Innovation never sleeps in the life sciences industry, and investors are putting more money into the sector then ever before. In the second quarter of 2020, venture capital (VC) spending in the industry hit $17.8 billion—a new record. While much of that is driven by the rush to find a vaccine for COVID-19, the industry is booming with new science and potential innovation in a number of areas and venture capital firms willing to bet on those discoveries.
One of the incubators helping to get those ideas ready for prime time and larger fundraising deals is the BioInnovation Institute (BII). This life sciences incubator and accelerator is based in Copenhagen and founded by the Novo Nordisk Foundation, which is one of the largest life sciences charities in the world donating up to a billion dollars of funding. Using these funds, BII provides early-stage life science ventures from around the world with knowledge, network, funding, and infrastructure required for startup success.
BII also recently partnered with eight international VCs to form a senior independent Program Advisory Group in order to help better select startups that VCs would eventually be interested in financing, and helping to prepare those companies get ready for future financing deals. The group consists of investors from SR One, Sofinnova Partners, New Enterprise Associates, Novo Holdings, Wellington Partners, March Fund, Rock Health, and BioVentures Investors.
PM360 recently spoke with Bobby Soni, Chief Business Officer of BII, about how BII is helping startups become the future of life sciences, the impact of this new Advisory Group, how COVID has accelerated their investment efforts, and what makes them think a company or idea is worth investing in.
PM360: What makes BioInnovation Institute unique as an incubator?
Bobby Soni: One of the things that makes us unique is we have been funded with a grant from the Novo Nordisk Foundation. While the amount of the grant is not public at the moment, it allows us to do things that you potentially otherwise couldn’t do. Essentially, we are their innovation center. Our remit is to take international science, incubate it at the BII, and make great companies so the products those companies work on can benefit society and patients.
It’s also important to note that we are a nonprofit entity. The reason we do what we do is we believe that there’s lots of great science that can have great impact, but normally wouldn’t get a chance to get there because of the systemic hurdles in the financing system of early-stage startups. We’re trying to attack that and give those companies a chance.
Currently, we work in three different industries—all life sciences related: therapeutics, bioindustrials, and health tech. Most of our deal flow at the moment is therapeutics related, but that just reflects the research base of where we’re located in Copenhagen and Scandinavia where there is an abundance of excellent science relevant for therapeutics. But we’re starting to see a lot more bioindustrial deals as well, and we are working to build up our presence in the health tech space.
In late September, BII announced the formation of an Advisory Group of eight international VCs. What do these VCs bring to the table to help you and the startups you serve?
We started working with the Advisory Group to get a VC’s view on our deal flow to see what they believe is fundable outside of BII. Currently, we fund our startups with 10 million kroner or approximately $1.5 million. That’s not a lot of money, but it is a lot for where these companies are in their development and what they otherwise could get. We are just trying to use that initial $1.5 million to get them to the point where they can actually raise seed or series A. That is where this Advisory Group comes in, they can help determine if outside VCs would invest in these companies, and if not, what can be done to help make those companies more fundable.
Do those VCs get first crack at investing when the time comes?
No, they have no formal rights associated with being part of the Advisory Group. Essentially, they just get to see our deal flow earlier then VCs that are not in our Advisory Group. But we work with all VCs and any VC that shows an interest in our portfolio has access to that company. It’s difficult to expect all our companies to get VC financing, so if there’s a VC that’s willing to roll up their sleeves and get in early then we are clearly going to allow them to have access to that company.
BII also recently announced a new program called VentureLab, which means you now offer three different programs for startups. Can you explain each one and what they entail for startups?
Our earliest one is our Faculty Program which is a $3 million grant we can give to international principal investigators (PIs) to run a project at BII. This essentially allows us to source science from all over the world.
Then we have our VentureLab program, which offers companies $500,000 and is essentially case-based training. Companies that come into the VentureLab program work for 12 months. They do key critical experiments to prove their technology works. At the same time, they do monthly crunches on different aspects of the company, which could include team development, fundraising development, commercial understanding, etc. The goal by the end is that these companies have a great understanding of how to differentiate themselves and how to enable the next round of financing, which could even be from our Creation House program.
Creation House is more money, it’s the $1.5 million I was talking about earlier. We expect Creation House companies to be more mature, so this money is used mostly on developing the team and helping them fundraise and complete key experiments that they need to do. This program runs two years, and by the end we’re hoping that they’re financed in a good seed round.
Do all of your startups have to go to Copenhagen to participate in these programs?
We source our companies and sciences internationally, but the requirements of the current funding we have are that we fund Danish companies. But people don’t have to move here, it is just required that the company is founded here. So we will help the founders create a Danish company in license, which they are sill the owners of. We also help staff the company as well as find a project manager to work with the PI in the company.
Since you source science internationally, do you work with any companies in the U.S.?
Not at the moment. Right now, our clear markets are the Scandinavian market because lots of great science is underfinanced there, and we are almost the main provider of financing for countries in that region. But we’re starting to see good deal flow from the UK and also from the rest of Europe. So our goal in the short term is to expand beyond the Scandinavian reach into the rest of Europe.
What are you actually looking for in the pitches you receive to decide if they are right for one of your programs?
In therapeutics we’re looking for novel mechanisms, novel targets, novel platforms, or just a novel understanding of biology that’s translated into products. In bioindustrials, a lot of arguments are made around whether this is better for the environment, but in the end, we need to see a business case that stands on its own without incentives and without government regulation hooking onto it. We’re looking for good economic cases where we can replace current chemical manufacturing, for example, with biomanufacturing.
It’s the same with health tech. We’re looking for something that’s science or research based and a fundamental understanding of how the data is affecting human health. Basically, we want to see how the science would become a product. So, we’re not really looking for apps, for example, that aren’t science based.
How has the pandemic impacted your deal flow, overall investments, or the activity you are seeing from companies wanting to make pitches? Has it slowed things down, or alternatively helped to speed things up?
We’ve kept our foot on the accelerator. Given the state of the market and the investing market, we felt it was important for us to be active and not let COVID affect our investing rate. We’ve basically moved to virtual funding and a virtual pitch process, and have still been able to successfully run our calls for pitches and get companies funded. We’re lucky in Denmark that we’ve had an appropriate response to coronavirus, so we’re semi open as it were and are still able to do things that many can’t in other countries.
Is there anything specific you’re helping startups gravitate toward to be successful in this industry’s current environment? Are there any lessons you believe are particularly important for them to learn, whether that is something they may need to do differently in the industry following the impact of the pandemic or anything else they need to know once they branch out on their own?
We’ve been doing this for two and a half years, and in that time we’ve done 17 Creation House companies. Three of those have now been funded in seed or series A having raised 26 million euros between them with seven VCs. So I think we have good proof of concepts on those three companies on what worked. We had one that closed due to technical failure and then we have 14 that are still active. Some are doing well and some are struggling.
What we’re learning is the key differentiator for those companies that do well is the team. Strong teams are absolutely critical for success. That’s why we’re starting to talk to our founders very early on about that need to develop a team around them. One of the things we helped them with is to try and find a senior biotech person early on to work with them. Ultimately, having that senior leader is a real key differentiator for the startup.
You already mentioned wanting to expand into more European markets, but beyond that what other plans do you have for the future at BII?
As I mentioned in beginning, we’re funded by the Novo Nordisk Foundation. As we continue to deliver for the foundation, we might also be able to offer incubation services to other parties that could be interested. For example, that could be pharmaceutical companies, bioindustrial companies, or even government organizations that want to stimulate growth in their region. It is an interesting concept, but we are still very busy with the companies funded with our existing grant.