By Niall Kirk, Director, Optimum Strategic Communications
Since 2011, over 40 European healthcare start-ups have used equity crowdfunding, rather than the traditional venture capital (VC) route, to raise funds to finance their company’s ambitions to solve healthcare problems. Of these, around 20 companies are focussed on biotechnology drug discovery.
The main crowdfunding platforms that have supported these biotech companies include SyndicateRoom, Capital Cell, WiSeed, aescuvest, SeedMatch, CrowdCube, Anaxago, Sharein and Pre-IPO.
Crowdfunding has raised over £20M for healthcare companies in Europe since 2011. This figure is dwarfed by the estimated $2B raised for European biotech’s by VC’s in 2017 alone. This illustrates how new funding paradigms initially find it hard to compete with existing finance sources. In biotech, liquidity events take much longer than for consumer or FinTech companies and so the sector may attract less interest from investors. This is why healthcare crowdfunding is less than 10% of the overall European crowdfunding market.
Crowdfunded biotech companies Antabio and Celixir have reached liquidity events rewarding their investors with capital gains on their initial investment. In 2017, Celixir offered investors a 2.7 return on their initial crowdfunding through a share buy-back. In 2012, Antabio investors were offered a 44% return on their investment after a series B Angel investor offered to buy them out.
Some of the most exciting crowdfunded biotechs are focussed on neurodegenerative disorders, an area big pharma has shied away from. Companies in this sector include AlzProtect, Bionure, Parkure and Mitodys Therapeutics. In the cancer therapeutics sector, companies such as Riboxx and TC Biopharm are developing new treatment modalities for this devastating disease. TC Biopharm recently announced a major agreement with US biotech star, bluebird bio Inc., a $6B market cap CAR-T leader, to jointly develop TC Biopharm research. A sector now overlooked by big pharma companies due to lack of clinical success is drug resistant infections. Both crowdfunded Antabio and MGB Biopharma are developing therapeutics in this hard to treat market and their efforts have been mirrored in the larger market by the recent Sanofi-Evotec alliance for antibacterial drug development, Novo Seeds investment focus on anti-infective start-ups and Peter Thiels’ Breakout Labs investment in drug resistant infection/microbiome start-up SciBac in the US.
So, what’s next for European biotech crowdfunding?
aescuvest is a healthcare focused equity crowdfunding company. In 2018, aescuvest and EIT Health announced the launch of the first pan-European equity crowdfunding platform for European healthcare companies.
aescuvest believes it will be the first equity crowdfunding platform that offers real cross-border equity crowdfunding, which not only allows investment from all countries, but also to be able to actively promote campaigns across Europe under the EU passporting regulation for investment products.
Companies will be able to raise € 500k to 10 million with a standardised prospectus, both allowing for cross-border financing under the European passporting regime. Under current rules, it is possible for a company to raise between up to € 1 million in capital, without issuing a prospectus.
Through the partnership with EIT Health, the aescuvest platform has access to a network of several hundred health start-ups from all over Europe that are applying for EIT Health programs each year. For the start-ups, through a funding on aescuvest.eu they achieve great visibility within the EIT Health network, comprising of around 150 leading organizations within the European Health Ecosystem.
Companies funded on the aescuvest platform include Immunologik, that develops a lead candidate for the treatment of HIV patients, Liqui-Patch, a drug delivery company, Ello, an assisted walker device for the elderly, and snakeFX, who are developing an external fixator device for surgery.
To conclude, biotech crowdfunding is still alive and well and finding its competitive niche against VC funding. Crowdfunding platforms are allowing novel and innovative biotech companies to raise capital and new crowdfunding platform models are driving further market growth.
Others in the space
Capital Cell is a Spanish based life sciences crowdfunding platform that opened a UK office in 2017. After investment in many European healthcare companies, Capital Cell have planned to develop an initial coin offering (ICO) platform for European biotech’s. The platform, Cell Market, will use its own cryptocurrency, CELL, as a transaction medium. This mirrors the earlier efforts by major US generalist crowdfunding platforms such as Indiegogo, Republic and Angelist who have started their own ICO initiatives.
In France, a recent crowdfunding platform MyPharmaCompany basis its business model on a return of royalties on the annual sales of financed products. This looks quite innovative as it is a royalty-based agreement (not equity), and hence it is not governed by the stricter regulatory requirements for equity-based crowdfunding.
Another French crowdfunding platform is PRE-IPO. PRE-IPO is a platform operated by Invest Securities that allows individual investors to invest in companies that are not yet listed but intend to list on a stock market in the short or medium term.
Until now, this type of transaction was reserved for the historical shareholders of the companies and the clients of investment banks. PRE-IPO wants to democratise the market by allowing individuals to invest from €2,500 in pre-IPO companies. Biotech companies backed by PRE-IPO include AlzProtect and InnaVirVax.
A similar company in the UK is PrimaryBid. Over the past three years PrimaryBid has rapidly grown into a dynamic, award winning investment platform that is democratising the public equity issuance market by allowing retail investors the ability to participate in equity offerings on the AIM market at the same time and price as institutional investors. To date, more than £56m has been sourced via the company’s platform. PrimaryBid doesn’t specialise in the biotech sector although one of their clients is Provexis, an AIM-listed company developing anti-thrombotic nutritional treatments.