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TVM Capital has been operating in the Life Science sector for the last 30+ years. Today, TVM Capital is an independent affiliation of venture capital and international private equity firms. Since 1984, its investment teams have financed more than 250 emerging companies.

The Impact of COVID-19 on the Funding Landscape for Start-Ups in Europe

“The Life Science sector – biotech, medtech, diagnostics, and digital health – moved into the public spotlight due to the intensive political discussions on healthcare, treatments, and vaccines. This helped the Life Science fund and start-up ecosystem to gain more awareness and, partially, more funding options,” says Dr. Sascha Berger, Partner in the Munich branch of TVM Capital.

The main challenge – and where COVID-19 didn’t help – was to raise significant funding for expensive go-to-market strategies. The overall uncertainty with this is making it harder to convince investors to go in bold. This remains a challenge and opens up opportunities at the same time.

The COVID effect – driving low rate of return from government bonds among other economic variables and incentives – made a lot of liquidity available for riskier investments,” shares Catello Somma, an Associate at TVM Capital.

Life sciences, in particular, is a sector on a rally since March. Although for early-stage companies the financing became slightly more accessible, for Series B companies and beyond, the delay in readouts – due to lab shifts supply chains in shortage for components and team members in quarantine – caused a temporary impasse. For late-stage companies, the bar to access big tickets remains high.

TVM Capital’s Investment Strategy

The fund’s investment strategy hasn’t changed since COVID-19. Compelling technology and products, convincing entrepreneurs, and a thought-through business case will remain the key fundamentals for start-up and VC investment success.

According to Catello Somma, “More than the investment strategy, COVID pushed to sharpen the strategies of prospect investments.”

TVM Capital’s Support for Their Growing Portfolio Companies

“I believe in trustful relationships, which are built over time. Founders and companies that have shown to meet ambitious targets in the past will have a high chance of manoeuvring these uncertain times. And we will continue to support our partners. We keep financial reserves for our portfolio companies for precisely these situations, allowing us to tackle emerging growth opportunities jointly,” says Dr. Berger.

Besides the financial lever, TVM helps its partners with strategic guidance, access to an expert network, and mentorship.

Expectations for 2021

Dr. Sascha Berger expects three major things for 2021:

  1. Working in a virtual setting, with video conferences all day long, is highly efficient for many types of discussions. However, trustful relationships can be maintained to a certain degree with video, but it’s very hard to build them that way.
  2. He predicts a further increase in venture capital dollar availability. Given the overall and enduring economic constraints, financing innovation, start-ups, and new technologies will remain an attractive option for investors. Hence the availability of funding for truly exceptional opportunities will continue to increase. “VC funding levels have gone to record heights, and I have no reason to believe this will stop short-term.”
  3. Dr. Berger expects to see a few breakthrough advancements in:

    a. Biotech (e.g., further and improved COVID vaccines and treatments).

    b. Diagnostics (new exciting technologies).

    c. Digital health (also due to more favourable regulations).

“I am expecting to see more seasoned talents leaving big organisations to run exciting projects, with the aim of contributing to innovation. Great innovation will come more and more the result of a convergence between different sectors. ‘Just pharma’ or ‘just medtech’ may work incrementally, whereas the disruption is in the crosstalk,” says Catello Somma.

Lessons from the Crisis

Sascha Berger believes it was quite impressive to see how fast and bold this medical challenge was addressed on global levels. His crucial learning in one sentence is: “Technology is developing fast, human behaviour is sticky, and we need to be smart in matching both.”

According to Catello Soma, “This crisis won’t be the last. So, it’s better to be prepared.”