Attracting the right amount of capital, from the right sources, at the right time is perhaps the most critical factor for any early stage tech company or start-up.
Now, more than ever, early stage companies have access to depth of capital not previously available.
Depth and variety of capital has expanded at an accelerating rate over the past five years with additional capital inflows from both domestic institutions (including superannuation funds) backing venture capital funds as well as overseas venture capital. The Australian biotech sector particularly benefited from the weight of capital in recent times, supported by the recent establishment of the $500m Biomedical Translation Fund as part of Malcom Turnbull’s National Innovation and Science Agenda.
This venture capital provides an attractive alternative to listing and allows these companies to avoid the concept of the “second valley of death” (where listing on the ASX, whilst seemingly attractive, creates additional distractions and costs, but not the ongoing capital required to fund commercialisation).
Along with the weight of capital has come an “acceleration” of investment, and a willingness to fund earlier stage opportunities (including some large pre-clinical investments in the biotech sector), rather than only those nearing commercialisation.
While Australia remains attractive, investors are continuing to look for global potential of the underlying technology, therapy or device (including in the US) to attract this venture capital.
Three key criteria for investment ready companies echoed at AusBiotech’s recent “making your project investible” event are:
- Market opportunity – not only size of market, but a clear operating model (including through to reimbursement) that supports the significant investment required, and established and defensible IP in key markets critical to long term value generation.
- Solid technology base – early stage trials required as a more robust proof of concept to make a case for value and attract upfront funding that can provide the critical speed to market.
- Adaptable management – a solid team and operating structure is perhaps the most important factor considered, along with the ability and willingness to build skill sets within the team through either supplementing or replacing skills as the company evolves.
Early stage investment across all sectors continues to receive a high level of attention and will continue to evolve over the coming years.