Biotech Start-up Funding Strategies: Grants vs. VC

I had a conversation with a good friend of mine recently, where the topic of funding strategies for start-ups came up, always a good topic for a debate – sort of like the Miller commercial “taste great vs. less filling”… but I digress.

Two choices seem to exists in the mainstream’s consciousness and admittedly at first in mine, when it comes to biotech funding, I’ll purposefully stay away from tech-startups because the economics are slightly different. Option A: try to stick to the grants and only go investors if you really don’t have a choice and try to retain as much control as you can. Option B: go to VC’s and give up control, i.e. an arm (and a leg, maybe throw in a kidney, too) worth’s of equity.

Using grants, i.e. SBIR, STTR, Gates and others is an interesting route but as a start-up in the biotech space, I’d say it is less than feasible long-term, because it leaves you severely undercapitalized. Show me one company that is successful using only grants as funding mechanisms, and achieves a good trajectory on it’s pipeline such that it can “escape the gravity well” of being an OK-funded, micro-sized firm and get into the stable orbit of being a well-funded company able to deliver milestones.

The REASON why grants don’t work in the long-term is that you don’t get a lot money out of it, even though someone might say a decent SBIR Phase II is nothing to sneeze at – you’re right, BUT you are linked to specific performance goals, that might or might not be in line with your – fast changing – business goals. Bottom line is: outside capital gives you the necessary quickness to shift your development to where it makes sense scientifically and commercially – grants do not.

So having said that, a feasible strategy is to leverage early grant money for validation/proof-of-concept data, which can then be leveraged for institutional investment.

The reality is you will have to give up a large part of your company and you will lose some control along the way. However that’s not always a bad thing. You need to be able to implement your vision, and can also profit tremendously from your boards’ insight and network. As with everything, it depends on managing the relationship with your investors, be they VC, Angels or friends/family, but beware the third category, unless you can stomach telling Aunt Selma she lost her nest egg.

Filed under: Uncategorized, Funding, Grants, Start-Up, VC

FDA establishing new standards for human clinical trial data

Interesting and overdue in my opinion, BUT will that increase rejections? Clinical trial design AND patient population selection will become absolutely critical as the sunk costs at that stage are enormous.

Side note on PatPop selection, this all will have positive bearing on the side effect profile IMO.

Link here: http://www.nytimes.com/2009/12/30/business/30device.html?src=twt&twt=nytimes

Filed under: Uncategorized

Test-post from Email

Let’s see how this works.

Filed under: Uncategorized

Random obserations and musings

On thenway to the rainforest national park in Puerto Rico, I saw a large complex belonging to “Lilly de Caribe”, by all accounts a subsidiary of Eli Lilly Co., Inc. A possibility for the complex being there is the wealth of natural products that the rain forest provides and that big pharma is screening for. Yet another reason not to kill off the richest repository of biodiversity on the planet (as if we needed more reasons!). I wonder how effective those natural products are at filling pharma pipelines…

My guess is not very, since they’ll most likely be matched against known active compounds, or as antagonists or agonists against known targets.

Filed under: Uncategorized, biotech, natural products, pharma