Today, medical cannabis is now legal in 22 countries in Europe, with six EU member states announcing legislation in the first half of 2018 – we believe it is only a matter of time before the UK follows suit and making the sector even more attractive to raising significant investment on London’s capital markets. However, what are the key factors required for a successful fundraise?
The UK has been a European leader in Life Sciences for decades, being home to a number of the continent’s top research universities, as well as a frontrunner in addressing a number of global health issues.
In the first nine months of 2018, London’s Alternative Investment Market (AIM) has seen £63 million raised by new market entrants (IPO) and £280 million raised by secondary raises. This indicates that despite the domestic uncertainty surrounding Brexit and the multitude of other negative factors within the global economy at the moment, market sentiment remains positive towards UK Life Sciences.
The most important aspect of any emerging business as sought by sophisticated investors is a strong, knowledgeable management team with a proven track-record. Institutions will invest in management’s innovation, ideas and drive, therefore it is key to make-up the management team with individuals with the right mix of skills and experience.
Many Life Sciences entities have developed or are in the process of developing their own IP. This IP forms the backbone of their company, with the rights being monetised and ultimately defining the value of the business. Patent law is complex, especially in Life Sciences, and therefore it is imperative to seek professional advice in order to safeguard any IP, either purchased or developed.
Investors will want to review a comprehensive business plan when evaluating an opportunity, and in a sector with significant complexity in its technology these plans should be quite the opposite - simple and easy to understand. Investors will see hundreds of different opportunities each year, therefore a concise, to the point plan will give the best chances of investment success.
There are many firms of financial advisers, lawyers, accountants, PR firms brokers etc. offering to support businesses seeking investment but the value of specific industry experience is often overlooked. The right adviser team will be able to leverage its experience to give proactive, useful advice, as well as a gateway to an expansive network of the right investors.
There are many charitable schemes and government grants available for pre-revenue, R&D focussed businesses that can provide a fantastic stepping stone for Life Science entities as they seek to grow. At the private investment stage, whilst not always the case, investors often like to see founders and management have invested not only their time, but also their own money in their business.
Investors need a legal structure to be tax efficient but also fit for purpose. Any structure should be considered with an advisor team to ensure it is right for investors and gives the ability to realise value in the future.
Ahead of private investment, financial, legal and regulatory records will need to be reviewed by investors, either by themselves as part of their investment appraisal, or by their advisers as part of a due diligence process. It is important that from an early stage records are kept in a complete and orderly fashion to ensure that no information gaps arise during the crucial investment appraisal phase.
Please contact Alex Nursey, Associate Director, Corporate Finance, if you wish to discuss further.