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Four tips for biotech start-ups seeking VC funding

By Jesse Schwartz
Published: December 19th, 2018

In his recent Forbes article, serial entrepreneur Alexandro Pando offers biotech start-ups some tips for raising venture capital.

“In a world where it seems like start-ups are created every day and market economics remain largely unpredictable, securing funding for your biotech start-up can prove to be an arduous task,” writes Pando.

While venture capitalists typically prefer tested and proven biotech companies, Pando says there is still hope for early-stage companies trying to secure funding. Here are four tips to help founders get closer to that goal:

1. Channel your fund derivation efforts in the right direction. A company’s marketability and overall appeal do play a factor in an investor’s decision making, but most VCs won’t commit unless the company fits their venture capital profile. Investors are particular about the sector and stage of development of the companies they choose from.

“It will be counterproductive to approach a venture capitalist with a long history of providing funding for a specific biotechnology niche when your company falls outside that niche,” writes Pando. Instead, founders should first understand what VCs are looking for by conducting a market analysis, and then look to pair with the right VC, one who has backed up companies in a similar space in the past.

2. Holding off on seeking VC money can sometimes prove to be beneficial. There is certainly no shortage of VC funding for biotech companies — this year alone, VCs and angel investors have raised over $758 million. Because small start-ups don’t need such large sums of cash — at least not at first — Pando recommends reaching out to private investors or brokering partnership deals, and keeping more control during the early days.

3. Government agencies can be a viable path to funding, too. “From local and international economic initiatives to grants emanating from research industries, governments and NGOs provide a multitude of funding sources for biotech start-ups to exploit,” Pando writes. He recommends engaging with government programs by establishing a direct relationship with program directors.

4. New-gen funding sources. Although VC funding has shifted towards proven biotech start-ups, a number of nonprofits, foundations and philanthropists have emerged to fill the gap in early-stage funding. These entities, such as the Leukemia and Lymphoma Society and the Michael J. Fox Foundation, provide as much as $600 million in biotech grants every year. “Even though they were primarily set up to cater to academic research, the significant majority of them (90%) will readily partner with commercially oriented biotech companies,” Pando notes.

Source: Forbes

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