The Secrets to Successful Biotech Startup Funding

Over the past year, there has been a significant shift in the landscape of biotech startup funding. Due to new government data, startups are receiving better funding deals, including smaller funding rounds and lower valuations. If you think about it, it’s hard to believe that biotech startups raised $21.1 billion in 616 transactions in 2016, with a median deal size of $30 million. Comparatively, in 2017, biotech startups raised $15 billion through 312 transactions, with a median deal size of $10 million and more significant funding rounds.

Biotech startups are well-known for being among the riskiest and most expensive businesses to establish from the ground up. On the other hand, many of them are also the most rewarding. It takes a significant amount of time and effort to build a successful biotech startup, and obtaining funding for your project can be difficult. In this article, we’ve got some tips regarding secrets to successful Biotech Startup funding.

What is a biotech company? 

Innovative companies that develop medical and agricultural products from biological resources and living organisms are referred to as biotech companies in the industry. These businesses are called bio-firms because their processes and end-products are derived from living organisms and molecular science. These companies produce other commercial products, including biofuel, genetic modification, and pharmaceuticals.

Biotech startups and other high-tech startups have seen significant growth in recent years due to the proliferation of innovative technology in the marketplace.

This is on top of the growing global healthcare and medical technology challenges, such as the COVID-19 global pandemic, which is becoming more prevalent. These factors contributed to the need for rapid development in the industry. Pfizer and Johnson and Johnson, the two most prominent companies in the biotech industry, are at the forefront of the industry.

Evolution of fundraising for technology startups between 2005 and the present

Y Combinator launched in 2005, at a time when the venture capital industry in Silicon Valley and Boston had already developed into a well-developed ecosystem of firms. However, access to those venture capital firms was severely restricted.

VCs preferred to fund companies that were already appearing to be a sure thing – in other words, well underway. Aside from that, they chose to finance MBAs who had prior executive experience and avoided unproven teams with technical founders. Because they had a monopoly on the funding market, they could demand onerous financial terms and frequently replaced founders with executives who were more favorable to them. For a long time, the only model of institutional seed funding was the “business incubator” model. Venture capital firms would fund well-connected founders they knew and then house them in their offices.

The cost of starting a technology company then dropped precipitously. It plummeted due to the development of new infrastructure, which included open-source software, modern web frameworks, SaaS developer tools, cloud hosting, and improved distribution channels. This meant that many technical founders, who couldn’t raise money from venture capitalists based on a PowerPoint presentation, were able to launch a product and gain users with little or no investment. Once they had demonstrated the viability of their concept, they could leverage their popularity to raise additional funds.

Even though companies like this only required a small amount of capital to get started, there was no place to turn for funding because institutional investors did not make small investments. This pivotal insight resulted in the establishment of YC and the emergence of hundreds of institutional seed funds to capitalize on the new opportunity. The availability of flexible, institutional seed funding fueled an explosion in the number of tech startups. Today, this is the preferred route for most tech startups to take to get off the ground.

Given that these companies would not seek VC funding unless they were significantly further along and had leverage, the balance of power shifted in their favor. The founders of a company have increasingly retained control over it. Investors have lost the ability to fire founders and replace them with more favorable executives. And when they did, they discovered something unexpected. Despite their inexperience, the founders were frequently the most qualified individuals to lead the company.

Recent Development of biotech companies

In today’s world of early-stage biotech funding, the “venture creation model” dominates the landscape. The venture creation model is characterized by the VC firm creating the company. Once they have an initial concept, they will put together a team of preferred executives to run it, often drawn from their pool of entrepreneurs-in-residence. The startup is typically incubated in the offices of a venture capital firm. The venture capitalist (VC) invests a significant sum upfront and acquires a controlling ownership stake.

In the same way, VC-incubated technology companies made sense when it was expensive to start a tech company, this model made sense when it was costly to start a biotechnology company. Because no one could get anything done until a venture capitalist wrote a $10 million check, this was the only way to get things started until recently.

However, this is no longer the case. As new infrastructure has reduced the cost of starting a technology company, new infrastructure has reduced the cost of doing biology by several orders of magnitude. These days, founders can make significant progress in validating a concept for a biotech company for much less money, in many cases for as little as $100,000. There are low-cost contract research organizations (CROs) that will perform scientific work for a fee. Small businesses benefit from companies such as Science Exchange, which provide instantaneous and cost-effective access to contract research organizations (CROs) and scientific supplies. It is simple to rent fully equipped lab space by the bench, and some companies will assist you in stocking the lab space. Affordable lab robots from companies such as OpenTrons make it possible to automate batch experiments, and computational drug discovery from companies such as Atomwise makes it possible to conduct some experiments entirely in silico. Patent filing costs are being reduced by companies such as Cognition IP, and Enzyme Pharmaceuticals are streamlining FDA submissions.

