LocalGlobe presents a 10 year view of European health and biotech

co-authored by Julia Hawkins and Ferdi Sigona

With the pandemic still not quite in the rear view mirror, it is an appropriate time to consider what’s next for healthtech and biotech.

LocalGlobe’s latest showcase was co-hosted by General Partner Julia Hawkins and David Rowan, ex-WIRED editor turned investor who currently manages the Voyagers health tech community and fund.

The event opened with a presentation by Yoram Wijngaarde, founder and CEO at Dealroom, talking about the impact that COVID has had on the sector, outlining the challenges and busting some of the myths around Europe’s healthcare systems, the ecosystem’s capital flows and its long term potential.

>> You can find the slides here

We then followed with a panel of healthtech and biotech founders and moderators, including Jacob Haddad, co-founder of AccuRx, Andrea Berchowitz, co-founder of Vira Health, and Zoe McDougall, VP Marketing and Corporate Affairs at Oxford Nanopore Technologies, moderated by David Rowan.

Next up was a panel of healthtech and biotech investors, including Isabel Fox from Luminous Ventures, Andrew Elder from Albion Capital, Liliane Chamas from Oxford Sciences Innovation, and Julia Hawkins from LocalGlobe and Latitude, also moderated by David Rowan.

Over the course of a lively discussion, we considered:

• How the market for healthtech companies is evolving
• The regulatory challenges startups face in the sector
• The role for university spinouts

How the market for healthtech companies is evolving:

David Rowan asked what reforms the Health Secretary Matt Hancock could enact to make the UK a better, easier place for ambitious health tech life science companies to grow, what would you ask Matt Hancock?

Our panellists gave the Health Secretary some great ideas.

• Autonomy of decision making: Jacob at AccuRx said that top-down programmes just can’t work because the system is so complex. COVID has shown that time and time again: the whole reason the vaccine programmes work so well is because GP practices get a box of 1000 vaccines and are told “go”.
• Data: Andrea at Vira Health said you’ve asked for all this female health data so use it, make it available to the rest of us, and do something with it.
• Biomedical research and translational research communities to keep working together: Zoe at Oxford Nanopore said the next big thing to come down the line would be drug resistance. We’ve come out of this with infrastructure and governments have suddenly realised that there’s a cost to pathogens. We’re crossing borders between researchers and public health and healthcare systems and, obviously, that was done because there was this incredibly urgent call to arms.

Investors were asked about the convergence of health tech and biotech over the next few years. If these worlds converge how do we make sure that we have the right ecosystem?

Andrew at AlbionVC was not convinced that they would completely converge, but thought the area of overlap would get bigger in the next five to ten years. The digitisation of biology is going to be a big driver in a lot of our technologies. At the same time, we’re getting this convergence with B2B investors investing alongside B2C or B2B2C investors.

We’re seeing companies scale much quicker so company building is much more important: we have to build teams much quicker around deeper IP. That leads to a convergence of data scientists, computer scientists and biologists and physicists, and bringing the right commercial people alongside these, and moving very, very fast.

We do need an ecosystem, because we need deep pockets of capital. We need specialised capital and we also need generalist capital. We need people focusing on the tricky questions and people who understand building tech companies and tech architecture at the same time as penetrating the archaic and dinosaur-like healthcare system or payers.

That is quite a complex set of things that move together, so yes we need an ecosystem from seed to series D, specialists and generalists.

What can investors do to make sure that Europe, and particularly the UK, are optimised for breakout health tech and biotech companies?

Liliane at OSI said that people and talent were the most important asset any sector or ecosystem had. She said that healthcare had opened up now for all kinds of people with all kinds of backgrounds and that people from other fields could bring valuable knowledge. There been some drought of talent in recent years but the next five or ten years were going to be incredibly exciting here at home in the UK and in Europe as well. People should stick around and ideally become multi-disciplinary.

Investors were asked about the difference in investing cycles required for consumer focused digital therapeutics over hardcore biotech life sciences?

