Do local investors make a difference?
E-mail outreach, online meetings and digital data rooms have become a given when trying to finance a therapeutic innovation! So, do local or regional anchor investors matter when developing a bioinnovation ecosystem? If the local innovation is world class, would it then not attract capital from wherever available?
Sunstone, in collaboration with our local peers and as a Nordic based investor, claims to play an important role in finding, developing and financing biotherapeutic opportunities that end up attracting international investors. But do we have data to support that claim? or should politicians and sovereign funds not care about supporting local investors – and just focus on the quality of local/regional innovation?
To understand the impact of local investors Sunstone studied Danish companies having received financings from 2010 and forward. We looked at the HQ address of the VC’s participating in Seed, Series A and subsequent rounds in Denmark. The figure below illustrates how the geographical distribution of investors changes as Danish therapeutic companies progress in financing. The 1st bar illustrates the geographic distribution of investors in Seed investments that by now are unlikely to achieve a Series A (have been trying for +4 years), the second bar shows the companies that we assume are still able to achieve a series A and the third bar the companies that actually managed to get a series A financing. The data should be interpreted with caution as it covers more than 15 years of trends in investor behavior. Nevertheless, it indicates that local investors increase the likelihood of achieving a later series A – when comparing the 1st and 3rd bar. The 4th and 5th bar illustrate how the geographical mix of investors evolve in Series A and later financings. If on average, investors invest the same amount in a financing, the data suggests that local investors play an important role in seeding companies and need to support approximately 50% of series A investments to progress local or regional innovation.
What are your thoughts? – How important are the local or regional investors to the innovation ecosystem?