Because of this infrastructure, biotech companies can routinely overcome major scientific obstacles during YC’s short program. Most of the time, therapeutics companies can demonstrate that their concept is effective in animal models. Human samples have proven to be successful in the hands of diagnostic companies. Companies specializing in synthetic biology have had excellent success in engineering cell lines.

YC companies have provided recent examples;

The year was 2015, and Jose Mejia Oneto was an MD/Ph.D who had just finished his orthopedic surgery residency when he decided to pursue an idea for a way to localize chemotherapy delivery. The technique had been developed in academia when Jose’s application to YC, but he had not yet attempted to apply it to therapeutics in animals. When he was accepted into YC, he went on to found Shasqi. His breast cancer mouse model research took less than three months, and he demonstrated that his localized delivery outperformed conventional chemotherapy with only the funding from YC.

Athelas develops a device that performs at-home blood tests for cancer patients, utilizing the company’s new computer vision-based technique. When the company’s founders, Tanay and Deepika, were still in college, they could produce a working prototype with only $40K in investment. During YC, they completed an initial study with 350 patients, which yielded very positive results. The FDA has now approved their device, and they are currently serving thousands of patients. 3

Of course, conducting clinical trials for drugs continues to be highly expensive4, and biotech companies will ultimately be required to raise large sums of money to fulfill their initial promises to patients. However, this is not dissimilar to the situation in tech companies. Each of the largest YC (software) companies has raised over $1 billion. The vital thing to note is that these companies could get off the ground with less than $100K and de-risk their ideas to the point where they could later raise additional funds.

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Predictions for the future

Because it is now possible to start a biotech company on a shoestring budget. It is now possible to create a tech company on a shoestring budget. You can maintain control over your company by raising money in small increments rather than raising a large sum. Furthermore, you can work on your idea rather than just pictures that venture capitalists come up with.

This new path has attracted a different type of biotech entrepreneur. Grad students and postdocs make up many of the biotech founders we see at YC5. Previously, their career options were limited to remaining in academia or working for a large pharmaceutical company. Starting their own business is now a viable third option for many people.

Suppose things proceed in the same manner as in 2005. In that case, we will see an explosion in the number of funding options available to biotech companies. Many traditional biotech investors are still on the lookout for the controlling legal terms out of favor in the technology industry in the early part of the century. As happened with technology investing, a new crop of biotech and tech/biotech crossover funds has sparked the growth of a vibrant new bio seed investor ecosystem, similar to what happened with technology investing. As a result, YC biotech companies are now raising $1-5 million in seed rounds after each batch of funding.

Even more exciting, this would indicate that we are still in the early stages of an explosion in the number of biotech companies in existence. The founders who are passionate about their ideas and who will sustain that passion while building companies that they love and that change the world will be more prevalent in these companies. Instead of being run by venture capitalists and hired executives, these companies will look more like tech companies.

What You Should Know Before Starting a Biotechnology Business

1. Intellectual Property

You’ve probably heard that if you want your invention to succeed on the market, you need to protect it; this is usually done through patents or by keeping it a closely guarded trade secret. But have you considered the possibility that other researchers have already come up with a similar idea that has been patented by someone else? Executing a ‘Freedom to Operate’ search is as important as filing your patent applications to protect your intellectual property. This FTO search can be completed by either hiring a patent attorney or starting with a simple online search and spending some time analyzing patent registration databases. A few hours spent scanning through patents.google.com should give you a pretty good idea of what’s already available.

2. Regulatory requirements and quality management

Although regulatory requirements can be complicated when starting a biotech company, considering them at an early stage of your development plan will save you a great deal of time and money in the long run. National and international agencies, such as the European Medicines Agency (EMA) and ‘notified bodies,’ regulate and audit medical products. This means, however, that your product and how it is manufactured will have to adhere to a set of rules and standards. A diagnostic test, for example, must be compliant with the European Union’s Medical Device Regulation. Implementing so-called “Quality Management Standards,” such as ISO13485 or ISO9001, is required for your organization to be successful. Additionally, your product will require a “CE certification.” It is possible to find this quality certificate on any device sold in the European Union; simply look on the back of your phone for it.

