Technology and life sciences specialist early-stage company investment group Deepbridge Capital has launched an Enterprise Investment Scheme (EIS) that aims to exploit the investment manager's knowledge of healthcare and medical technology innovation.
As revealed by Professional Adviser last week, the fund will follow the model of Deepbridge's existing Seed EIS aimed at the same sector. That vehicle has raised £5.2m to date and will have funded more than 30 companies as of the end of this tax year.
Deepbridge makes much of its expertise in the life sciences arena and currently manages more than £60m in various funds, including the evergreen Deepbridge Technology Growth EIS. The company pointed out investing in life sciences, healthcare, biotech and medical technology requires sector-specific knowledge.
"With life sciences, it is a very technical sector," said Deepbridge head of marketing Andrew Aldridge. "It is very complex. There are medical, pharmaceuticals and research and development [R&D] elements involved."
Aldridge added that many of the companies Deepbridge invests in will be pre-revenue and that often a sale would come through before the company started making any revenue, such is the nature of the medical innovation and drug discovery sector. "An R&D company may make limited commercial revenues before being bought," he added.
The nature of the sector also meant the failure rate for start-ups was relatively higher than with other sectors. "The companies tend to fail fast," said Aldridge, noting a drug that failed a medical trail would necessarily mean the investment was lost. To balance that, he added, the company had "a good pipeline of potential opportunities and some good deal-flow".
Aldridge explained that the Deepbridge approach, led by the firm's head of life sciences Dr Savvas Neophytou, was to identify innovations with the potential opportunity for high growth and then to work closely with those companies to develop leading-edge businesses.
Commenting on the launch of the new fund, Tom Hopkins, co-founder and partner at tax-efficient investment adviser Kin Capital, noted that funds that focus on specific sectors have the advantage of accessing better-quality deals in their chosen field.
But he added: "Investors should be aware that while life sciences have the potential to produce fantastic returns, the timescales involved can be long, and the results can be quite binary so expect losses to come through before the winners."
Deepbridge said it had spare capacity with both its Life Sciences EIS and Technology Growth EIS funds.
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