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Surprising Turnaround in VC Financing
The financing situation recovered astonishingly fast in 2010. Following a desolate prior
year, there was a marked improvement in industry indicators and in developments in indi-
vidual companies. The regional biotech companies managed to raise more than 100 million
Euros and two new funds for early stage investment have been established.
The industry proved resilient to the financial and economic cri-
sis and weathered the turbulences on the private capital markets
well. There are now signs of a capital market recovery, so that the
market may be able to meet the continuing high financing needs
of the biotechnology and medical engineering industry better
than in the prior year.
According to a survey conducted by Fleischhauer, Hoyer & Partner
with a panel of 37 leading VC suppliers, investments in Germany
increased from 341 million Euros in 2009 to 505 million in 2010
(panellists only). This amounts to a rise by 48 % and meant that
the pre-crisis level was almost reached again. Most of this capital
was invested in the biotech (124 million Euros) and medical engi-
neering (80 million) sectors. In terms of the regional distribution
of these investments, Berlin-Brandenburg came in third position
after Bavaria and North-Rhine Westphalia. IBB Beteiligungs ge-
sell schaft was again one of the most active investors.
This positive trend was also confirmed by a survey conducted by
biotechnologie.de for the year 2010. According to the findings,
privately held dedicated biotech companies received a total of
312 million Euros from their investors, which is twice as much as
in 2009 (142 million). Listed companies collected a total of 335
million Euros, compared to 122 million in 2009.
According to research by BioTOP, more than 100 million Euros
were invested in biotech companies in the Berlin-Brandenburg
region in 2010. This is a record compared to the preceding period
and higher even than during the pre-crisis year 2008. With app.
60 million Euros, listed companies thereby procured the largest
share of investments by capital increases. Among privately held
companies, NOXXON AG was the front-runner by a wide margin
with investments of 33 million Euros.
In addition to increased private sector investments, the indus-
try also benefited from public-sector funding from the states
of Berlin and Brandenburg earmarked for the expansion of the
infrastructure and new product developments in the amount of
43 million Euros. In total, some 150 million Euros were there-
fore invested in the regional industry in 2010. Funding also came
from the German federal government and the European Union,
which was not examined in detail in our analysis, but is usually
in the lower tens of million range.
These very positive results, especially compared to the preceding
years, should not obscure three factors, however. First: the major-
ity of the financings mentioned benefited only a small number
of companies. It must consequently be presumed that demand
for financing remains higher than supply and that many com-
panies sought, but failed to obtain financing. Second: Start-up
financing is more or less non-existent. This is reflected not only
in the number and quality of start-ups, but also in the difficul-
ties experienced by enterprises which received pre-seed financ-
ing, e. g. from the federal programmes Go-BIO or EXIST, but now
have major problems finding start-up financing despite having
reached an advanced development stage over the years. The High
Tech Gründerfonds (HTGF) has certainly been the most successful
instrument for financing technology-focused start-ups for many
years. But not every start-up matches the requirement profile
of the HTGF, so that many founders have to look elsewhere for
Federal Funding (BMBF) for R&D projects in biotech companies
Berlin
14,98
Hamburg
10,04
Baden-Württemberg
7,7
Bremen
7,31
Sachsen-Anhalt
7,03
Thüringen
6,29
Bayern
6,23
Per capita funding (euro), Figures for 2005-2009, source: ConsulTech GmbH, 2010
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financing. Third: Apart from the validation support programme
VIP of the German Federal Ministry of Education and Research
(BMBF), there is no effective instrument for translating the inno-
vation potentials in academic research at universities into com-
mercial applications. It is therefore to be hoped that VIP will be
continued and improved in certain respects to become even more
effective.
New pre-seed and start-up funds have been established in
Berlin-Brandenburg which is to create new dynamism in certain
areas. Investitionsbank Berlin has set up the Technology Develop-
ment Fund TEF which is to support the development and market-
ing of inventions at the Berlin universities. The aim is to overcome
the present barriers to utilisation and continued development by
a clear marketing-oriented focus. The inventions at Berlin’s uni-
versities are managed and supported by ipal GmbH which also
proposes projects suited for the IBB’s TEF pro-
gramme. In the start-up segment, Peppermint
has initiated a second venture fund together
with Stiftung Charité: the Charité Biomedical
Fund. The Charité Biomedical Fund is an inde-
pendent fund that invests in young companies
in the health sector which have a first proof of
concept. The fund focuses on companies in the
medical engineering and health services seg-
ments, whereby the pharmaceutical segment is
also considered selectively.
Klaus Lücke
Founder and Managing Director
of GILUPI GmbH
Funding for the Market Launch of Medical Products for the
Isolation of Rare Cells from Blood
»
In addition to our technology as a key differentiator, a further strength of
GILUPI is our good investor team. It makes me very proud that,
in addition
to the ERP Start Fund at KfW Mittelstandsbank, all of our existing investors are
contributing to the follow-up financing with more than 3.6 million Euros and
thereby supporting our growth strategy. This financing round will not only
enable us to bring to market our first product, the Nanodetector Cancer01,
but also to create the structure required for future cooperation ventures.
Dr. Joachim Rautter
Managing Director
Peppermint Venture Partners GmbH
New Fund for Startups in Biomedicine
»
The Charité Biomedical Fund, which was launched by
Peppermint Venture Partners GmbH in November 2010,
provides young companies in the region with a new private
partner for venture capital financing. With a volume of cur-
rently 25 million Euros, the fund is planning to invest in
ten to fifteen companies. Investments will focus on medical
devices, but medical services and the biotechnology sector
will also be considered. The viability of the technology or
the business model (proof of concept) is a key investment
criterion. The new fund is cooperating closely with Charité
under a cooperation agreement, so that potential spin-offs
from the Charité and the research facilities cooperating with
it will be one of the focus areas of Charité Biomedical Fund
investments.