3. Evidence and maturity

Evidence is everything in the field of healthcare. You will discover that a significant portion of the time and money you invest in your company generates large amounts of data that can be used to scientifically and unambiguously demonstrate that your product is effective. As you may be aware, most therapeutic products will eventually be subjected to extensive (and extremely expensive) clinical trials. This evidence is required to gain the support of insurers, regulatory authorities, and medical professionals in the field. In the meantime, the evidence you can generate is used to convince others to believe in your product and make a financial investment in it. Furthermore, the evidence you have contributes significantly to your product’s development maturity. This maturity is usually measured using the Technology Readiness Level scale, which ranges from 1 to 9.

4. The right business model

You are now a ‘for-profit’ organization marking a significant distinction between academic research and industrial research. You must develop a very specific plan for how someone will spend money on your invention to be considered successful. Insurance companies in healthcare reimburse many products that are beneficial to patients. On the other hand, this insurance process will require a significant amount of time and effort due to the vast differences in healthcare systems between countries. Consequently, you must consider whether you ultimately want your company to ‘commercialize’ the product or whether you want to sell your innovation to a larger diagnostic or pharmaceutical corporation. Alternatively, you could try to negotiate a co-development agreement with a large player in the market or hope that a major player in the market acquires your company. If you want to gain more insight into business models, try to see what similar companies are doing.

5. Funding, funding, and funding

The most significant stumbling block for start-up businesses is obtaining sufficient funding. When it comes to creating evidence for your invention, you want to spend as much money as possible doing expensive experiments. However, investors want to see evidence before investing in your early-stage technology. Many potential life-changing innovations fall victim to this stage, ironically referred to as the ‘valley of death,’ before they ever get off the ground. This should not discourage you, as there are numerous avenues for funding your idea, including venture capital, angel investment, crowdfunding, and other forms of crowdsourcing. In addition, you can apply for loans and subsidies. To begin, look into the EIC Accelerator. This subsidy type focuses on early-stage companies with promising new products or services. Eurostars may be the right program for you if you have already gathered some evidence and some initial funding for your project.

Of course, there are many other considerations to consider when launching your biotech company. One of the most important take-home messages is to “avoid concentrating solely on the science” and try to keep track of some of the less scientifically challenging aspects of starting a biotech company. For your idea to benefit patients at the end of the day, these elements may be necessary pillars.

6. Seek help from others.

Last but not least, refrain from attempting to accomplish everything yourself. Having the right team around you can be extremely beneficial. It can also be beneficial to simply ask for assistance from time to time. Catalyze specializes in assisting biotech companies at all stages of development to develop a solid funding roadmap and shape their overall company strategy and vision. If you would like to learn more about Catalyze and how we can assist you, please do not hesitate to contact us.

What distinguishes a biotechnology company from a pharmaceutical company?

Both biotechnology and pharmaceutical companies are segments of the same industry. Still, they have very little in common with one another. Although they both manufacture medical products, the primary difference is the source of their raw materials.

Biotech companies derive their product base from living organisms and molecular biology. In contrast, pharmaceutical companies derive their medicines from artificial and chemical agents. On the other hand, biotech companies derive their product base from living organisms and molecular biology.

Why is the biotech sector unique?

1. Exorbitant scale of funding requirements: Biotech companies must spend significant money on research and development activities to bring a drug or product to market. It has gotten to the point where they rely on external sources for large capital investments to continue operating.

2. Extensive research over long periods: Biotech companies conduct an extensive research over long periods, sometimes lasting several decades, to develop a new drug or medical technology. Because of the extensive nature of life science, research can take a long time to develop a drug and bring it to a market-ready status.

3. Uncertainty about the outcome: A great deal of risk and uncertainty is associated with businesses in this sector. A company can spend a significant amount of time and money developing a drug that may never be successful and, as a result, is denied access to the market. It takes a great deal of analysis and calculated risk-taking on the investor to make a successful investment in biotech companies, especially when the investment is made at an earlier stage of product development.

Steps to Starting a Biotechnology Company

Step 1: Make sure that the idea fills a genuine market need.

Good ideas are just that: good ideas; however, not all good ideas result in creating necessary products. You should be aware that numerous exciting technologies are still searching for a market need. Consider whether there is an actual market need for your future product (see BioBlog’s post “The Deception of Marketing a High-Tech Product” for additional information). Additionally, make certain that the technology of interest is protected by intellectual property rights (IP rights) (IP). Next, obtain the assets, intellectual property rights, and commitments from the inventors and key personnel (if you are not one of them) who possess the knowledge and expertise necessary to make the technology successful.

