Khosla Adventures – Headed by well-respected Vinod Khosla, this VC firm is known for having many irons in the fire successfully, working a multitude of deals continually.
NEA – Since 2010, Maryland-based NEA has sealed 50 health tech deals. They also invest in other healthcare-related deals.
F-Prime Capital Partners – F-Prime is heavily involved in gene therapy investments. Other VCs have dubbed Ben Auspitz, an F-Prime investor, as the best gene/cell therapy VC around.
Fundraising Tips for Life Science Companies
Starting with a great team is undoubtedly the most successful route to land funding for your life sciences company. After all, an investor will opt for an A team with a B idea every time. Still, it’s essential to have the right strategy and benchmarks in place before diving into this venture headfirst.
But first, we published an entire series on Series A fundraising: Start here if you’re up for some in-depth information on the subject.
In trying to convince VCs to invest millions of dollars in a specific vertical, you must have at least 1-3 years of financials etched out. This approach means more than merely showcasing your budget or economic forecast. Investors want to examine your monthly actuals. In other words, they need to know how much money you need and for what.
Also, they want to know that you have the industry knowledge to flesh this thing out, per se. Having the right team in place is part of meeting your financial metrics. Investors won’t pull the trigger on financial information alone; they need the whole package — a multi-dimensional team and solid financials.
As you likely know, clinical trials are a painstaking process, costing loads of money and lasting a long time. Only about 30% of Phase II candidates reach a Phase III trial. Furthermore, a failed clinical trial can cost between $800M and $1.4B.
In response to these bleak numbers, investors are tracking the trial progress differently. A few novel ideas are trending.
One trend is that VCs are investing early in biotech companies. A chief reason for this approach is for the firm to gain more control over the future of the biotech company, in general. Thus, increasing the success of the venture overall.
Many VC firms focus solely on the company and the industry. In the life sciences space, though, mounds of knowledge exist from previous ventures. As a result, savvy investors are beginning to bridge the gap by hiring data scientists to let the investments of the past guide them to make better decisions.
Finding the Right VC
It’s worth mentioning that even the VC firms listed earlier are attracted to specific parts of the life sciences industry. For example, there’s a slim chance that Fifty Years is going to jump on the opportunity to invest in your pharma startup, even if you portray yourself as unstoppable. You’re not their jam.
Instead, do your research to spread a smaller net. Keep in mind that your goals must align with each other, and you need to take the time to network. Reading a VC profile is great. However, it doesn’t provide enough information about that particular firm to honestly know if you want to pursue a professional relationship or not.
Lastly, you must prepare yourself to “date.” After honing in on the goals of a VC firm and getting acquainted with the partners, it’s time to get to the detailed nitty-gritty of the firm. This approach will often land you with pitching opportunities, where dozens of questions will be fired your way — so cover your bases well.
How Insurance Can Support Funding Efforts
A solid pitch deck will present a thorough picture of your company and its big plans. However, most seasoned VCs have seen it all, so they will want to know just how well you’ve covered your bases, as cautioned before.
What’s more, is that many of these same investors experienced the slump a few years back. They want some surety that you are a top-notch opportunity, with ideas up your sleeve should some aspect of the deal or company go south.
Showcase Your D&O Coverage
This part of the process is where you can showcase your insurance coverage, particularly a directors and officers (D&O) insurance policy. Some investors won’t even consider funding your Series without this specific policy. From a VC’s point of view, it’s just too risky.
First, investors take an ownership stake in your company and typically appoint someone to your board of directors. The firm wants to ensure that their employee is protected from legal liability. Plus, if you and the VC get into a dispute, the firm wants to be sure that you have the capital to cover the legal costs without risking the entire company’s future.
Consider that these types of losses for companies without D&O insurance average $394,000. That said, the highest reported loss was an astounding $17M.
Understand the Importance of a D&O Policy
A robust D&O insurance policy can safeguard your company in such situations, protecting its future. D&O coverage works to cover claims arising from an individual’s alleged failure in their capacity as a leader of the company. Some common allegations include breach of fiduciary duty, unfair trade practices, mismanagement of shareholder voting procedures, securities violations, misrepresentation, etc.
A D&O policy can cover several scenarios, such as:
- Side A – It protects the individual directors by paying legal costs and settlements resulting from a lawsuit.
- Side B – This portion indemnifies the entity after it paid those individuals named in the lawsuit.
- Side C – If the entity is named alongside the individual directors in the lawsuit, Side C covers the balance sheet of the company.
Understanding the details of what coverage your life science company needs can be a confusing process. Founder Shield specializes in knowing the risks your industry faces to make sure you have adequate protection. Feel free to reach out to us, and we’ll walk you through the process of finding the right policy for you.
Want to know more about D&O insurance? Talk to us! You can contact us at email@example.com or create an account here to get started on a quote.