“To attract capital, let’s turn the game around”

Text: Afram Yakoub, Communications Manager, SwedenBIO

Why should they invest far away in an unknown company and team if they can invest within their ecosystem in front of their door and can basically grab a coffee at Starbucks

With a background spanning multiple roles as an entrepreneur, investor, and advisor, Dr. Andreas Schmidt has a broad view on business strategies, a topic he looks forward to discussing in detail at the NLSDays supersession: Preparing for the next unicorn: how to choose your business model?

Dr. Schmidt has raised more than 50 million USD in venture capital and built the overall strategy of the companies he co-founded. He also established partnerships with multinational pharma companies and leading academic institutions in the US, Asia, and Europe. His foremost message to young companies in the tough fundraising environment is to have a clear path to early revenue independent of large-scale venture capital.

“Early startup companies that can articulate precisely how they gather a new modality of clinically relevant data rooted in a unique and protectable wet lab method are the stars of our time. And startups with a path to early revenue, being potentially independent from large-scale venture capital, are kings,” he explains, elaborating further that; “– In general, companies that not only have great technology but demonstrate that they can sell life-science-related data and potentially build up new business models based on it will succeed. I am convinced that currently, it’s not just about the best technology, but about the demonstrated proof to be able to commercialize data in new ways. There will be a ‘Google moment’ – or a few – in the life sciences,” Dr. Schmidt predicts.

On bioconvergence and achieving balanced partnerships

The boundaries between biotech, medtech, and AI are blurring, and bioconvergence is increasingly a reality in today’s life science industry. Dr. Schmidt believes this will influence traditional business models as precision medicine will rebalance the value creation proposition of diagnostics versus therapeutic drugs, a development he explains by citing one of the biggest icons of the tech world.

“Steve Jobs once said he thinks the biggest innovations of the 21st century will be at the intersection of biology and technology. I believe that what we’re currently seeing it in the car industry – as value is shifting from the companies building engines to those programming autonomous navigation systems – this will happen in the pharma industry as well.”

It remains to be seen whether pharma companies will be fast enough in terms of “innovation by acquisition” so that this shift happens within a company, or if this will lead to a value shift towards more digital and potentially completely new companies, Dr. Schmidt muses.

The company he led, Proteona, successfully partnered with pharma and was acquired by Singleron last year. But partnering and acquisitions between technology and pharma companies are not always straightforward, as he has experienced firsthand.

“Partnering with pharma for a platform technology company is challenging as there are many possible entry points and conversation partners. Even the pharma companies themselves often cannot say where to start. Finding the best fit that translates into mutually beneficial business can be a lengthy road”, he says and explains; “– A partnership between a startup and pharma alone often suffers from a lack of medical direction. While a startup and clinic working together miss the scalability, impact, and resources of a big pharma company. And a clinic and a pharma working together typically is called something else: a clinical trial, not an innovation partnership,” he points out.

Hunting for capital by turning the game around

Nordic countries have many spin-off companies from academia and a tradition of early IPOs. At the same time, the level of international investors in the Nordic life science industry is relatively low. From Dr. Schmidt’s perspective, it’s mostly useless to chase international venture capital in the traditional way. The effort should instead be put into strategies to attract investors indirectly.

“Turn the game around. Attracting international investors is hard. Especially if you have Silicon Valley or Boston life science investors in mind. Why should they invest far away in an unknown company and team if they can invest within their ecosystem in front of their door and can basically grab a coffee at Starbucks while walking over to the board meeting of their portfolio company?”, he asks rhetorically and proposes several alternative strategies to attract foreign investment.

One such strategy he espouses is to attract early foreign startups backed by big VCs and offering them clinical trials, research, or business partnering conditions in the Nordics as a way to also bring along the VCs connected to them.

“Another option I see working out quite well around me is to focus on the so-called ‘turtle entrepreneurs’. These are scientists from top-notch universities who return to their home country and start anew, drawing in investors from their academic circles from places such as Stanford, Harvard, MIT, and other such institutions.”

Taking a cue from Singapore, Dr. Schmidt suggests yet another indirect strategy that involves utilizing the economic weight of national institutions to lure investors.

“Use the networking value of your country’s retirement system. Venture capital funds need to raise their money from limited partners, too. And these limited partners have deep access to the VC funds’ incentives and operations. And who is the superstar in playing that game? Singapore! Their national endowment is spread across Sandhill Road, which is the VC lane around Stanford, and Kendall Square, the yard in front of MIT. This might be a hint for Norway in particular,” he says in reference to Norway’s enormous national sovereign wealth fund.

Looking forward to real-life examples at NLSDays

As a speaker for the supersession Preparing for the next unicorn: how to choose your business model?, Dr. Schmidt looks forward to all the encounters and the ability to dive deeper into the topic and fill it with real-life examples. The ability to interact in person is also something he appreciates post-Covid.

“I look forward to interacting with the great life science community in person. While Corona helped to push digitalization, it also made me appreciate personal contact – meeting for a coffee and brainstorming the next projects and proposals that lead to both pragmatic business as well as next-generation breakthroughs,” says Dr. Schmidt.