Step 2: Identify the company’s founders and other key personnel.

A company’s ability to attract and retain talented employees is critical to its success. Determine who these people are and what they are interested in and committed to the future organization by conducting a thorough search. Not all individuals who express an interest at this stage should be considered founders of the company, nor should all founders be compensated in the same way with the same amount of stock unless they intend to devote their full time to the organization once it has received funding. Trying to figure out what percentage of a company you own is difficult. A single founder receiving identical equity ownership who will not be actively involved with the new organization while maintaining a secure position with a good salary and riding on the coattails of the other founders is undesirable.

Step 3: Locate a Reputable Attorney

This individual is a critical business partner. Your attorney will be the person you turn to when you need advice, guidance, counsel, and legal advice and solutions. They will assist you in navigating through the corporate and business issues that arise at every stage of establishing and growing your business. You will likely have this individual’s phone number memorized within the first week of starting your business venture. Because of this, they must be someone you can trust and get along well with. Above all, they must be professionals with many years of experience advising start-up biotechnology companies, as described above.

Step 4: Incorporate your company as a C Corporation once you have Investor Interest

Your next objective will be to obtain funding and/or secure federal SBIR (Small Business Innovative Research) grants. You will not be able to do either of these things unless you have a legally formed corporation. There are numerous benefits to incorporating early, one of which is the ability to issue founders’ stock without paying exorbitant sums of money for shares (or incur significant tax consequences) because the company’s valuation is extremely low. Most businesses will start as a limited liability company (LLC) and later convert to a Delaware C corporation, where the corporate laws are more favorable to businesses, during their inception and early stages. Once your company gains traction and attracts investor interest, biotech companies should be organized as C corporations rather than LLCs. It may be best for investors in biotech and life science companies to hold off on making investments until they have resolved the issue of changing to a more appropriate corporate structure.

Step 5: Develop a comprehensive marketing and business strategy that is well thought out.

To raise money, you must first develop a well-written business plan that clearly describes: the market problem and need, how your product will solve it, how much money your product will generate, what you intend to do with the money, what the return and exit for the investor will be, and who the key personnel is within the company. Your business plan should be written under the supervision of an attorney. They will assist you in converting this into a fundraising document if you so desire (private placement memorandum). After that, you will seek an audience with the appropriate investor groups interested in your stage of development and industry sector.

Step 6: Run your business as if it were a virtual company.

Maintain your day job! Build your company with care while keeping your risks to a minimum. When you have a computer, a cell phone, and an internet connection, you don’t need a physical location at this point in your business. However, make certain that you have access to a conference room or meeting room, but refrain from spending money on renting one at this time. Keep in mind that while working on your new enterprise, you should exercise caution when performing any work for the new enterprise while still employed at your current place of business. Suppose you use company time and/or facilities to launch your new business venture. In that case, you may face legal ramifications due to this. Make sure to discuss these concerns with your legal representative.

Step 7: Following the acquisition of seed capital, consistently advance the technology through successive product development milestones.

Please ensure that you identify and document the key value-enhancing product development milestones throughout the entire product development process. Then, by meeting these projections for the first few of these milestones, you will be able to demonstrate consistent progress. All investors are interested in hearing about companies making consistent progress along a predetermined development path. By meeting key milestones on time, you will increase your company’s value while decreasing the risk associated with your investment. Meeting planned milestones consistently increases the likelihood of obtaining additional funding.

Strategies for Successful Biotech Funding

The biotechnology industry is thriving right now. According to McKinsey & Company, venture biotech funding is expected to reach $36.6 billion by 2020. When it comes to responding to the COVID-19 pandemic, the healthcare industry has done an excellent job of identifying and developing new solutions to keep the virus from spreading. It is encouraging to see the progress that has been made, it’s understandable that investment is on the rise.

The amount of money invested in biotechnology increased dramatically after a slight dip at the pandemic’s start. In the same McKinsey article, they discovered that the average share price of U.S. and European companies increased at a rate more than twice that of the S& P 500, while the average share price of Chinese biotech companies increased at a rate six times that of the S& P 500.

It is currently a favorable moment for biotech companies to seek more funding and capitalize on rising interest from biotech investors through specialized techniques such as venture capital, seeking government or corporate grants, or working with research universities.

