Challenges and Opportunities in Biotech: Insights from Annick Verween of Biotope Ventures

Europe is striving to establish itself as a global leader in biomanufacturing, yet the current environment remains daunting for early-stage biotech founders and investors alike. Annick Verween, head of Biotope Ventures, articulates the challenges facing the industry: “It’s horrible,” she asserts, emphasizing the lengthy timelines, scarce capital, and frustrating regulatory pathways.

“Biology doesn’t multiply like an Excel sheet,” Verween quips, particularly underlining the complexities faced by agricultural biotech companies, where timelines can often extend far beyond expectations. She expresses concern over the funding landscape, stating, “I’m afraid we haven’t hit rock bottom yet.”

Despite these challenges, Verween acknowledges positive developments, such as an increase in joint assessment agreements with corporates that replace ineffective letters of intent (LOIs) and a rise in funding from patient family offices. There’s also clearer communication from corporate venture capitals (CVCs) about the key performance indicators they require.

The Biotope Model: Bridging Gaps in Early-Stage Biotech

AFN: Can you tell us about Biotope Ventures?

AW: Biotope Ventures, an initiative from the Belgian research institute VIB, aims to foster biotech innovation. Similar to how Wageningen University excels in food and agriculture, VIB is distinguished in biotech. My three-year tenure began with a mission to support startups from both within and outside our institute, focusing on sectors like planetary health.

Initially functioning as an incubator, Biotope is now an early-stage investor targeting biotech startups globally, except in the US and Canada. With a recent investment pool of €5 million ($5.8 million) from our second fund of €9 million ($10.4 million), we aim for five investments annually with modest funds.

Understanding the Biotech Landscape

AFN: What makes biotech startups particularly challenging to launch?

AW: The core challenge is the prolonged timeline and substantial financial demands. For agriculture-focused startups, seasonal data collection can be particularly taxing, while regulatory approvals can span several years. As a result, many startups have adopted more creative, lower capital expenditure models, yet scaling remains unpredictable.

Raising funds is arduous for both startups and investors, with unclear exit strategies exacerbating the situation.

Navigating the Current Financial Cycle

AFN: Where do you see us in the current funding cycle?

AW: I fear we may still be on the downward trend of this cycle before things improve.

AFN: How long does it currently take for startups to secure early funding?

AW: Startups need at least a year just to raise a couple of million euros, necessitating that they start the fundraising process very early.

Challenges with Investor-Startup Relations

AFN: You’ve been vocal about the ethics of investor relations. Can you elaborate?

AW: If investors keep the door open without clear feedback, startups may misinterpret this as a sign of potential interest. Transparency is essential; investors should communicate decisively whether they’re still interested and what they’re seeking.

Many startups struggle to balance fundraising with operational tasks, and this disconnect ultimately harms innovation. Consequently, there’s a cascade effect in the ecosystem, with startups facing cash shortages as funds remain in limbo.

h2>Bridging the Gap: Investor-Startup Alignment

AFN: How can biomanufacturing startups secure funding when VC backing is hard to come by?

AW: Angel investments in biotechnology are rare due to high ticket sizes and the complexity of the tech. However, the increasing interest from family offices and the emergence of CVCs may offer new funding avenues.

AFN: What is the role of CVCs in this domain?

AW: Corporates can significantly aid the sector by clarifying the performance indicators that investors seek. This hands-on information can help startups pivot and align with market needs, thereby enhancing their value proposition.

Establishing Traction in a Competitive Field

AFN: How can pre-revenue startups demonstrate traction?

AW: Startups often face a ‘chicken and egg’ scenario, needing funding to advance their products while also needing to prove value to corporates. Instead of ambiguous LOIs, establishing joint assessment agreements for product testing can provide concrete insights and help validate business models.

Developing a Strong Financial Foundation

AFN: You emphasize the importance of a capital stack. Why is that?

AW: Early investment is critical for long-term sustainability. Relying solely on grants or VCs limits a company’s potential. A diverse capital stack unlocks additional funding opportunities, fostering growth.

Characteristics of Effective Leadership in Biotech

AFN: What do you look for in a founder?

AW: I seek a founder who combines long-term vision with a strong operational focus—someone who can navigate the complexities of both science and business effectively.

What Turns You Off in a Pitch?

AW: Pitches lacking concrete data or portraying an unrealistic market landscape discourage me. While passion is essential, clarity in the problem being solved and customer willingness to pay must be front and center.

Noteworthy Portfolio Companies

AW: A couple of companies worth mentioning include Shelfion, which offers AI-driven shelf-life prediction, and B’ZEOS, known for producing seaweed-based packaging pellets. Both companies highlight innovative approaches to solving real-world problems.

For more insights, stay tuned to our ongoing Investor Q&A series.