In my recent analysis of venture capital investors over the 2007-2011 period I highlighted the top 25 investors on a region-by-region basis by the number of deals they participated in over the 5-year period. For the most part, readers familiar with the venture capital universe will not be surprised by the names that make up the top 25 in each region. Those investors are generally considered among the leading investors in the US and Europe, the names that most life science CEOs could rattle off the tops of their heads.
But that’s not the whole story: digging into the numbers reveals some surprising insights into investor activity – and points to life science companies having a hard time finding investors.
‘Big names’ step out
What struck me immediately was the lack of activity among the top investors in each region. Many – in some cases over half – of the top 25 investors didn’t do a deal in that region in 2011.
In the 6 regions analysed (West Coast US, North East US, UK, Alpine Rim*, France & Benelux, Scandinavia) the top 25 lists comprise a total of 124 VC firms (some firms appear in more than 1 list). In total, 74 of the most active investors in each of these regions in the five years from 2007 didn’t actually make any investments in the region in 2011. Or to put it another way, half of the top transatlantic life science investors didn’t do a single deal in their top regions in 2011.
|Region||Top 25 investors not doing deals in 2011|
|West Coast US||14 (56%)|
|North East US||10 (40%)|
|Alpine Rim*||7 (28%)|
|France & Benelux||10 (40%)|
Setting the bar low
Another surprise is the number of deals you needed to do in a region to make it into the top 25 for 2007 to 2011 – as low as 3 deals over 5 years for France & Benelux, and Scandinavia. That’s less than a deal per year. At the other end of the scale, just doing 2 deals per year will get you into the top 25 VCs in the West Coast US. And these numbers include follow-on investments, ie putting money into your existing portfolio.
|Region||Number of deals to get into top 25 2007-2011|
|West Coast US||10|
|North East US||9|
|France & Benelux||3|
The phantom ‘Global Investor’
Very few of the top investors make frequent investments in more than 1 region: only 19 investors appear in more than 1 top 25 regional list. Novo Ventures is the only investor heavily active in 5 of the regions; 5 of investors are active in 3 regions, and a further 12 investors are top in 2 regions. Only 10 investors appear in both the West Coast US and North East US top 25 lists, indicating significant regionalisation within the US. Of those 10 investors, 3 are headquartered outside the US.
4 Europe-based investors appear in either of the two US lists, and 4 US investors make it onto a European top 25 list.
The truth about venture capital?
This analysis points to a distinct absence of leading global life science investors, and explodes the myth of the big name investor. The well known life science investors don’t do nearly as many deals as they’d like the world to believe, and that investment activity dwindles when you strip out follow-on investments into their existing portfolio. For example, Orbimed have made 7 life science investments to date this year, but only 1 was in a new company not previously in their portfolio. Abingworth haven’t invested in a new company in Europe since 2007.
For life science CEOs looking for money this just goes to show how hard they’re going to have to work to find investors (and the reason we built VM Index). Knowing or pitching to a dozen or so ‘big names’ doesn’t really scratch the surface, and investors typically only invest in 1 out of 100 companies that they meet with.
In Part 2 of this analysis I will look into the the long-tail of investors participating in life science deals that dwarfs the ‘big name’ life investor lists.
*Alpine Rim = Austria, Germany, Switzerland