1. Determine the Most Appropriate Biotech Funding

The costs of research and development alone are extremely high in the biotechnology industry. It is necessary to have access to raw materials, labs, machinery, and highly trained and experienced employees to create a preclinical working prototype or begin drug development before you can even begin. You’ll also require funding once your product reaches the clinical trials stage, which can be a lengthy process due to FDA regulations. And all of this occurs before your product ever hits the market, which can be a lengthy process due to FDA regulations.

When your company starts, most of its value is tied to intangible assets such as intellectual property, which can be difficult to value. You’ll need to secure sources of funding upfront to be able to operate successfully, and you’ll need to determine which type of fundraising will be most effective for your company. This can be determined by creating a budget and examining the areas in which you will require financial assistance. In order to discover specific funding sources, you’ll need this information before you even begin your search. A medical trial may necessitate a grant application for a medical device trial, in which case you look at grants and apply for that award.

2. Apply for Government or Corporate Grants

It’s a relief to know that there are a variety of grant sources available, including public, private non-profit, and for-profit corporations. Finding the perfect prospects for your firm may necessitate some investigation, but the good news is that in step one, you produced a list of areas in need of investment.

Some government funding is available from the National Institutes of Health and the National Science Foundation. It’s a bonus for a company just getting started to have free search pages. The National Institutes of Health and the National Science Foundation both support university-based research in a wide range of health-related fields. Check out grants.gov for more government grant alternatives.

There are also grants from corporations and non-profit organizations. A few examples of corporate funding offered by Pfizer include COVID-19 treatments and prevention, as well as quality improvement programs. The Prevent Cancer Foundation, a non-profit, offers funds for oncology research aimed at detecting and preventing cancer in its early stages. On Science, you’ll find a comprehensive list of grants available, as well as advice on how to apply for grants.

Not all available grant resources are free, so keep that in mind when you’re researching.

3. Partner with a Research University

You may potentially be able to secure funds by cooperating with a biotechnology research university. Many biotech businesses benefited from this strategy, which was good for the institution. There are 13 different forms of cancer that are being studied by the University of Texas MD Anderson Cancer Center’s Moon Shots Program, which includes AstraZeneca and Pfizer.

If you’re not quite ready to partner on a big pharma scale, consider working with a university that has a biotech startup incubator. For example, the University of Florida’s Sid Martin Biotech Incubator helps startups grow their medical device, therapeutic, diagnostics, biopharma, and other ideas by allowing them access to their lab space, faculty, and other client resources.

4. Reach Out to Biotech Experts

When you’re in your initial stage of development, it could be difficult to recruit an investor—and reaching out to biotech experts could be a good idea because your preliminary proposal may make more sense to someone with knowledge in the field. They’ll have a better idea of the scope of your potential project. They could either advise you on ways to secure funding or invest in the project themselves if they have the capital to do so.

According to ICR Westwicke, even if these experts don’t offer to fund, partnering with them could help your company gain more credibility and build stronger connections in the field. With a biotech expert and solid data on your side, you may have a better shot at securing funding.

5. Pitch to Venture Capitalists

Venture capitalists typically demand proof of how a potential investment could generate a profit before making a decision. If you’re still in the early stages of development, they may be harder to convince. Still, some VCs feel like the biotech industry has matured and is not as high a risk as it used to be. In 2020, venture capital activity in the biotech sector was expected to increase by 45 percent; according to McKinsey & Co., VCs, on the other hand, still want to see a company’s past. According to Investopedia, venture capitalists (VCs) prefer to work with companies that are already ready to go to market rather than those in the early stages of business development.

Waiting to seek venture funding until you’re ready to commercialize your idea is the wisest course of action. Your product could be a fantastic source of immediate cash if you are ready to manufacture it. In order to get the most out of their investment, your company will want to have a say in where your company goes.

6. Look for Angel Investors

If you need money sooner than a venture capitalist can provide, consider reaching out to angel investors. Angel investors typically write smaller checks in the early stages of a company. In contrast, venture capitalists tend to invest much larger sums once the company has matured. Think of an angel investor as a catalyst for growth and a VC as someone who helps take that growth to new levels.

The Angel Capital Association says these types of investors are sometimes former entrepreneurs themselves, so along with funding, they might be able to offer you some guidance in other areas of your business as well. To find an angel investor, check the ACA’s member directory. Make sure that if you do choose to work with an angel investor, they meet the requirements set by the U.S. Securities and Exchange Commission.

