Our Boehringer Ingelheim Venture Fund on the search for groundbreaking trends
The Boehringer Ingelheim Venture Fund (BIVF) acquires minority stakes in biotech start-ups exploring promising therapies and technologies, and even supports the majority before and during their founding. As an early-stage financier, the BIVF steps into the start-up world instead of the usual bank loan, since especially young start-ups are not yet granted loans by banks in this stage.
Record inflation, interest rate hikes, lowered economic growth forecasts and the prospect of an impending recession: start-up financing will not get any easier in the coming months and years, even in the biotech sector, which is popular among investors. According to data provider Crunchbase, investments in 2022 are expected to be at least a third below the previous year's level. It will be particularly difficult for founders who are still at the very beginning of their research. Because the earlier the investment is made, the greater the risk for investors. Institutional investors such as “classic” venture funds and banks are often not willing to take this risk under the current economic conditions - also because a possible return on investment is too far away.
But then, who are the investors that are already investing in innovative research projects and not just in already profitable companies? In most cases, it is not the classic investment banker in a pinstriped suit. Meeting Frank Kalkbrenner, Global Head of the Boehringer Ingelheim Venture Fund (BIVF), one will see a man with grayish hair dressed in a casual jacket and jeans. He has dispensed the sneakers for today, he says. In one breath, the physician explains the importance of innate and adaptive immunity in immuno-oncology; in the next, he talks about the process of evaluating investments of companies in this field.
In a nutshell: What is the BIVF?
Driven by scientific data
In 2010, the BIFV launches its first investments. “Since then, we have made 64 investments, invested in 57 companies (40 of which we have invested in since the founding phase) and made 7 so-called fund-in-fund investments, as well as a number of exits – Initial Public Offerings (IPOs) and sales,” Kalkbrenner sums up. “We primarily analyze scientific data for our selection. Unlike traditional venture funds, financial indicators are of secondary importance to us. After all, we not only invest in biotech companies, but we also mostly help to build them up ourselves. This means that we identify academic groups that address issues or technologies that are in line with Boehringer Ingelheim's long-term innovation strategy. We work for the goal that the projects will result in a major product innovation over a five- to eight-year period that can then eventually contribute to our clinical development pipeline.”
Focus areas of the BIVF portfolio
Therefore, the investments are made in startups that address one of two areas: Therapeutics in the fields of immuno-oncology, regenerative medicine, and anti-infectives directed against bacterial infections or technologies for digital health. The fund's volume of 300 million euros is “evergreen” – meaning that its founding volume is to be maintained over the years. “To keep it that way, profits from exits are reinvested and not distributed to our shareholders. This is possible at a family-owned company like Boehringer Ingelheim because our shareholders think in generations, and we can plan over the long term. To minimize the risk of such early investments, we also form joint ventures to invest together with other parties – mostly government investors or other corporate venture funds,” Kalkbrenner explains. Generally, a 20-30 percent share in the young company is acquired with the initial investment.
What do we bring to the partnership with our portfolio companies?
For an investment from the BIVF, we receive a seat on the supervisory board and can thus act jointly with the start-ups. As a result, the start-ups benefit from the long-term strategic perspective and experience of a family-owned company with which they can jointly drive research and development (R&D). “To get to market quickly, biotechs need to focus more on preclinical and clinical development processes, planning early and finding ways to reduce risk in development. Our experienced venture fund staff, usually recruited from Boehringer Ingelheim's R&D organization, help them achieve this,” Kalkbrenner says. “We also assist in licensing negotiations with universities, company management and with forming joint ventures for further rounds of financing. And we are doing so in all kinds of countries in Europe, as well as in the UK, Canada, the U.S., China and Singapore.”
Global team with extensive expertise
Research for investment opportunities is constantly conducted by the global team, which is based in Germany, USA, and China, with decisions also made in this global team in recurring video conferences. Twice a year, the whole team meets in one place and discusses the investment strategy in the different areas and reviews the company portfolio from all perspectives: “We do not need a sponsor in research for the initial decision making as it is often the case in other corporate venture funds. Because of our own experience, we can bring proposals for investments to our investment committee directly,” Kalkbrenner says about the venture fund's decision-making processes and structures.
The investment committee includes Michel Pairet, Head of the Innovation Unit and Member of the Executive Board Innovation, Michael Schmelmer, Member of the Executive Board IT/HR/Legal and Finance, Paola Casarosa, Head of Therapeutic Areas, Uli Brödl, Head of Clinical Operations, Jochen Gann, Head of Corporate M&A, as well as Kalkbrenner himself. Selecting the right investment opportunities is labor-intensive, but equally insightful: “We have hundreds of discussions with start-ups every year, are confronted with hundreds of business plans. But that's also why we recognize groundbreaking trends much earlier than the general public,” Kalkbrenner describes.
The portfolio will continue to grow
BIVF's investment is typically intended to run for five to seven years. After that, the portfolio company is usually at a stage where the product or technology could be licensed by us, or the company can be acquired altogether. In most cases, however, the aim is an exit – this is due to the large number of portfolio companies. In recent years, five portfolio companies have been acquired by us, five more have been sold to other companies and one start-up has successfully completed an IPO in the USA. Of course, some companies fail as well.
“We have built up a very mature portfolio over time. It is thus becoming increasingly difficult for us to identify the so-called “white spots”, meaning technologies that are considered strategically important but are not yet represented in the portfolio,” Kalkbrenner says about the prospects for the BIVF. Nevertheless, the investment portfolio will grow in the future – also in breadth: “We are currently also evaluating the possibility of expanding the venture fund into the area of animal health.”