Where the mon­ey is: Biotech’s megahubs com­mand VC's bil­lions

 

When it comes to the ge­og­ra­phy of biotech mon­ey, there’s the Bay Area/Sil­i­con Val­ley and the Boston/Cam­bridge hub at the epi­cen­ter of the North­east’s key re­gion.

And then there’s every­thing else.

As part of a se­ries on ven­ture cap­i­tal and biotech, End­points asked the an­a­lysts at Thom­son Reuters to run the num­bers on where the life sci­ences in­vest­ment mon­ey flowed last year. They tracked  $3.5 bil­lion for Sil­i­con Val­ley plus the Bay Area and $2.8 bil­lion for New Eng­land. Bro­ken down by city, $6.1 bil­lion went to Boston ($2.7 bil­lion), San Jose ($2.5 bil­lion) and San Fran­cis­co/Berke­ley ($1 bil­lion).

To put that in­to per­spec­tive, that was eas­i­ly more than half of the $11 bil­lion in life sci­ences in­vest­ment cash tracked by Thom­son Reuters last year.

Af­ter the Big 3 you’ll find San Diego ($725 mil­lion), New York ($454 mil­lion) and the Great Lakes area ($412 mil­lion) round­ing out the top 5.

That $5 bil­lion tracked by Thom­son Reuters that fell out­side the megahubs rep­re­sents a big part of the record wave of cash that has been flow­ing through the start­up side of the busi­ness in re­cent years. But the num­bers al­so re­flect a harsh re­al­i­ty for com­pa­nies off the beat­en track: VCs of­ten like to keep their in­vest­ments close to home, and they long ago grav­i­tat­ed in­to the megahubs.

That trend has big im­pli­ca­tions.

While San Diego and to a less­er ex­tent New York have done well, the fur­ther you are off the home turf of the VCs, the less like­ly it is you can find sup­port. So ex­ec­u­tives tend to con­gre­gate around the megahubs as Big Phar­ma looks to raise the flag at the epi­cen­ter of R&D – a trend that has helped make Kendall Square be­come one of the most ex­pen­sive places in the world to do drug re­search.

And it’s a trend that reach­es be­yond U.S. shores.

Eval­u­ate Phar­ma re­cent­ly con­clud­ed that UK biotechs raised 489 mil­lion pounds ($655 mil­lion based on the new, post-Brex­it val­ue of the pound) in 2015, which would qual­i­fy as the 5th largest hub if it was fit­ted in­to the U.S. list. More transat­lantic cash has been adding mon­ey to the mix, but the UK still rep­re­sents a trip that many VCs don’t want to make.

With more mon­ey to in­vest we’re see­ing more megarounds for up­starts, which in­cludes $250 mil­lion for Stem­cen­trx (South San Fran­cis­co, bought by Ab­b­Vie) and the $217 mil­lion De­nali (South San Fran­cis­co) start­up round. Mod­er­na (Cam­bridge) raised a block­buster $450 mil­lion. And it’s no sur­prise that all three are in the coun­try’s two big hubs.

This re­port fol­lows last week’s by-the-num­bers break­down on the top VCs, which you can find here.

 

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