LONDON – Europe has its fourth new fund in less than a month with the launch of Eir Ventures, which arrives on the scene with €76 million (US$85.9 million) to invest in life science startups in the Nordic countries of Norway, Denmark, Sweden and Finland.
The new fund has been set up by three veteran venture capital investors in the region, who point to a huge imbalance between the quality of the research base and the amount of available capital.
“There are probably many regions in Europe with an imbalance between great science and venture capital. But there is a particular imbalance in the Nordics,” said managing partner Stephan Christgau. “There are really only five professional investors, yet there are great universities, leading pharma companies and a strong skills [base],” he told BioWorld.
That is backed up by the European Commission’s annual innovation scoreboard 2020, published in June, which once more ranked Finland, Denmark and Sweden as top performers that are significantly above the EU average, a position they have maintained since 2012. Meanwhile, Norway, not an EU member but closely aligned with the bloc, is ranked as a strong innovation performer.
Denmark and Sweden also are rated as best performing in terms of their research systems. They are open for international cooperation, with well-networked researchers and a high quality of research output, the scoreboard says.
“The Nordic region is ranked year after year as one of the most innovative in Europe, with a stable business environment and a successful track record of medical innovation and world class science,” Christgau said. “However, the region is severely underserved with professional venture capital.”
While VC is in short supply, there is a keen band of retail investors, prepared to buy shares in listed life sciences companies. That could be a sign of strength, but Eir Ventures co-founder Magnus Persson argues the opposite is true, with immature companies that are not able to attract significant private rounds listing on a public exchange, before they are in suitable shape.
The resulting valuations are generally well below what a company would expect to achieve in a series A or series B in other countries, and many struggle to survive.
“We see hundreds of developing companies going public because of retail investors’ [appetite],” Persson said. “So we see a big open playing field. Sweden, in particular, is a good feeding ground for young companies,” he told BioWorld.
As a reflection that these structural shortcomings are recognized by policymakers, two of the main investors in Eir Ventures are the Swedish government venture capital company Saminvest and the Danish state investment fund Vaekstfonden. Eir also has backing from the European Investment Fund and Novo Holdings, as well as private investors.
Some of the new fund will go to very early stage academic startups, with Eir Ventures working in collaboration with university technology transfer offices. “There will be a small allocation to seedlings that are not quite ready for a formal round of investment,” Persson said.
The majority of the money will go to startups at later stages of development, or to more mature programs spun out from pharma companies.
“The main thrust will be classical, to bring companies to value inflection points,” Christgau said. “It will mainly be therapeutics, but could also be digital health and med tech.” Reflecting that scope, the fund is named after Eir, the Nordic goddess of health and healing.
In advance of setting up a website, Christgau said there already have been more than 100 enquiries. He expects the first investment to be made within the next couple of months. “We do have opportunities lined up,” he said.
In his former post, Christgau was senior partner in Novo Holdings, of Hellerup, Denmark, from 2007 to 2019, playing a leading role in the launch and growth of Novo Seeds, an early stage investment fund.
Persson, a medical doctor, formerly was at the Swedish VC firm Healthcap in Stockholm. He has also been hands on in university spinouts, as chair of the technology commercialization arm of the Karolinska Institute in Stockholm, one of Europe’s leading medical universities.
In many respects, the Karolinska has been an embodiment of Persson’s observations about the meager financial foundations of Nordic life sciences. In the first half of the last decade, the institute’s commercialization arm, Karolinska Development AB, which is listed on the Nasdaq market in Stockholm, built up and was solely funding, a portfolio of 33 small spin-outs.
By 2015, it was evident this was not sustainable and some companies were written off, while others were sold. By the end of 2017, there were 10 companies, a number of which have attracted external investment.
“They did a good job, but they were limited by funding,” Persson said. “We will have a very different model. We will be very oriented to syndication with other investors; we hope to bring in colleagues and friends from the European VC community.”
The third managing partner of Eir Ventures is Andreas Segerros, formerly partner at Sunstone Capital in Copenhagen, Denmark.
In addition, a special partner, Amanda Hayward, is based on the U.S. East Coast. “Amanda has done a lot of seed-stage investment and her U.S. perspective will bring something new to the Scandinavian and Nordic system,” said Persson. “Having a bridgehead in the U.S. will make it easier to get our companies known, for investment, dealmaking, M&A and licensing.”
Eir Ventures launches a day after Forbion announced the first close at $208 million of its fourth fund, and a couple of weeks after Biogeneration Ventures closed its fourth fund at $118.7 million and Epidarex Capital launched its third fund at $126.3 million.