Innovate while investing responsibly
Sander Slootweg says he was attracted to the biotech sector by its potential to deliver profits while creating positive change.
“If you can marry investing for profit with investing for societal gain and societal benefits, that, to me, is ideal,” he says. “This sector is by default, by its nature, highly impactful.” Slootweg's background is, by his own admission, not typical for most people on his team at responsible investment firm Forbion. He studied business and financial economics in the Netherlands, then joined a large Dutch multinational bank in the early 1990s as part of their management trainee programme.
By the late 1990s, Slootweg moved over to the private equity arm of the bank. At the time the life sciences sector was booming, and the private equity team were encouraged to invest in the space – unusually, given it is more often the preserve of venture capital. “These companies were developing new drugs and new medical devices, but were not generating any revenue,” says Slootweg.
Those early investments turned out to be winners – probably more by luck than wisdom, he says. But those early bets on biotech companies were innovative all the same. The UN Principles for Responsible Investment, to which Forbion is a signatory, didn’t even exist until 2005. Perhaps only $5 trillion of assets were under management by 2006 – a number that has since ballooned to $120 trillion1 . But back when Slootweg was investing in biotech firms, the concept of responsible investment wasn’t even known.
By 2000, Slootweg and colleagues were given permission to build out a team that was more fit to purpose to capitalise on the opportunities the sector offered. “We hired PhDs and MDs,” he says, “really smart people that helped us better to understand all the intricacies of the sector and the specific disease areas we were investing in.
They managed to do so, and Forbion was born. Forbion has an impact scale that ranks investment opportunities not just through a financial return perspective, but also societal impact. The company takes key indicators of a potential investment and looks at them holistically, beyond the bottom line, before deciding where to invest. “I think we are, in a sense, front-runners there, trying to make it insightful what the impact exactly entails,” says Slootweg. As part of its due diligence process Forbion assesses prospective investments on a complex grid of ESG metrics and Slootweg says they will decline to invest if the collated scores do not satisfy them.
The venture capital company now has branched out beyond its original strategy of finding quality companies with the exciting lab findings to other, ancillary strategies. One is an earlier-stage strategy called BGV: BioGeneration Ventures. “It's essentially our early stage outlet if you will,” says Slootweg. "They do mostly company creation." By using Forbion’s funding, early stage companies – often academic spinouts and smaller startups – can build to a level that makes them more attractive for larger funds.
It’s a key role in a rapidly growing, innovative world. “Biotech is a relatively young industry,” says Slootweg. He’s seen the sector shift significantly in the 20 or more years that he and Forbion have been involved in it. Companies that were once conducting early experiments are now conducting phase 2 and 3 trials, the final studies needed before approval by the likes of the European Medicines Agency and the US Food and Drug Administration.
He’s seen, over the years, other companies following the Forbion model, which looks at societal benefits, not just financial returns, when considering where and in what to invest. Some biotech companies seem reticent to financially back novel curative drugs, that solve health issues quickly, worried that it cuts back on potential long-term returns. "But you can put a price on it where you can still make serious money," says Slootweg. "We like when you have a better outcome for the patient and ultimately also a financially better outcome for society."
But that doesn’t mean Slootweg and Forbion take on charity cases. “We’re not a charitable organisation,” he says. “We’re a for-profit venture fund. But there are so many opportunities presented to us” – on an annual basis, Forbion sources about 1,100 – “that many of those qualify from a financial returns perspective, so we can afford to apply these other filters.” That’s a luxurious position, Slootweg admits, because in other sectors finding companies that are both profitable and impactful can be more challenging than the life sciences sector.
Picking those companies to invest in can often involve intangible elements, as well as what Forbion’s impact scale suggests. “One of the most important success or fail factors is still the management,” he says. “You can have great science and great innovation, but if you don’t have the right management team to translate that into a thriving business, you might as well donate your money to charity.”
When it works, it pays off big time – both for Forbion, and for the world as a whole. One of Slootweg’s biggest wins for us all was his early investment in the gene therapy sector. In 2004, the firm invested in a gene therapy company based in Cambridge, Massachusetts. The prevailing thinking was that gene therapies were a fun research tool, but would never have a commercial use. “Everyone said: ‘This is not going to work’,” Slootweg recalls. “It was a matter of putting the whole puzzle together, from the manufacturing and right preclinical experiment, to the right ideas about how to clinically develop this."
Today, gene therapies are a major and growing sector, expected to rise from a value of $6 billion in 2020 to $46.5 billion by 2030 – and a driving force in innovation, with new developments overhauling the way we treat and prevent disease by delving into genes. For Slootweg, the next winners are being born today.
Biography / key highlights
1989 Graduates with a degree in Business Administration from Nijenrode University, The Netherlands
1992 Graduates with a degree in Business and Financial Economics from the Free University of Amsterdam
1993 Joins the management trainee programme at ABN AMRO Bank
1999 Starts as investment director at ABN AMRO Capital Life Sciences
2000 Builds a team to capitalise on responsible investment, hiring PhDs and MDs, as co-founder and managing partner of ABN AMRO Capital Life Sciences
2006 Co-founds venture capital firm Forbion as managing partner
Currently serves on the boards of portfolio companies NewAmsterdam Pharma, Azafaros, Replimune, NorthSea, Xention and Oxyrane