Is the Venture Capital Model a Dead End for Early Stage Biotech?
Venture capital funding is considered to be the lifeblood of any promising biotech company but because of several years of recession and timid investing the industry has suffered. The recent PwC MoneyTree and Dow Jones VentureSource reports show some positive signs that investors are getting back in the game. While the number of deals continues to shrink, the amount of cash invested has actually increased. This means fewer but fatter deals for biotechs who can prove they are worth the risk. The data also reveals a trend of venture dollars moving away from early stage companies and into increasingly later stage deals that offer a bit more security and a faster turn around for investors.
“If you don’t have a clear pathway through the FDA, it’s tough to get funding these days. It clearly is raising the bar on what type of companies will get funded by the venture capitalists,” noted Tracy T. Lefteroff, global managing partner of the venture capital practice at PwC.
Related Event: C21 BioVentures 2011
May 24-26, 2011
The Meritage Resort
Napa, CA, USA
Find out more
First time deals are sharply down
During Q1 of 2011, 35 life science companies received venture capital funding for the first time, attracting $129 million. This data represents a sharp 40% decline in the number of companies and a 46% drop in dollars invested when compared to the Q1 of 2010.
“First-time funding is expected to remain challenging for the sector, with fewer deals and smaller deal size for fledgling companies,” Lefteroff observed. “Lengthy and costly R&D and uncertainty in the regulatory approval process continue to drive more investors toward follow-on and later-stage deals with companies that are closer to successful product launches or the exit market,” he continued.
So what does this mean for the early and mid stage, cash strapped biotech company? What impact will it have on innovation? Is this the beginning of larger changes in the way we discover, develop and commercialize tomorrow’s medicine?
Tell us what you think by leaving your comments below. Continue the conversation with us at C21 BioVentures on May 24-26 in Napa, California. C21 is the leading conference for early stage biotech investing and partnering. With an all-star advisory board of leading VCs, a world-class program of experts covering current issues and unparalleled access to meet face-to-face with top pharma and investors, C21 is a must attend for leaders serious about moving their business to the next level.
Looking for more? Related stories: VC Deal Terms: Double-Dipping in the Life Sciences - Forbes.com
2010 Venture Financing in Review — A Year of Slow Recovery - Cooley LLP
More VC But Fewer Deals Signal That Investors Are Becoming Even More Risk Averse - GEN
Biotechnology startups struggle as venture capitalists seek quick hits - SF Public Press
- Jonathan Inman
Marketing Manager, TVG
About TVG
Since 1992, TVG has been connecting innovators and leaders in the life science industry across the US, Canada, China, Europe, Australia, Latin America, India, and Asia. TVG enables a global network that supports life science companies as they build new relationships, enter new markets, and create new products. Our 19-year track record (1992-2011) of success is founded on our deep industry knowledge, our integrity in business, and our powerful network of valuable relationships. We are judged by the company we keep and have helped over 3,200 life science companies achieve their business goals. We continue to expand our network into new markets in Latin America, China, and India — fulfilling our vision to be Your Global Life Science Network.
