Venture Capital Moves into the Microbiome

IPA AdminMarket Trends

Money is rolling into microbiome companies.

“This year, microbiome investment has surged again despite a decline in overall venture funding. The $616.9 million raised for microbiome companies to date so far in 2016 is more than all of the venture investment in the microbiome space in 2011 through 2015 combined,” according to a Wall street Journal article written in September by Brian Gormley.

Venture capital, while flowing, is cautious in how it’s approaching the space, unlike the billions which funded the boom, when companies were often college kids with a big idea—or looking for an idea–and no product.

Venture capital panel

Last month at Global Engage Symposium in San Diego, a packed auditorium gathered to learn from a panel of venture capitalists.

First off, the microbiome is unusual in that it crosses food, drug and device pathways, important differences in regulation as well as execution. This makes the venture more complicated but also one with more lucrative potential.

Eric de la Fortelle of Seventure Partners said there are “few investors in microbe space but other venture capitalists are testing waters.” He added that money will be made by finding “low hanging fruit” in the space, such as dermatology.

“The low-hanging fruit are the companies involved in infectious diseases; companies in metabolic, gut-brain are bigger reach,” explained another panelist, Bernat Olle of Vendata  Biosciences.

Asked how they identify the best companies to invest in, Olle replied: “quality of science, strength of IP, management team, and other investment sources.”

Malcolm Kendall of Microbiome Insights added: “patient advocacy groups are good places to start looking for investment.”

Successes, and a setback

According to Wall Street Journal’s Brian Gormley:

Venture-capital investment in microbiome companies has grown at a faster rate than overall venture-capital funding. From 2011 through 2015, venture funding in microbiome firms soared 458.5% to $114.5 million, while overall venture investment grew 103.4% to $75.29 billion.

Gormley cites Vedanta Biosciences Inc as well as Human Longevity, Inc and Indigo Agriculture Inc as big winners in funding.

Not all is rosy however. When Seres Therapeutics recently announced that clinical trials in treatments for recurrent Clostridium difficile infections were less than satisfactory, its stock price plunged. Gut check indeed.

Going forward

Investors won’t flee entirely. As de la Fortelle said during the discussion, “opportunism and pivot are vital.”