A Trade Secrets reader recently emailed me to ask if we might supply a post on this question: “How would an entrepreneur or small biotech raise funding, after having biological proof of concept?”
I put that to our authors. I received a handful of answers (pasted below), and also a few promises to tackle that question in coming posts. As always, feel free to direct remarks or further questions to the authors in the comments section.
David Wilson, whose experience is from China and the US, said: On the surface I have witnessed all types of financing vehicles, from traditional banking to self-financing through personal credit cards. The short answer is that financing is available, and you have to pursue all avenues if you are passionate about your business.
Fahd Al-Mulla said he’d take up the topic in a future post, but also said: In Kuwait we have a governmental agency that funds small businesses and entrepreneurs. If you work in Kuwait University, there are business incubators, etc., available.
He pointed to this post as useful information.
Chris Hillier said: It is a straight-forward question but perhaps not as simple to answer. From my experience in Scotland, proof of concept is a direct step out from the laboratory science. The science has been developed, usually by an academic, and has been tested at the PoC stage with the market potential already in mind.
At this stage, often the entrepreneur/start-up is still not investor-ready and probably has an embryonic business plan and an incomplete view of the market. Often this is accompanied by an over-confidence in the potential of the product and an over-valuation of its worth. So, there needs to be a period of commercial due diligence that should be honest, highly critical and realistic. Assumptions must be justified and any supporting case histories or comparators used must be truly analogous. It is vital that the entrepreneur himself/herself challenges his/her own assumptions at this stage prior to approaching the angel or VC investor. If affordable, independent diligence would be a good investment.
In Scotland there are a number of government-sponsored initiatives that would support these activities. These are incredibly helpful and provide young start-ups with a great support at this stage.
Then it is a matter of using all and any means to get onto the radar of funding opportunities. Depending on a number of factors (cash requirement, time to market, management experience, market need, level of disruptiveness) this can take a long time and a lot of work. Though if you are in the right space, at the right time, with the right technology, this might be rapid.
The process of interacting with the VC is a whole story on its own, though I personally have presented 52 times over the last 15 years with different ventures, and yes, I was counting!
Viren Conde: From the Indian perspective, see Financing Know-Hows for Biotech Start-ups in India.
Prashanth Bagali: My experience is as an entrepreneur in Malaysia since 2005, and I’ve successfully incorporated two biotech/bioinformatics companies, raised Phase 1 and 2 fundings, as well as public grants.
He’s also launched products in the local and ASEAN markets, so he’s able to offer advice to fellow scientists, technologists and researchers.
A. If the innovator is an Ontario start-up company they would likely qualify for the full range of services provided by MaRS Discovery District, i.e. access to advisory services from a panel of >20 life sciences industry veterans (pharma, biotech, VC, legal, regulatory), eligibility for a program to bring in an experienced executive to assist in fundraising, access to incubator space, eligibility to apply to the MaRS Investment Accelerator Fund ($500-1000K seed funding), investment pitch training, business plan assistance and inclusion in angel investor, VC and strategic partner events hosted by MaRS.
B. If the innovator is a Greater Toronto Area academic, the process would be a bit different. The technology would first be disclosed to the appropriate technology transfer office, who would then pass it on to MaRS Innovation – a federally funded group that has first-look rights to all academic IP in this region. If MaRS Innovation decides the data is compelling and the market need is sufficiently strong, it will fund additional de-risking studies (up to early clinical studies) and the development of a robust IP estate. The goal is either to use the technology to create a spin-out company (usually a portfolio of related technologies in each company) or license to a strategic partner. MaRS Innovation is also staffed by industry experts and they are responsible for the development of each sponsored technology.
Simply put, both MaRS initiatives are intended to increase the odds of successful development of strong innovations whether academic or private in origin. Go here for more.
Others should be weighing in on this coming up. Stay tuned.