Our recent webinar with SEHTA on investment and funding highlighted several areas that life sciences companies should consider throughout their lifecycle.
When it comes to investing, the landscape in this sector is very positive. UK Life Sciences companies raised a record-breaking total of £6.6 billion in the first ten full months of 2021, a striking increase on the amount raised in 2012. One third of the top 50 life sciences universities in Europe, and four of the world’s top ten universities are in the UK. The amount of venture capital funding available to European BioTech firms has more than doubled in less than a decade and UK companies now account for 29% of the total raised.
This increase is aided by the ability of investors to support promising projects and companies for longer, participating in more rounds of funding over longer periods of time. Wealthy individuals are seeking impact investments, alongside financial returns, resulting in more and more interest in early-stage businesses. Additionally, angel investors and networks are growing in sophistication, whilst pharmaceutical companies’ corporate venture arms increasingly support early-stage BioTech organisations, often investing alongside traditional venture capitalists (VCs).
However, the US market currently leads the way globally, with a total of around $56 billion of venture capital raised in 2021. This compares to China’s $16 billion, followed by Europe’s $12.3billion.
Significant interventions from the UK Government in an attempt to further develop the UK life sciences sector include £200 million in funding through the Life Sciences Investment Programme. We are already seeing the impact in the UK of a renewed focus on this sector as record levels of venture capital have been raised, putting the UK total to £4.25 billion ($5.787 billion) in 2021, up from £2.8 billion in 2020.
In addition to venture capital, IPOs are now providing more access to fresh capital for companies and part or full exits for some investors, with listings opening up larger pools of capital to support later-stage development.
Companies looking to raise funds quickly though should not forget the advantages of using an advanced subscription for equity (“ASA”), a simple instrument that can also allow for Enterprise Investment Scheme relief for eligible investors, though it does have its own limitations.
Following the webinar, questions arose probing into further detail including the below:
There is a lot more money being invested in life science. Notably, the amount of money raised in each series has increased. What is driving this value increase?
- There is simply a lot more money around. There are more venture capital firms ready to deploy investment and an enhanced focus on this sector.
- Additionally, UK companies need to raise larger rounds in order to stay competitive vs businesses raising funds in the US.
Can you say more about ASAs?
ASAs are principally used by individual investors, but they can also be deployed by VCs. They can be particularly useful where a business wishes to delay having a valuation until a larger, institutional round.
Would you recommend raising in London, Berlin or the US?
This depends on where your business is based, and how well connected you are with your investors. Do you have the ability to get to the relevant institutions? Do you have enough awareness of the markets in the jurisdictions to identify the relevant investors and their focus?
Is an ASA similar to a SAFE?
Yes, A Simple Agreement for Future Equity ‘SAFE’ is effectively the US equivalent of an ASA.
For further information, please contact:
James Paton-Philip, Partner, Hill Dickinson Hong Kong