DUBLIN — The Joint Polish Investment Fund (JPIF), Poland's first institutional life sciences venture capital fund, has raised $42 million at first closing and is aiming for $70 million in total.
It will invest the cash in innovative early and mid-stage Polish firms involved in medical technology, mobile health and, albeit in more limited circumstances, in drug development. It is open to investments in other parts of Central and Eastern Europe, and it is also scouting the large Polish diaspora for entrepreneurs who may be interested in relocating to Poland.
"We're trying to be opportunistic, which is why the scope is rather broad," JPIF general partner Kreske Nickelsen told Medical Devices Daily.
The Warsaw-based fund has received backing from Polish and European institutional investors, including the National Center for Research and Development (NCBR), an agency of Poland's Ministry of Science and Higher Education.
The European Investment Fund (EIF), a European Union agency that finances the European small-and-medium enterprise (SME) sector through venture capital and other financial instruments, has not participated, however. Although it has a mandate to invest in Eastern Europe, the EIF and JPIF were not able to agree on terms. "The EIF has expectations which are increasingly difficult to meet, if I may say so," Nickelsen said. "We just couldn't square the circle in terms of their requirements and what we were willing to do."
JPIF is focusing on a country that has, unlike many of its neighbors, enjoyed steady economic growth for almost 25 years. Its proximity to Germany provided an initial stimulus, after the fall of the Berlin Wall. Membership of the European Union, which it joined in 2004, has further accelerated its transition to a modern economy.
Living standards are still well behind those in the West, however, and the government is trying to move its economy further up the value chain. "Most of the country is in a middle-income trap. It's the service bench of the rest of Europe right now," Nickelsen said. That's why innovation is such a priority.
"The beauty about Poland at the moment is the life sciences/biotech start-up scene is flush with cash," she said. "There's a massive net inflow of capital coming from Brussels. The Polish government is determined to spend this cash on innovation and technology development." Private investors can achieve a high level of leverage on their investments therefore. "It's like Germany fifteen to twenty years ago," she said.
The country can claim a healthy life sciences innovation ecosystem, with, Nickelsen said, excellent clinical services and high quality research. "There are institutes which are world class," she said, noting that one large Warsaw-based research group had 40 papers published in the various Nature journals last year.
Entrepreneurial know-how is a limiting factor, however. "People and knowledge is probably the main deficit we're facing," she said. "[A lack of] experienced teams is the big thing." The fund will be heavily engaged with its portfolio, therefore.
JPIF's four-strong team of partners combines western venture capital experience with local entrepreneurial expertise. Marek Orlowski is the founder of Polish pharma firm Nepentes, which Sanofi SA (then Sanofi-Aventis) acquired for about €106 million ($116 million) in 2010. Nickelsen, a German national, has previously worked with London-based 3i plc and with Aescap Venture Management BV of Amsterdam, the Netherlands. Axel Polack is a former life sciences general partner at TVM Capital, in Munich, and the first CEO of the German tech transfer firm Ascenion GmbH. Anna Aranowska-Bablok has operational and investor experience in the pharma industry and in start-up companies.
The fund is domiciled in Amsterdam, the Netherlands, because of the ease of doing business there and because of the favorable taxation regime. "Setting up a fund in Amsterdam is so easy" Nickelsen said. "It's a well-oiled machine." Moreover, management fees in the Netherlands are not subject to value-added tax (VAT). In many other parts of Europe, a 23% rate applies.
The fund is close to making its first investments. "We've got two term sheets out," Nickelsen said. "Deal flow is strong." It already has some international prospects too. "Funnily enough we're looking at two U.S. deals as well."