Last Thursday, we were proud to co-sponsor the Emerging Allocators Association (EAA) event at Bain Capital with our partner, BipSync, highlighted by an engaging fireside chat with Adam Koppel.
Here’s a quick look at some of the key insights from the evening’s conversation:
As a life sciences company, what drives success?
- Strong governance and true alignment with the board are essential foundations.
- In life sciences, success isn’t only about chasing revenue. It’s about reallocating free cash flows and achieving operational excellence.
- Relationships matter. Focus on becoming a trusted partner rather than operating transactionally.
From a life sciences Growth Equity GP vantage point, top 5 factors that result in losses:
- Companies must have a strong balance sheet to navigate unexpected curveballs. Misjudging the time and capital needed to reach success can lead to loss.
- Failing to adequately assess management quality and your alignment with the management.
- Misunderstanding the value inflection points critical to a life science company’s growth path.
- Getting the technicals wrong. Human biology is complex, and even with deep diligence, there’s always a margin for error.
- Underestimating competitive intensity in the market.
Why would an LP invest in life sciences? What are key manager research considerations?
1. Portfolio Construction & Opportunity Set
- Life sciences can deliver an uncorrelated return stream to institutional portfolios.
- The impact of the portfolio to do good for our generation.
- While the sector often presents binary risk (50/50 outcomes), skilled investors can shift that to 80/20 success ratios.
- The landscape has grown: from 250 life sciences companies in 2008-09 to over 850 today, with wage inflation significantly impacting capital burn rates.
- Macroeconomic factors like public policy, interest rates, and inflation are increasingly influencing the sector and will present headwinds.
2. Manager Selection
- Has the GP back tested their investment decisions? Do they have a data-driven research and diligence approach?
- Does the GP have the right industry skillset and a diligence framework to create alpha- generation opportunities?
- Do you align with the GP’s investment principles when thinking about portfolio construction?
In a complex sector like life sciences, high-quality due diligence is critical. Platforms like DiligenceVault enable allocators to efficiently assess managers and investments and help unlock new opportunities with greater transparency and confidence.
Thank you again to EAA and Bain Capital for hosting a fantastic event!
