thuja presentation bio business summer school 2013

BioBusiness Summer School 2013

Venture Capitaland

Medical Product Companies

Michel Briejer

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What is venture capital?

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What is venture capital?

• Venture– High risk enterprise– Technology based– Relatively lengthy development trajectory– Much money needed (millions of Euros)– No short-term profitability or positive cash flow

• Capital– Financing in return for an equity stake (shares: co-ownership)

• Sub-category of private equity– Investments in private (non-public) companies

3


Why venture capital

4

Life of company (years)

Capi

tal n

eed

(mio

Eur

o)

University Late stage VCs

Informal investors Revenues from sales and partnering

Subsidies, “soft loans”

Early stage VCs

Bank loans


Venture capital and innovative companies

• Venture capital is an essential part of the innovation ecosystem

• Particularly important to enable transition of technological inventions towards commercially viable products

• Almost all successful high-growth technology companies have had venture capital at their basis to fund product development

5


Correlation # PE investments and # companies

6

Source: EVCA yearbook


Symbiosis between science parks and VCs

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• Boston

• New York

• Los Angles

• Research triangle (Raleigh)

• San Francisco

• San Diego

• Seattle

• Washington

Top 9 US science parks

Source: The Brookings institute (2002 report) Thuja Capital analysis

Metric Top 9 Last 42

NIH funding (mio US$) 812 104

Patents 2,641 263

Venture Capital (mio US$) 957 27

R&D Alliances 1,089 11

New companies 35 2.3

Large companies 24 1.5

Main differentiators


Types of VCs – by stage

• Seed/early stage– Fund size € 10-50 mio– Limited geographical focus– Hands-on, active, assistance in setting up and building company and further

fund raising– Seed capital, series A-B funding

• Mid/late stage– Fund size € 50-250 mio and beyond– Continental or even WW focus– Mature companies, experienced management– Supervision from a distance– Series B-E funding

8


How a VC makes money (ROI)

• Trade sale: – Sale of shares to an external buyer– Sale of part of, or entire, company in return for cash

• IPO– Sale and trade of shares at a stock exchange (public trading)– In recent years the IPO route has not been an option

• Dividends (profit share)– Do not provide the return on investment pursued, poorly compatible with

pursued financial dynamics

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How a venture capital fund gets its money (1)

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How a venture capital fund gets its money (2)

Party

Institutional investors (pension funds, insurance companies, banks)

Family officeshigh net worth individuals

Governments (TechnoPartner,European Investment Fund)

Universities

Companies

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Drivers

Return

Return, philantropy (sometimes)

Stimulate innovation climate

Stimulate spin-offs, return, “valorization”

Strategic motive


How a venture capital fund works

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Venture capital fund

Portfolio

Valuecreation

Exit

Return

Institutional investors


The work of the VC

13

Venture capital fund

Portfolio

Value creation

Exit

Return

Institutional investors

Fundraising Selection

Active support

Active support


Venture capital - fund structure

Most funds have a similar set-up, typically:

• Closed end: fund ends after 10 years (+2)

• Fund investors (limited partners) commit money, and money is called pro rata for each investment/round

• Fund management co-invests in fund (1%) – and hence also benefits from a good fund performance

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The price of moneyor: there is no such thing as a free lunch

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Independence

Spread of risk

Fiscal consequences

Added value

Costs

Repayment

External financing

Loans Informals VC Subsidy

Medium

Good

Some

Little

Low

Yes

Low

Good

Some

Medium

High

Yes

Low

Good

Few

Much

High

Yes

High

Good

Few

Little

Low

No


VC money is difficult to obtain

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150+ new business plans

5-10 selected

1-2 new Investm

entsPER YEAR


The quest for return on investment

• A VC fund is successful if it generates a good return on investment

– Quick exit generates better return than exit after long period (IRR)

– Overall fund money multiple of >3x (or better: IRR >30%)

– Per fund portfolio of 10-12 companies 3-4 companies need to be exited with multiple of 5-10x

• How to select high-potential propositions with a prospective for good return on investment?

