Q&A: Forbion Capital Partners' Sander Slootweg

Francesca Veronesi: You recently held a final close on €360m for Forbion IV, surpassing the initial hard-cap of €350m. How was the fundraising process?

Sander Slootweg: The fund officially launched in May 2018 and held a first close on €270m in July, while our previous vehicle held a first close in October 2014 and closed in April 2016 on €183m. Certainly we had a much swifter and easier fundraise than we have previously seen. This being the fourth generation fund and having kept the same core team over time, we have a good track record, which significantly helped new LPs to come on board. The split between new and existing LPs is roughly 50-50. New investors include UK-based Pantheon, Dutch institutions ASR Insurances and the TNO Pension Fund, and Nordic investors Formuesforvaltning and KLP. Existing LPs European Investment Fund (EIF) and development bank KfW also returned in the new fund.

FV: How attractive are European life-sciences-focused VCs to LPs?

SS: From our perspective, there remains a significant undersupply of capital for European early-stage life sciences investment. The sector has very high barriers to entry due to the deep-rooted life sciences expertise required to successfully identify opportunities in the market and execute on them. In light of this, we've seen strong engagement and interest from across the spectrum of alternative asset investors.

FV: What have historically been your main challenges when fundraising?

SS: Historically we have been backed by family offices, and governmental and regional bodies. However, we really wanted to welcome Dutch institutional investors, pension funds and ISR insurance companies, which usually don't back venture funds. The fact that the latter have made commitments to Forbion IV is a sign that VC is now a firmly established asset class for Netherlands-based investors.

FV: What are the so-called 'build' opportunities cited when you announced the closing of the fund?

SS: This kind of backing involves Forbion founding or co-founding a business and owning a stake in the 35-70% range. The build strategy on behalf of VCs started in the US and is very established there, while in Europe few VCs take on such a great ownership from the start. Forbion had two build-ups in its second fund and then four in Forbion Capital Fund III. We feel this is now a consolidated model and therefore agreed with our LPs that five out of 15 investments will be build-ups, while five will be established businesses deemed 'growth' companies.

It would be difficult to have more build-up investments, seeing as they really require a strong involvement from our staff during the investment period. Having said this, the positive results we've seen with NorthSea Therapeutics, Staten Biotech, Catalym and Replimune prompted us to set a goal of up to five companies backed via build-up investments.

FV: What returns do you expect in this market?

SS: European venture has done very well over the past five years. Compared with the US, one doesn't see rounds in the $100-300m range and syndications are common. With lower ticket sizes but the option of floating businesses on Nasdaq, returns can be really high when investing in European businesses.

We will be expecting 2.5x returns altogether and for individual successful companies it will be 5x. Since we invest in venture, we have an attrition rate of circa a third. Biotech IPOs have been possible on Nasdaq since 2013 and this has made a huge difference, giving a great alternative to trade buyers and proving a premium of 40-50%.

FV: Will Forbion IV only invest in European companies?

SS: Around 80% of biotechnology and pharmaceutical companies we back are based in Europe. In North America, we usually invest alongside co-investment partners, which we may bring in to our deals in Europe. These firms include Versant Ventures, OrbiMed, Omega Capital, New Science Ventures, Atlas Venture and Foresite Capital.

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