Beating the odds

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Using Pitchbook® we have identified 56, EUR >50M, M&A transactions of VC funded companies developing therapeutics from 2010 to 2020 and have modelled the investor cash flow in each of the companies. Combined, the M&A’s returned a multiple of 6.4x.

The 56 companies were financed with 138 financing events (1999-2019) and in the same period Pitchbook® registered 1553 VC-backed financing events in therapeutic companies in total.

With a VC fund performance requirement of 3x, a EUR 100M fund would need to invest EUR 47M into the companies from our M&A analysis (6.4x47M = 3x100M). Assuming a fund investment average of EUR 7.5M per company in 12 portfolio companies – the fund needs at least 6 (47M/7.5M) of these companies over the typical 5-year investment cycle.

At random, you will have an approximate 138 in 1553 (roughly 10%) chance of investing in a company that later will M&A.

To get 6 companies that will M&A EUR>50M out of a 12 companies’ portfolio, you need to improve your chance of a correct draw to 50% or approximately by 5 times over random pick. Being 5 times smarter than a random draw is what it takes in venture capital when you focus on therapeutics.

Food for thought?

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BOSTON, March 29, 2022 (GLOBE NEWSWIRE) -- Galecto, Inc. (NASDAQ: GLTO), a clinical-stage biotechnology company focused on the development of novel treatments for fibrosis and cancer, today announced it has completed enrollment in Parts 2 and 3 of its ongoing 3-part...

Sunstone Life Science Ventures is looking for a Student Assistant

No longer accepting applications We are looking for a student to join our team for approximately 8 hours a week. As part of the team, you will play a pivotal role in the management of our deal flow, which lies in the order of 400-500 opportunities every year....

Sunstone announce new investment in immuno-oncology company STipe Therapeutics

Sunstone Life Science Ventures today announce it has invested in new portfolio company Stipe Therapeutics ApS (“STipe”), an immuno-oncology company dedicated to developing novel cancer therapeutics based on its first class drugs modulating the STING pathway.

Zealand Pharma achieves primary and all key secondary endpoints in pediatric Phase 3 trial with dasiglucagon for severe hypoglycemia

Zealand Pharma A/S (“Zealand”) (Nasdaq: ZEAL), a Copenhagen-based biotechnology company focused on the discovery and development of innovative peptide-based medicines, announces positive results in the pediatric Phase 3 trial with dasiglucagon for severe hypoglycemia...

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Sunstone has previously investigated the return multiples of venture capital funded companies HQ’ed in Europe (https://bit.ly/3n0bd3B) and concluded that when the total invested amount exceeds EUR 50M, the return multiple tends to stay below 5 in M&A transactions....

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