Sofinnova Partners, a leading European venture capital firm in life sciences, has raised €150mn for its early-stage environmental impact fund.
The Sofinnova Industrial Biotech II fund will invest in start-ups that use biotechnology to develop sustainable solutions across the food, agriculture, chemical and materials sectors.
The latest fundraising by Sofinnova Partners, which is based in Paris, Milan and London, is a sign of growing investor appetite for industrial biotechnology, Michael Krel, a partner at the firm, told Impact Investor.
“We have been in this field over the past 12 years or so, and we’ve seen a tremendous improvement in technology during that time,” Krel said.
“What is possible today with biotech has nothing to do with what was doable 10 or 15 years ago. Today, you can develop far cheaper and better products than the chemical industry.”
The fund’s current portfolio consists of companies which develop bio-based crop protection solutions, upcycle agricultural waste into chemicals, food or feed ingredients, use fermentation to develop food ingredients or biologically produce new chemicals and materials.
Lead or cornerstone investor
Since its foundation in 1972 Sofinnova Partners has backed more than 500 companies from seed to later stage, and created global market leaders.
The company typically partners with entrepreneurs as a lead or cornerstone investor with the aim to transform groundbreaking innovations into future businesses that positively impact the world. The firm has more than €2.5bn under management.
Sofinnova Partners plans to make initial investments of “anywhere between €1mn and €10mn” into around a dozen companies for the Industrial Biotech II fund, Krel said.
“We back entrepreneurs that have strong, differentiating technologies that address real problems.” The firm typically stays invested for a period of six to eight years.
KPIs to measure impact
Finding a way to measure the environmental impact of the fund wasn’t easy. “What was challenging was to find one single metric, a one-size-fits-all KPI (key performance indicator),” Krel said.
With the help of consulting firm Deloitte and the European Investment Fund, Sofinnova Partners developed a methodology that measures impact by collecting select KPIs per company, before working out a composite value.
“A lot of people are claiming they are investing in impact and so forth,” said Krel. “But not that many are actually really doing it. But we are really doing it.”
Climate crisis, Covid-19
Investor interest in industrial biotechnology was further boosted by both an increased awareness of the climate crisis and the Covid-19 pandemic, according to Krel.
“There is an interest in more sustainable products,” among investors, Krel said. With the UN COP26 climate summit just ending large investors, including institutional investors and family offices “need to put their money where their mouth is, and they need to put money into more sustainable development and ecological innovations,” Krel said.
The global biotechnology market is expected to grow close to 16% per year between now and 2028, when it may be worth $2.44 trillion, according to a report by US market researcher Grand View Research.
“The fundraise attests to the success of our strategy over the past decade and the growing understanding of how biotech can help to address global environmental challenges such as climate change, biodiversity, pollution, and food waste,” said Joško Bobanović, partner in the Sofinnova Industrial Biotech Fund.
He added that “a large majority” of the fund’s existing investors have returned, while “a significant number of new investors” joined from across the world.