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We are Our Own Investment Opportunity

July 1, 2019

The global population is aging at a rapid pace; the world population of seniors (60+) is expected to double by 2050[1]. This trend is apparent in the US as well – by 2030, older people (65+) are expected to outnumber children (18-) for the first time in US history[2]. Alternative investment strategies focused on age-related technologies and life sciences offer a unique “do good, do well” opportunity.  Florida in particular may be an especially interesting market by being at the epicenter of these demographic trends along with aging technology and life science innovations.

Technology advances have for the first time in history made precision medicine possible, enabling truly targeted and personalized care to improve quality of life and potentially transform our understanding of aging. Innovations like CRISPR-Cas9 is one of the biggest breakthroughs in science in the past decade – it is an easy yet very powerful tool for editing genomes which enables the ability to precisely engineer bio-therapeutics and pharmaceuticals (up to and including personalized medicine) and directly edit genetic errors that cause disease[3]. Another area which has seen significant innovations is immunotherapy, which uses the body’s natural defense cells to fight diseases by activating and expanding them[4].  Two types of such defense cells have attracted a lot of research attention: T cells and NK cells.  When the body is under attack by diseases (cancerous cells, virus infected cells, etc.), the first responders are NK cells, which attack abnormal cells of all kinds.  Because the median age for a cancer diagnosis is 66, understanding cancer’s disease pathology could reveal new insights into what exact mechanisms also affect aging[5].

The demographic shift and technological advancements are occurring on a global level, making it an interesting investment thesis from a broad perspective, but Florida is especially interesting since it has the highest percentage of seniors of all states (1 in 5 Floridians are 65+)[6], and it has the 5th highest median age of all states.[7] Furthermore, Florida has the nation’s 2nd largest pharmaceuticals manufacturing industry, 2nd largest medical device manufacturing industry, and 5th largest biotech R&D industry. The graphic below from Enterprise Florida highlights some other interesting statics about Florida’s life sciences cluster[8].

[1] World Population Prospectus 2017 (https://esa.un.org/unpd/wpp/Publications/Files/WPP2017_KeyFindings.pdf)

[2] US Census Bureau 2017 National Population Projections (https://www.census.gov/newsroom/press-releases/2018/cb18-41-population-projections.html)

[3] https://futurism.com/crispr-genetic-engineering-change-world

[4] https://www.sciencemag.org/news/2018/09/engineered-natural-killer-cells-may-be-next-great-cancer-immunotherapy

[5] https://www.cancer.gov/about-cancer/causes-prevention/risk/age

[6] https://www.worldatlas.com/articles/the-us-states-with-the-oldest-population.html

[7] https://www.census.gov/newsroom/press-releases/2017/cb17-100.html

[8] http://www.enterpriseflorida.com/wp-content/uploads/brief-life-sciences-florida.pdf

Although it often takes biotech companies substantially longer time to generate revenue than “typical” tech companies, this does not always equate to longer exit horizons. In fact, for VC backed biotech companies that exited in 2018, the median length to exit was 3.1 years, and 70% of the companies exited as pre-clinical or Phase I companies[1]. This trend has held true for the past 5 years – half of the $1B+ M&As that occurred in the life sciences space between 2013 and 2018 were pre-clinical/phase I companies[2]. Furthermore, exit multiples continue to attract risk-tolerant investors; average total deal multiples in 2018 was 22x.9

Investors who are interested in investing in private companies could capitalize on the opportunities arising from this demographic shift which is spurred on by technological advancements. Investing in private companies focused on the demographic shift and aging, either in the technology or the life sciences space, could be especially opportunistic in Florida. This can be made possible for individual investors either through individual investments in private companies, or through venture capital/private equity funds.  

About DeepWork Capital

DeepWork Capital, previously known as FAN Fund, invests professionally managed committed venture capital in growth-oriented early-stage companies in the technology and life science sectors in Florida and surrounding areas. The firm prefers to take a lead or co-lead investor role while working closely with other investment groups and takes a hands-on approach with its portfolio companies. For additional information please see http://www.deepworkcapital.com.

[1] https://www.svb.com/globalassets/library/managedassets/pdfs/healthcare-report-2019-annual.pdf

[2] https://www.svb.com/globalassets/library/uploadedfiles/content/trends_and_insights/reports/healthcare-investments-and-exits/healthcare-report-2018.pdf

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