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IRR and Money Multiple

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A VC weighs the following characteristics

• Proposition:– Fit to fund focus and strategy– Feasibility– Realistic plan, timelines, costs– Commercial potential– Risks

• Team:– Experience, capability and credibility– Chemistry, trust and added value between team – VC

• ROI:– Pre-money valuation: number of shares obtained for investment– Investment round size, use of proceeds, value creation– Exit possibilities, exit horizon, capital need toward horizon

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What to watch for in a VC

• Fund focus – fit of VC with proposition, in terms of experience, portfolio, but also company stage

• Network- does the VC have an interesting and relevant network?

• Know how and experience – are fund managers of potential value to the company?

• Chemistry – ability of building fruitful relationship during the long-term commitment

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Investment process and support Thuja

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Source

Clos

ing

Selection Analysis

Active sourcing:• Universities• Network• Field monitoring• Meetings

Passive sourcing

• Focus funds• Investment

criteria

• Presentation(s)• SWOT• Business plan

refinement• Team• Preliminary

Investment Proposal

Negotiation

Term

shee

t

Value creationDue diligence

• In-depth due diligence

• Structuring• Legal

documentation• Internal approval

process

• Terms• Valuation• Investment• Business plan• Structure• Capital need• Syndicate

Exit

• “Hands-on” support and guidance

• Leverage network• Supervisory

Board• Connect to VCs

and business partners

• Support business development

• Connect to exit parties

• Active exit management

Investment process Support


Thuja Capital

• Management of three funds:– AlpInvest Life Sciences portfolio– Thuja Capital Healthcare Fund (TCHF)– Thuja Capital Healthcare Seed Fund (TCHSF)

• Fund managers:– Harrold van Barlingen (founder)– Michel Briejer

• Office: Utrecht Science Park

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AlpInvest Portfolio

23

Active

Exited


Thuja Capital Healthcare (Seed) Fund - portfolio

Company (location) Product Class Status

ArGEN-X (NL/B) Therapeutics Participation since 2008

Bioceros (NL) Therapeutics Sold in 2011

Cavadis (NL) Medical devices (diagnostics) Participation since 2010

Cristal Therapeutics (NL) Therapeutics Participation since 2012

DCPrime (NL) Therapeutics Participation since 2010

Fabpulous (NL) Medical devices (diagnostics) Participation since 2009

Hemics (NL) Medical devices (diagnostics) Participation since 2011

Mellon Medical (NL) Medical devices Participation since 2013

NightBalance (NL) Medical devices Participation since 2011

Okapi Sciences (B) Therapeutics Participation since 2008

TheraSolve (B) Medical devices Participation since 2011

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Thuja Capital Healthcare (Seed) Fund

• Geography– The Netherlands and Belgium (mainly Flanders)

• Stage:– Early stage: Seed, Series A

• Technology focus: medical products– Novel therapeutics, new formulations, novel applications– Medical devices, medical technology, diagnostics, biomarkers– Cross-over products– Medical foods

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Challenges

• Fundraising is THE key challenge for fund managers– Poor financial climate does not stimulate appetite and makes investors risk

averse– Banks are faced with Basle-3, insurance companies with Solvency-2 rules

which reduces their ability to invest– Pension funds are rethinking their investment strategy

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Contact information

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This document neither contains an invitation or offering of securities, nor should it be regarded as an investment advice. This document may not be reproduced or (re)distributed in whole or in part in any form or by any means without the prior written consent of Thuja Capital. The information contained in this document , including the additional oral and written information has been compiled from sources Thuja Capital believes to be reliable. Thuja Capital will not assume nor accept any responsibility in relation thereto. This information may be changed or updated by Thuja Capital without notice.

Thuja CapitalYalelaan 403584 CM Utrecht

Tel: 030 253 3849Mobile: 06 2246 2927Email: [email protected]

Web: www.thujacapital.comTwitter: @ThujaCapital

thuja presentation bio business summer school 2013

Health & Medicine

venture capital

venture capital

fund managers

thuja capital

medical devices

medical devicesparticipation

insurance

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