Investors and big pharma no longer avoiding techbio companies

Techbio is a field where the computational expertise of the tech sector and the biological know-how of the biotech sector converge. This leads to applications including the use of clinical and genomic data as well as sophisticated artificial intelligence (AI) algorithms to cut healthcare costs, deliver personalized medicine, and speed up drug discovery.

“If you're not leveraging tech, you're not competitive,” said Leigh Brody, investment manager at the UK firm AlbionVC, on the panel Investment for TechBio companies. “There is no way back anymore.”

Chris Baker, investment principal at the charity LifeArc Ventures, acknowledged that techbio is in the industry spotlight, with AI-based computational tools for drug discovery developed by Google DeepMind winning part of this year’s Nobel Prize in Chemistry. Even with the biotech market being slow to invest in companies at present, techbio companies that are “on trend” will get capital, he said.

And while big pharma companies waited and watched the space for a time, the giants have begun to share their resources with techbio players in mounting partnership and licensing deals, Brody said. "We are finally seeing everyone jump in at different levels,” she added.

From struggling startup to big pharma acquisition

The panel saw Eli Lilly’s acquisition of the UK-based company Aparito earlier this year as a sign of how big pharma has come around to the promise of techbio. Aparito has developed an app platform that lets patients measure their clinical progress using their own devices, letting healthcare professionals monitor them remotely in clinical trials.

Back when Aparito’s CEO and founder Elin Haf Davies set up the company, however, techbio companies found it harder to attract backers.

"None of the tech investors got us and none of the life science investors got us,” Haf Davies explained. She later said she “pitched to all these funds and was rejected time and time again."

While Aparito raised less funding than its techbio peers, the Wrexham-based business carved out its own niche by focusing on academic and patient group partnerships in addition to other collaborations. It also focused on having a revenue model from the start, with constant feedback from clients, which have different metrics to those of investors.

With the Lilly acquisition in the bag, Haf Davies sees things turning around for techbio startups nowadays. "These things take time to mature, and I'm sure that the pace of change will be much quicker now," she said.

Business models and investors

Specialist tech and biotech investors were reluctant to take the plunge in the past but they are beginning to bridge the techbio “gray area” between the two spaces, Brody said. However, there is plenty of room for generalists such as angel investors to come in and support techbio companies, she noted.

On the other hand, generalists are sometimes unprepared for the inevitable nuances of a techbio business, and this can complicate efforts to move the company forward, said Baker.

For example, techbio companies have a diverse array of business models, including offering a software as a service (SaaS) or using their technology to develop a pipeline of products. A company evolving its business model when times are difficult can lead investors with different theses to disagree on the destination of the company, Baker said.

There are other inevitable headwinds for investors and founders, with one being that sealing a collaboration or licensing deal with pharma companies can take 12 to 18 months, Brody said. This can be “very burdensome on companies, especially when they're raising money,” she explained, adding that many companies seek bridge funding rounds until they can close revenue-generating deals, which can be a challenge for investors to navigate.

Tips for techbio success

One of the main tips for techbio investors is that they should look outside their usual horizons and consider non-traditional founders and locations, Haf Davies said. One spectacular example of this was social impact investors in Aparito, which received a greater than 10 times return on their investment, she noted.

On the other side of the coin, founders should be enthusiastic about their technology but, given limited time and capital, channel the enthusiasm properly with real deliverables and objectives ironed out, the panellists said. Meanwhile, they should keep in mind that there are different ways of succeeding in techbio other than the traditional investment and exit focus, Haf Davies emphasized.

“I can assure every single founder out there that the highs and the lows are particularly extreme, and that's why you have to make sure that you're enjoying the journey of building the company,” Haf Davies noted.