FAQ
About Sofinnova Partners
In what areas does Sofinnova Partners invest?
We invest exclusively in the areas of technology and life sciences. The disruptive technologies that we concentrate on lead us to deals in the cleantech sector.
Why do you only invest in these areas?
We have developed our expertise in these sectors that carry the most potential for growth, a determining factor in our investment making.
Would you consider investing in a company from another sector?
Yes, on the condition that the potential for development and growth is strong, that the market relates to technology, life sciences or cleantech, and that our expertise can bring a real benefit to the project.
Why do you invest early in a company’s development?
This is a key part of our investment strategy: to identify early on new trends and disruptive technologies, and to then finance the ambitious management teams behind them.
Do you finance spin-offs?
Yes. In this case, we invest in the technology and also in the team that developed the technology in the midst of a corporate structure. We then take an active part in the positioning and structuring of the new company to ensure maximum success.
Are you involved in other kinds of private equity, such as buyouts?
No, because it represents a form of investing very different from that which we practice. We believe buyouts are best carried out by experts in the field, notably because they involve taking on debt, something we do not do.
Where do your investment professionals come from?
Sofinnova’s partners have strong experience in management, research and in entrepreneurialism. Their experiences are varied as are their domains of specialty and their professional backgrounds.
Who are your investors?
Our investors are international institutions (insurance companies, pension funds, funds of funds, corporations). We have benefited from their strong backing and support for each fund raised.
The French venture capital market
What makes you different from other French VC firms?
With more than 35 years of experience, we are one of the premier venture capital firms in Europe. We have thus passed through several financial cycles, among them periods of crisis like that which touched the Internet sector at the start of 2000. This knowledge and experience with market cycles gives us strong credibility.
Moreover, our teams have proven experience in their investment sector and have demonstrated their capacity to structure companies from start-up to profitability, having, for the most part, attracted international visibility for the companies in the process.
Being an independent partnership, we know how to take hold of opportunities with a strong determination. We know also to be patient, and will remain with companies for the long term until they are perfectly mature. And finally, we are totally European with a large portfolio invested in all the major countries of Europe.
What role has Sofinnova Partners played in developing French venture capital?
Sofinnova was created by the French government with the objective to import from the United States and develop in France the concept of venture capitalism as it was practiced in Silicon Valley. It is for this reason that very rapidly, in 1976, Sofinnova instilled itself in San Francisco to absorb the region’s best business practices. We continue to promote these practices in France and in Europe, on watch constantly to ensure that the relevant regulatory frameworks are adapted fiscally and financially in favor of the development of high technology enterprises.
The founding presidents of the Afic (Association française des investisseurs en capital) in 1984, and of the EVCA (European Venture Capital Association) in 1985, were partners from Sofinnova.
In France, Sofinnova contributed to the passing of the statute of the Jeune Enterprise Innovante. At the European level, Jean-Bernard Schmidt was president of the EVCA (European Venture Capital Association) in 2003, and lobbied extensively in favor of European high technology.
Sofinnova has strongly contributed to the establishment of the global standards of the industry, actively participating to the EVCA ’s reporting guidelines and to the IPEV (International Private Equity Valuation)’s valuation guidelines.
What do you consider some of your big success stories?
It is difficult to single out companies from the 160 that Sofinnova has financed since 1989 or the 420 companies financed since our creation. However, companies like Actelion, a leader in the treatment of pulmonary hypertension, now valued by the stock market at 7 billion Swiss francs, representing the largest in Europe for a biotech company, VistaPrint, in the domain of online printing, exceeding capitalization of $2.5 billion are very handsome successes.
In 2010 Sofinnova completed major landmark exits such as CoreValve, a medical device company providing a minimally-invasive alternative to open-heart surgery, acquired by Medtronic for $700 million plus milestone payments, Fovea, a biopharmaceutical company focused on ocular diseases, acquired by Sanofi-aventis for €370 million, Novexel, a pharmaceutical company focuses in the anti-infectives spaces, acquired by AstraZeneca for more than $500 million or Sensitive Object, a developer of a touch unit technology, acquired by Tyco Electronics.
More recently, Sofinnova completed major exits such as Movetis, acquired by Shire for $428 million, E-mail Vision, acquired by Francisco Partners for $65 million and Preglem, acquired by Gedeon richter for CHF445 million.
We are also very proud to have financed startups in a period where it was daring to enter into sectors of technology still little explored. Examples include Genset, a pioneer in the decoding of the human genome, Parrot, the worldwide leader in Bluetooth applications, and Exhonit and Nicox.
The US connection
What is your relationship with Sofinnova Ventures ?
Since the buy out of Sofinnova by its teams, the two branches of Sofinnova in Paris and in San Francisco operate independently with distinct structures. We fundraise separately and make our investments with full autonomy. Our cohesion rests on the fact that, under the same brand, we share the same entrepreneurial spirit and the same investment strategy: technology and life sciences investing, principally early stage and as the lead or co-lead investor.