How to Get Funding for a Biotech Company

1. Early-stage funding from VC firms and angel investors

According to Crunchbase data, BioTech startups raised $65.0 billion in funding in just one year in 2021. Meanwhile, global biotech and healthcare investment totaled a whopping $120.9 billion.

GL Ventures, Northpond Ventures, Temasek Holdings, Lily Asia Ventures, Novo Holdings, Orbimed, and RA Capital Management are among the venture capital firms leading this surge in investment in the sector. These venture capital firms primarily invested in series A and B financing and grant, debt, and convertible note financing.

Because of the large amounts of capital that venture capital firms and angel investors invest in promising companies, they continue to be one of the most attractive financing options for technology startups. After raising $250 million in a Series A funding round in February 2021, Contessa pharmaceuticals raised $380 million in an initial public offering (IPO) in June of the same year.

Most importantly, they do not require collateral or monthly repayment plans to finance a startup.

The disadvantage of this type of funding, on the other hand, is the high expectation of profits placed on the investment, and this expectation is placed on the investment in a very short time. VC firms anticipate that they will begin to see a return on their investments anywhere between 6 months and 1 year. On the other hand, biotechs invest a significant amount of time in their research and development. This has the potential to significantly reduce profitability.

2. Startup accelerators and incubator programs

The foundation of business accelerator and incubator programs is provided by investment firms, which provide seed funding and business mentorship, networking opportunities, and technical support to early-stage companies. There are specific accelerators dedicated to raising funds for biotech and medical technology startups. They also invest in early-stage and seed capital for high-growth-potential start-up companies.

Pros:

• Support from industry professionals who are experts in their field

• The provision of laboratory space as well as other technical equipment.

• Investment in the form of seed capital

• Business mentoring, free entrepreneur communities and professional networks are all available.

• There is no requirement for collateral to obtain funding.

Cons:

• Forfeiture of less than a 50 percent ownership stake in the company

• The company has lost complete control over its operations.

3. Grants for research from charitable organizations and the government

There are many financing initiatives available to Biotch companies to spur the development of innovative medicines and improve healthcare delivery practices. For example, charitable organizations such as the World Health Organization (WHO) and governments have established funds to support medical advancement, the development of new health technologies, and the creation of environmentally friendly products at all stages of development and growth.

The best part is that when the government or a non-profit organization funds a BioTech startup, it gets to keep 100 percent of its equity.

Pros:

• Obtaining funding for scientific research grants

• Assistance with product development

• The protection of intellectual property (IP).

• Utilization of research facilities and technical equipment

Cons:

• The application process for this type of funding is time-consuming, and it may take a long time to receive funding.

4. Grants from academic institutions

Institutional investors such as academic institutions provide incubation centers for innovative scientific and technological research. To build their businesses early, low-budget biotech startup owners can take advantage of academic resources and even gain access to seed funding.

Discoveries and intensive research are always welcomed with great enthusiasm in the world of academia, which is constantly striving to develop newer technologies while also staying one step ahead of the curve.

Pros:

A seed grant for product development and product research

• Academic institutions are not typically involved in equity investments.

• The provision of low-budget personnel.

Aside from product testing and design labs, other technological resources include:

• Technical assistance and guidance

Cons:

In comparison to other institutions, our financing capital is lower.

• It is possible that intellectual property rights and patents will have to be shared with the parent institution.

5. Campaigns for crowdsourcing

As a financing option for any type of startup or project, crowdfunding has become more and more popular in recent years. When it comes to raising money for early-stage biotech startups, a different model (known as equity crowdfunding) is available. Instead of simply paying for a product, equity crowdfunding allows investors to receive a share of the company’s equity.

According to its website, the crowdfunding website Anaxago helped a French neurological company called Eyebrain raise £1.3 million in 2015. Crowdfunding platforms such as Capital cell and Medstartr are equity crowdfunding platforms created to cut the time it takes for biotech and medical technology companies to raise funding in half.

Although the amount of money raised through crowdfunding is still small compared to venture capital firms and angel investors, it is a fast and efficient method of obtaining seed funding. Given the long operational duration and generally high-risk nature of biotech firms, there has been a lot of skepticism in recent years about the practicality of Crowdfunding for them.

Conclusion

Like any other technology company, Biotech companies have a plethora of financing options from which to choose. The company in question determines the most appropriate funding option and the amount of control they are willing to give up. Do they require funding for a short-term or a long-term period? What amount of funding is required? Is it necessary for them to receive infrastructure support or not? Is it better to seek industrial advice or not?. These factors, among others, will determine the most effective way for individual biotech startups to raise capital.

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