TVM raises E336m for life science

The German-US venture capitalist has closed TVM Life Science V well above its initial E250m target, indicating that investor demand for biotech is holding up well.

Techno Venture Management, the venture capital firm with offices in Munich, Boston and San Francisco, has closed its new biotechnology fund at E336m. The initial target for the fund, trading as TVM V Life Science Ventures (TVM V), was E250m.

TVM said that raising the fund in 2001 had proved a challenge, given the general market downturn, the worsening outlook for venture capital, closed public markets and the impact of September 11. That the firm completed the fundraising so successfully suggests that, unlike other supposedly high growth sectors, life science is still held in high esteem by institutions who otherwise often turn their backs on venture capital propositions.

It is the first time that TVM has raised a large sector-specific venture capital fund , as opposed to the four previous vehicles it had raised, which were aimed at both life sciences and IT and communications .

Commenting on the fundraising, Helmut Schühsler, TVM’s managing partner, said that an industry-specific fund offered investors greater flexibility and helped simplify their decision-making process.

He said that TVM had chosen to launch a dedicated life science fund first, because conditions for this industry were more favourable than for IT and communications. The firm, which has 15 full time investment professionals and eleven additional advisers, continues to make new investments in information and communications technology out of the relevant portion of TVM IV, which closed in May 2000 at E300m.

Schühsler said that TVM would raise its first dedicated IT and communications fund next year.

Key investors in TVM V include Dutch private equity house NIB Capital, which has a 10 per cent interest in the fund, Allianz, KfW and TBG, a subsidiary of Deutsche Ausgleichsbank.

70 per cent of commitments came from Germany and Switzerland, between three and four per cent from the US, and 15 per cent from Singapore, where according to Schühsler TVM has a strong set of relationships stemming in part from a number of its portfolio companies doing business there.

Asked about the recent surge in demand for life science investment opportunities, Schühsler said that many investors mistakenly thought of biotechnology as a safe haven. “It is a difficult sector and it hasn’t got any easier lately, but many venture capitalists have switched out of IT and back into biotechnology”, he said, questioning the wisdom of such moves.

“We believe that life science investing will continue to be very profitable for investors who have a strong franchise in the sector, a deep understanding of the industry, patience and a clear commitment to creating value for shareholder',

Schühsler allowed that there was a degree of downward protection for investors in bioscience because even companies that were not flying particularly highly were very often worth something to someone and could be sold on relatively easily. However he insisted that to benefit from this one still had to make the right investment decision, and therein lay the difficulty.

Since inception, TVM has invested in over 190 companies in eight countries. More than 40 of its portfolio companies have undergone an IPO at a major stock exchange.