BIA BioFinance and BioInnovate Europe 2011

On Friday the 17th of June I attended the Bioindustry Association's (BIA) BioFinance and BioInnovate conference at the London Stock Exchange. Here's the review:

Overall, the day covered the venture capitalist rounds of funding business growth and the changes that this market had seen over the past three years. The speakers were from as diverse a background as SME directors and investment specialists, through to government agency representatives such as the National Institute for Health Research, Framework Project 7 and the Technology Strategy Board.

- the investment market is changing
I came away from the day with a distinct impression that the venture capitalist system had evolved as a result of the economic downturn. The fact that the standard VC investors were fewer and more risk-averse was repeatedly stated. As a counterpoint to this change there appears to be more of a focus on investors that take a longer, strategic view. These investors are more willing to stay with the company for a later exit as well as offer more support to de-risk their investment.

- the UK value for money
Another point made from an American investor was the capital efficiency of the companies in the UK. Capital efficiency of the inventors, researchers and businesses over here is a selling point that is worth shouting about. More can be done with less and although we're not quite at the level of the emerging (emerged?!) economies such as China and India due to our labour costs, we've always had a philosophy of efficiency with technology and project management. This can pay dividends when presenting to VCs.

- big companies as investors
Over the course of the past five years, and perhaps due to the reduction in VC availability, there has been a willingness to engage with Corporate Venture Capitalists. Larger companies which may be in the same market sphere are now taking a larger slice of the investment process. Traditionally seen as potential competitors and dangerous because of self-interest, they are now recognised as valuable partners. One piece of advice stuck with me: Have more than 2 CVCs as investors! You will get better value from each and if they are both interested in the final product you get healthy competition, different perspectives, less chance of a single CVC dominating and some decent agreement for protection in the Memorandum of Association.

- use the Enterprise Investment Scheme and R&D tax credits!
Both are fantastically useful methods of getting value for money thereby making your business more attractive and de-risking the investment. The R&D tax credit system can also be used to help the bottom line. The caveat is that many grants may impact your ability to claim R&D tax credits, the credits do not cover state aide funded projects so any project costs that involve state aide are ineligible. Non-state aide funds are okay but you can only claim the credits on the remaining portion of the project cost. There also seems to be several opinions on what is classified as state-aide, even in the grant bodies themselves. The best advice is to have a close relationship with your tax inspector and understand what drives them, which is mostly an overwhelming desire to help married to a strong concern for getting it right before the money flows out of their door!

- general tips for preparing for investment
Other than the obvious, which is to prepare a good plan and get help there are other tips that were shared by the investors (non-exhaustive, of course!):

• Have clear thinking on what you're offering and developing
• Meet the investors as often as possible - no deal is ever done before anyone has met and a lot of business is initiated during networking
• Any documentation must be short and punchy, with detail if needed. Tailor it to the audience!
• Be persistent
• Be polite and efficient. Emails and telephone calls that go unanswered can quickly bring a project off the boil and are unprofessional
• Have lots of contacts and several points of contact with each organisation if possible. I would add that you should primarily deal with just one.
• Think about ways to structure investor offers, particularly for corporates as these can be set up to have as little effect on their own balance sheets as possible making it easier for them to invest
• Don't be in a situation where you need the investment when asking for it; investors will bargain the best deal for themselves!
• Approach the right people that are likely to be interested in your story, helpful in the future and enthusiastic
• Have a competent and experienced team

- lobbying government
The BIA have an effective strategy of influencing and lobbying national government and are working hard to get the voice of bioscience heard by the policy makers. It's worth raising issues that matter so that the industry as a whole can benefit. They were instrumental in the reform of the R&D tax credit system and in the new patent box concept. So keep on at them and us and we can keep the UK in the premiere league of bioscience!

That was the crux of the meeting. I feel I have more of an insight into the market and landscape around investors now and am glad I went. I also have some more contacts in the business and heard some fascinating talks! Further event reviews will follow so watch this space!