With two record-breaking final quarters under its belt 2017 moves into the annals as one the biggest years for venture funding. After investors ploughed $3.3bn into private companies in the third quarter, the final three months defied expectations and saw a further $3.4bn raised. The total haul for 2017 hit $11.3bn, putting it ahead of 2015’s previous record of $11.1bn (see tables below).
Growing investor confidence across the sector helped drive these numbers, while the move towards fewer, but much bigger, bets on companies also played a part. This trend is now surely the new normal – a notable example of this much-to-few strategy being the staggering $1.1bn Roivant received for its series A round in August (see tables below).
Arguably it makes sense for investors to form strong syndicates to raise large tranches of cash to fund companies as far along their development as possible. Not only does it reduce risk and avoid the inevitable dilution of the traditional model of drip feeding funding, it means companies can concentrate on what they do best: developing drugs. It is, investors argue, a formula that should result in the companies with the strongest business models and science doing well.
|Annual VC investments|
|Date||Investment ($bn)||Financing count||Avg per financing ($m)||No. of rounds ≥$50m||No. of rounds ≥$100m|
While the data suggest there is money out there for companies with the right story, for those not on the radar of the big venture capital syndicates life is getting tougher. Despite the huge amount raised, last year saw only 411 rounds, a low point for the last five years.
Unsurprisingly, the average amount raised in 2017 went up, hitting $30.5m. An even more stark example of the rich getting richer was the number of big rounds during the year.
At the height of the biotech boom in 2015, 58 companies managed to attract rounds of $50m or more. In 2017 this jumped to 68 companies and the number of even larger $100m+ rounds also outpaced 2015, with 15 companies trousering this amount.
|Top 10 rounds of 2017|
|Roivant Sciences||1,100||Series A||August|
|Vir Biotechnology||350||Series A||October|
|Ginkgo Bioworks||275||Series D||December|
|Cheplapharm Arzneimittel||210||Series Undisclosed||September|
|ADC Therapeutics||200||Series D||October|
|Cullinan Oncology||150||Series A||October|
|Vir Biotechnology||150||Seed Capital||January|
|BridgeBio Pharma||135||Series A||September|
|Rubius Therapeutics||120||Series A||June|
|Semma Therapeutics||114||Series B||December|
The one company that stood head and shoulders above the crowd when it came to attracting venture capital was Roivant Sciences. Many can remember when the $450m Moderna landed in 2016 seemed like a big deal, but Roivant re-wrote the fundraising manual with its single $1.1bn series A, beating medtech company Grail’s $900m.
The size of these fundraisings indicate that in certain fields, investment models has fundamentally changed. The super-sizing of rounds has come alongside the rise of venture syndicates, which now more often than not include technology companies alongside traditional VC and pharma groups.
Grail counted Amazon among its investors last year, while Arcus Biosciences, Gritstone Oncology and Armo Biosciences were all beneficiaries of Google Venture’s interest in healthcare.
As for Roivant, it might need the money with its two public companies Myovant and Axovant Sciences so far failing to impress. September also witnessed the spectacular failure of Axovant’s Alzheimer’s drug intepirdine (Axovant scraps Alzheimer’s bid – now back to the amyloid hypothesis, September 26, 2017).
With the convergence of healthcare and digital health continuing a pace, 2018 could see more technology investors play a role. But as Roivant’s lead investor Softbank has found, the hoped for high rewards of being disruptors in pharma comes with high risk.
Even without the outlier contribution of Roivant, 2017 would still have been a strong year for venture investment, the second highest since EP Vantage has been conducting this annual analysis.
Other winners in the year included infectious disease company Vir Biotechnology, which despite only launching in January 2017 managed to pick up $500m in two funding rounds during 2017, including money from the Bill and Melinda Gates Foundation.
Ginkgo Bioworks and Rubius Therapeutics were interesting addition to the top rounds, given their respective focus on bioengineering and red blood cell therapies.
Although investors continue to put ever bigger eggs into ever bigger baskets, a small modicum of hope might be taken from the increasing diversity of investments, including into less fashionable therapy areas including infectious diseases. But this is unlikely to provide much comfort to the multitude of very early stage companies staring into the funding abyss as their counterparts have money showered upon them.
|Top 10 rounds of Q4 2017|
|Vir Biotechnology||350||Series A||Oct|
|Ginkgo Bioworks||275||Series D||Dec|
|ADC Therapeutics||200||Series D||Oct|
|Cullinan Oncology||150||Series A||Oct|
|Semma Therapeutics||114||Series B||Nov|
|Orchard Therapeutics||112||Series B||Dec|
|Arcus Biosciences||107||Series C||Nov|
|Tessa Therapeutics||80||Series Undisclosed||Dec|
|Codiak BioSciences||76.5||Series B||Dec|