Andrew agreed that biotech life sciences required longer-term investment. “It’s hard to return a fund in the time period that it can often take new combinations of molecules to be proven and go through regulatory hurdles. A downside to health tech more generally is the regulatory barrier, but in the long term, we actually think it’s positive too, because it’s also a really good moat once you’re in. You just have to have that long term vision and have longer term pools of capital. With more investment starting to come into healthtech, we’re going to see tighter cycles.”

The regulatory challenges startups face:

Everyone recognises that working with the NHS is difficult, because of its bureaucracy and resistance to change.

Jacob said that trial and error was the way that AccuRx succeeded. A user-centred focus turned out to be the key: “We spent five months living in one GP practice, building the scalable prototypes. And that user centered focus continues to be where we are today, with a much, much bigger team.”

UK-based companies do have some advantages in healthcare — when interacting with a single provider, although the reality is that companies will most likely need to sell into over 200 CCGs (Clinical Commissioning Groups).

But the overwhelming advantages recognised by the companies were from the UK’s tax regime which makes raising an early round easier and the huge numbers of really clever people. Oxford Nanopore, which has now raised 13 rounds over 15 years, explained to people from the outset that this would take a long time. Zoe said: “instead of saying we’re going to develop an arena and molecular diagnostics for infectious disease we said we’re going to develop a platform.”

AccuRx will concentrate on the UK market in the near future as there is still a lot more to achieve. “I think the UK and the NHS is the best place for us to build our products. And then you know once we’ve shown what a system wide communication platform looks like, we’ll be able to export that.”

Investors were asked if they had noticed any naivete or lack of realism in UK founders about what is going to take to build a successful venture backed company in health tech and biotech?

Julia said that actually the quality of companies and founders coming through was high and that they were alive to most of the challenges they will face. “It really depends on the founder as to whether they are naive to, for example, some of the commercialisation aspects or how difficult it is, or will be, to enter the different healthcare systems.”

The role for university spin-outs:

There are signs that research is being commercialised increasingly effectively in Cambridge and Oxford and that tech companies and university research teams are collaborating more.

Zoe agreed that we are embarking on a wonderful era for innovation and life sciences. “We now live in a world where people are reading about life sciences on the front page, and not in the middle pages. And so you’ve got specialist investors that are turning into generalists and generalist investors turning into specialist investors. Which means that the pools of capital, people who understand that life science companies can solve urgent real life problems, not just in health care, but in food security and environment has absolutely shifted in the last 18 months.” The ready availability of capital, however, does cause talent problems — because there isn’t enough talent to go round. Life sciences will probably need to bring in people from other industries to create value and impact.

Investors were also asked about the difficulty of assessing the potential of detailed science at an early stage, before it becomes a viable commercial business.

Isabel at Luminous Ventures said that bringing a commercial and/or more general view could be very useful. “Often it comes down to the founder, their ambition, do they want to grow it into a large business, are they able to attract the right talent, can they tell the story? Storytelling for us is majorly important: if they’re not able to tell the story in a coherent way, if they are too scientific in explaining what they’re doing, they’re unlikely to get the talent and the press coverage, and investors to back them.”

One of the challenges that often happens with university spin outs is the question about how much the university will expect to own in the spin out company and different universities around the world take different approaches. Investors were asked about whether some approaches were more entrepreneur friendly and more likely to help a founding team raise later rounds?

Liliane agreed that this was an achilles heel of the UK ecosystem in general. Five years ago the tone was a lot less founder friendly. We’re seeing a lot of changes and particularly at the level of the University of Oxford. There’s been a lot more flexibility and understanding in terms of continuing to be competitive in retaining a lot of these brilliant founders and ideas and incentivising academics to spin out.

You can watch a recording of the event here which concludes with a beautiful performance by Emie Nathan.

Thank you for reading.

Oh and we’re also hiring….

• We plan to add significantly to our investment team this year both at the Partner level as well as Associate level.
• We plan to go deeper into areas such as healthcare — if you have domain expertise, or amazing friends who do, we would love to hear from you. Please drop us a line: Julia@localglobe.vc