When we first did a landscape review of the Greater New Haven Biotech hub, we noticed that nearly all biotech companies in the state were locally founded, and mostly powered by local intellectual property at Yale University and the University of Connecticut. This sparked a curiosity in the venture financing landscape; was it also a hyper-local story? Does this fast-growing stealth hub have what it takes to attract capital from seasoned financiers outside its home turf? What is the distribution of active financiers by therapeutic area and what can we learn from this? In this blog, we provide a review of that journey.
State VC Connecticut Innovations Dominates by Deal Volume
The state is placing the biggest bets on home turf; this alone is not surprising, however the scale, frequency and volume of investments is noteworthy (Fig. 1, 2). Connecticut Innovations (CI) is the state’s “strategic venture capital arm and is the leading source of financing and ongoing support for innovative, growing companies. By offering equity investments, strategic guidance and introductions to valuable partners, CI enables promising businesses to thrive” [CI website]. Nearly 2 in 3 of CI’s investments are in biotechnology/ biosciences. There are essentially three main ways biotech companies are formed: (i) A Biology-first approach in which founders explore emerging areas of biology and then search for targets and pathways implicated in disease, (ii) a Technology-first approach in which founders identify a ground breaking technology and then search for diseases where the technology could have an impact and, (iii) an indication thesis wherein founders identify severe diseases of interest and then search for ways to address them. And obviously neither is a mutually exclusive approach [adapted with modifications from a Baybridge bio webcast]. We analyzed the companies in which CI has recently invested and noticed that the firm invests regardless of how the biotech companies are founded or which therapeutic area they are in.
Venture Capital Interest in the Hub is a Global Story
If there were ever any doubts as to whether this emerging biotech hub has what it takes to attract capital beyond its borders, that has certainly been laid to rest. We see a diverse mix of international investors and established US-based biotech investors.
In the Rare Disease space for instance, Rallybio, a Science Park New Haven-based biotech attracted a diverse and sophisticated syndicate that includes (i) local players Canaan Partners and Fairview Capital Partners, (ii) national biotech heavyweights Cambridge MA-based F-Prime Capital and San Francisco-based 5AM Ventures, (iii) international behemoth Mitsui Global Investments, among others(Fig. 3). We see this global story play out across other therapeutics areas including the hub’s anchor points — oncology and neurology. Corporate venture funds are also flocking to the hub, led by Pfizer Ventures and Johnson & Johnson Labs.
More than Just a Biotech VC Story
One would be remiss to tell the financing story of the Greater New Haven Biotech hub without mentioning the pivotal, but often unsung role played by non-profit and government agencies. Local university-tech transfer affiliated entities are betting early & often. The Yale Entrepreneurial Institute, the Technology Incubation Program (TIP) at the University of Connecticut and the Blavatnik Fund at Yale have been involved in deals across all therapeutic areas we reviewed. And yes, they aren’t just attending the party, they are organizing it! Equally notable are the US Department of Defense and the National Institutes of Health in several early stage deals.
Closing Thoughts
When fans like us who obsess about biotech see capital from industry veterans flow into an emerging hub, our youthful impatience in the discovery process sets in. It starts to feel like the lead candidate optimization process is occurring in geological time frames. Naturally, we wonder when a wave of initial new drug applications (INDs) will set in to justify the capital inflow. We look for any signs from scientific and investment conference presentations to see if licensing deals and M&A activity into and out of the hub will soon heat up. This is where the rubber meets the road and the science gets really exciting. And just may be, the IPO filings pick up momentum and become the norm, not the exception.
By Samuel Kitara & Jun Chen
