White Paper: Health tech observations from LocalGlobe

Abstract.

We share the view that the UK has the potential to be a world leader in health tech, and see enormous opportunity for iconic companies to be built at the intersection of life sciences and technology. Over the last year we have focussed our efforts on developing our investment thesis and building relationships where the most promising UK health tech companies are being formed — and as a result have met with over 120 companies. This paper outlines some of our key observations and suggestions to promote the creation of world-leading companies and increase the visibility of this vibrant ecosystem to the world.

LocalGlobe is a London-based market leading seed fund

We’ve seen the full journey for companies from inception and seed through to $bn exits and IPOs including some emerging market leaders: Citymapper, Improbable, Moo, Secret Escapes, Transferwise, Zoopla

We look for fund returners — every investment we make, we filter for outlier founders who want to build $bn businesses

Since 2015 our portfolio companies have raised >$4bn

We see enormous opportunity for iconic companies to be built at the intersection of life sciences and technology, and believe the UK has the potential to be a world leader in this space

We have a unique and emerging health and technology ecosystem around King’s Cross Knowledge Quarter (including: The Alan Turing Institute, Benevolent AI, Deepmind, Facebook, Google, The Francis Crick Institute, Mind, Royal College of Physicians, Royal Veterinary College, Wellcome Trust, Great Ormond Street Hospital, UCL) with fast connections to world leading academic institutions in Cambridge (including Sanger and Babraham Research Centre) and Oxford

9 life science unicorns have been created to date in the UK: 2 in Oxford (Adaptimmune, Oxford Nanopore Technologies), 1 in Cambridge (ABCAM) and 5 in London (Autolus, BenevolentAI, Biovex, and Orchard Therapeutics, and most recently Babylon Health)

Across all sectors, the UK has created 72 unicorns (36% of total European unicorns) and the lead has been increasing in the last 5 years

We are actively looking for health tech investments, and have made 10 to date (8 in the UK, 2 in Israel):

— In healthcare tools, we are investors in Echo (recently exited to McKesson), offering repeat prescriptions via their app; AccuRx, developing communication tools for GPs to connect with patients, focussing on the UK initially, and most recently we invested in Elephant Healthcare building lightweight mobile products for clinicians in emerging markets starting with Lebanon and Kenya

— In diagnostics, we invested in Zebra Medical offering AI diagnostic tools for radiologists, based in Israel and one in stealth building a universal engine for one-step precision cancer diagnostics

— In consumer, we have invested in Ferly, a sexual wellness company, Many, a men’s health company, Eastnine, an audio coaching app for runners, Yulife offering life insurance to SMEs and consumers, which is tied to a wellness product, and MyHeritage sells DNA Kits to understand more about your heritage, based in Israel

— Our thesis also spans into digitally enabled and advanced therapeutics as well as platforms underpinned by computational biology, where we are also actively sourcing investments

Over the last year we have focussed our efforts significantly to strengthen relationships where the most promising UK companies are being formed.

— We have looked at over 120 companies the majority from Oxford, Cambridge and London (Crick, Entrepreneur First, UCL, Imperial and Zinc)

— We are working with a wide range of investors including: Parker Moss, Chris Hopkins, Leila Zegna, Rabin Yaghoubi, Jambu Palaniappan, Andy Richards, Rebecca Todd, Andrew Elder, Pam Garside, Vijay Barathan, Jack Kreindler

We have found:

— Some founders, particularly in key Cambridge and Oxford ecosystems, are giving away significant amounts of equity at inception, which makes it difficult for some investors to follow on to help the company grow.

— Teams are often imbalanced in terms of tech and life science experience. We believe it is imperative for teams operating at this intersection to be balanced in terms of life science/clinical experience coupled with deep technology experience.

— UK is not yet considered a world leader in health tech. Despite having all the components of a world class health ecosystem, it is not yet mentioned alongside leading life sciences and computational biology ecosystems: SF Bay Area, Boston or Israel.

— Route to market traction is key. Almost all companies we have invested in have had significant traction via NHS (AccuRx), going direct to customer (Ferly, Eastnine, Many, YuLife) or traction in other markets (Zebra Medical, My Heritage, Elephant Healthcare).

— NHS is a blessing and a curse. It is great to have a single payer system but it is still slow, bureaucratic and sometimes impenetrable for start-ups and SMEs. We do know this is changing with the government’s commitment to improving care through technology.

— UK is losing talent, mostly to the US. If companies don’t have a route to market in the UK they relocate to other key markets, mostly US.

What can we do better:

— PR: Share more data on the breadth and uniqueness of the emerging health and tech ecosystem from King’s Cross to Cambridge and Oxford, as well as more coverage on the unique and rich history of UK health innovation

— ECOSYSTEM BUILDING: LocalGlobe to host series of workshops around specific themes including representatives from the community of health tech founders, angels, investors, accelerators, pharma, government, academia

NHS MARKET ACCESS

— How do we standardise the way CCGs assess and purchase software? Is there a role for a central body such as NHSX to do an assessment (which is transparent and standardised) which CCGs could then refer back to (instead of each CCG doing it in their own way)

— How do we encourage NHS Trusts to work together to avoid pilotitis

COMPANY FORMATION

— We need to help Founders set themselves up for success in this emerging sector, and help unpick the different starting points and expectations from traditional life science and health tech angels, and VCs – as I believe the most successful companies in this space will access both life science and tech investors!

ACADEMIA/TECH TRANSFER

— Can academics join start-ups as well as maintain a foot in the academic world?

ROLE OF CORPORATES

— Emerging models of corporate innovation strategies in pharma and health insurance

Huge thanks to my panelists from our roundtable (Chris Hopkins, Pam Garside, Tara Donnelly, Vishal Gulati) and everyone who came and provided feedback on this white paper (Adam Higgins (Astra Zeneca), Adrian Ibrahim (Sanger), Akta Raja (NED Royal Free), Andrew Elder (Albin), Andy Merritt (LifeArc), Ash Patel (Optum), Barbara Domayne-Hayman (Crick), Bobby Kaura (Illumina), Christopher Kelly (DeepMind), Eyal Gura Zebra), John Counsell (UCL), John Davies (Amazon), Julian Tsoi (Numis), Lina Wenner (FMC), Margaret Hollendoner (Google), Meriweather Beckwith (Oxford Capital), Min Hu (Av8), Pahini Pandya (Panakeia), Pandu Rahrja-Liu (Panakeia), Paul Dowling (KQLabs), Rebecca Todd (Longwall), Simon Waddington (UCL), Tim Samuels (All Hail Kale), Umang Patel (Babylon), Vivek Mathew (AccuRx)

Our next event is a salon on working with the NHS co-hosted with Akta Raja (NED at the Royal Free). Discussion with decision-makers within local hospital trusts and the private sector about how to remove barriers for working together. Stay tuned!

Please also find our summary slides, which we also shared at our LP Showcase here

Have a fantastic summer!

Team LG