What awaits a company financed by Sofinnova Partners with Sofinnova Ventures in the U.S.?
Sofinnova Ventures has access to local market intelligence as well as an exceptional rolodex of contacts from large American corporations. These resources can be put forth on behalf of European businesses looking to make their mark in the United States through their business development efforts.
Investment strategy
In what countries do you invest? Do you invest outside of Europe?
We are active throughout Europe, principally in France, the United Kingdom, Germany, Switzerland, Belgium and Italy. We also invest in the United States.
We look for :
- disruptive technologies that will have an impact on their market for the long term
- entrepreneurs who are ambitious for their company and wish to build it into the world leader in their sector
- relevance on an international scale.
What is your average investment size?
We can invest up to 25 million euros in a company, in stages. Generally, we begin with an investment of about 2 million euros for the initial round, and ensure a second round of 4-6 million euros. We participate very often in the first round of financing before even the first revenues. In some of these cases, if we estimate that a project necessitates a validation period before a larger commitment can be made, we will finance the seed round up to 750,000 euros.
Do you insist on having a board seat in the companies you invest in?
Generally the lead or co-lead of an investment round, we are active investors, notably at the board level. Through our extensive network and accumulated experience, we contribute to the company’s development.
Do you always lead or co-lead the round?
We generally lead or co-lead the financings in Europe, with an eye toward strong local venture capital partners who are well-established in their home country and have ample reserves for refinancing portfolio companies.
Besides financing, what else do you bring to a company?
We add value beyond financing. Without imposing upon the daily operational management of the company, we contribute to:
- strategy: the formation and evolution of the business model, international expansion plans and new market strategies.
- selection of team leaders: support in the recruitment of the management team and in the hiring of independent board members.
- financing: organizing investor syndicates and new rounds of financing, fostering merger and acquisition opportunities.
- protection of technology: put into place the strategy of intellectual property development and protection.
- execution of the IPO or corporate acquisition.
- facilitate access to large customers with whom Sofinnova has strong relationships.
- foster overseas expansion into the most attractive foreign markets thanks to our high level international contacts.
- introduce a partnering network formed by Sofinnova: lawyers, accountants, public relations professionals, marketing consultants and human resources professionals, all set up to work effectively with start-ups.
- share their experiences with entrepreneurs during the different stages of their company’s development, with more then 70 CEO peers already available in the Sofinnova family.
- open for them administrative and if necessary political networks that will support innovative young enterprises.
Present in the two sectors of technology and life sciences for over 20 years, Sofinnova Partners surrounds itself with the best scientific competencies and techniques in these domains. We collaborate with internationally recognized experts in these fields, who share their scientific knowledge and experiences in the trenches in order to help us with our project selection process.
It is like this that Sofinnova Partners created in 2002, for example, a “telecommunications advisory board”, a group with high level responsibilities for several European and Asian mobile telecommunications operators. This group regularly shares their points of view on new technologies and bear news on the future of the industry.
Financing
What’s a typical funding scenario?
Our favorite scenario involves identifying a unique breakthrough idea or product, gathering and nurturing talent about it, and then leading a first round of financing along with other prominent venture capitalists.
How does the investment process work?
It takes about three months to go from the initial presentation of a project to the proposal of a term sheet. This may seem long, but it is the time we need to execute due diligence, that is to say the time necessary to check the references of the entrepreneurs and the technology, to comprehend the sector and its competitive landscape and to determine with which other investors we will work. It can then take one to three months between the term sheet and an investment closing, depending on the complexity of European syndications. The process is typically managed by a single partner, who is responsible for the investment from deal generation to exit from Sofinnova’s portfolio. The decision to engage with a company generally represents a commitment on the order of 4 to 6 years.
What kind of exit strategies do you use?
It is our business to ultimately exit our capital from a company. The exit strategy is therefore a subject we study closely at the time of investment. It should be elaborated on carefully and applied at an appropriate time in the best interest of the company by the founders and management.
The investors in our funds are sophisticated investors, conscious that our job takes time and that patience can be rewarded. There is therefore not pressure for rapid liquidity. We operate with respect for the companies we finance: we seek above all to maximize the exit value for each enterprise. The interests of the company, its founders and its management team are also of importance.
Entrepreneurs
How many business plans do you review each year?
In a typical year, we receive around 1,500 business plans. We read all of them, but will carefully study between 250 and 350 plans, and proceed with in depth due diligence in 50% of these cases. We usually finance between 8 and 12 new companies per year.
How do I submit my business plan to Sofinnova Partners?
We have a general email address: deal@sofinnova.fr that should be used by entrepreneurs who don’t know us yet. But if you know one of our professionals, you can communicate your business plan directly.
What if I receive no immediate response from Sofinnova Partners or receive a negative response?
We will contact you to acknowledge receipt of your plan in the week following its submission. Generally, it will be reviewed in the month following its receipt. If a negative response is received, it is possible to return to Sofinnova Partners later if your business model evolves or the market further develops.
