“Life science startups are the only companies that are forced to define their corporate strategy as a function of their financing rather than to gather financing in accordance to a previously well-defined corporate strategy.” -Steven G. Burrill, Annual Report on the Life Science Industry

Besides having the essential elements like innovative science, solid management team, strong intellectual property and ingenious marketing strategies, the success of any biotechnology company largely depends on how the strategic financial models are structured into the business plan. After all, questions pop-up like, who are these financing sources; how much do they give; how much do they take; when and how to approach them; and the current trends in financing biotechnology firms. A thorough knowledge of all financing opportunities is critical to succeed in the biotechnology business.

This write-up is also to encourage readers to add examples in each category of the financing partners for the biotechnology industry, without which it’s incomplete to conclude. Comments or suggestions to virenkonde at gmail dot com. Thanks!

1. Venture Philanthropists are a network of wealthy individuals or not-for-profit foundations which provide non-dilutive initial capital along with mentorship, disease knowledge, patient access and an understanding of the end market that few traditional VCs can offer. Government provides small amount of non-dilutive grants, while research is still in the laboratory. Technology Transfer Offices are part of the academic institutes which provides small amount of non-dilutive seed capital along with help in the IP processes such as out-licensing deals of technology or a lead molecule. Although, these funding sources are available at an early stage of drug development, they are not always efficient.

Do you know of any wealthy individuals, non-profit foundations, government grants or licensing deals out of the university spin-offs that have contributed to the growth of life sciences-based industries?

2. Angel Investors are wealthy individuals or groups usually from industry itself interested in high returns on investments. They provide small to medium capital with mentorship, creditability, and network of contacts. However, they are assembled into a closed circle and sometimes hard to reach. A typical Angel Investor will demand a larger share of the company as they are interested in the company’s management activities. However, you might actually benefit from their experience and advice. Most angel investors are in for a single round of investments and they aren't repetitive investors.

Do you know of any angel investors or their associations that have contributed to the growth of life sciences-based industries?

3. Venture Capitalists are investors with mostly industry background which also demand a fair amount of control over your operations and decision-making. However, they also rally around the business, helping with management, promoting it and providing contacts, and to protect their investment.