The founders of the biotech industry are no strangers to challenges. Success is impossible without a substantial investment, time, and know-how. Although life science startups managed to emerge relatively unscathed last year, the persistent economic climate is turning fundraising into a never-ending marathon. Inflationary market dynamics and the current fiscal tightening continue to pose significant risks to capital commitments. Getting a capital raise in 2021 seems like ancient history.
To ensure survival, it is essential to explore alternative funding methods instead of relying solely on classic fundraising.. This is especially true for biotech start-ups, where the investment needs are higher and the time frames for success can be much longer.
If you're an entrepreneur in the biotech industry, it may be time to make practical changes to ensure your business thrives. behold Five strategies that could help your biotech company navigate a cooling fundraising environment:
1. Set lower fundraising goals
During an economic downturn, trying to raise a large sum may not be feasible, and the time and resources you invest in fundraising could be better spent on key business initiatives. By collecting less, you can prioritize your survival, conserve your most valuable resource (time), and keep your focus on near-term tipping points.. With a smaller pool of investors, you can also maintain greater influence over your company's strategy.
2. Target experienced investors
When it comes to raising capital, it's critical to focus on building relationships with investors who share your vision and can offer you more than just capital. Investors who have experience in your industry can provide valuable guidance and connections that can help you overcome challenges and seize opportunities.; This type of investor is valuable in a downturn as they can advise you on specific technology strategies.
3. Look for associations
Strategic partnerships or collaborations with other companies in your industry are also options to consider in lieu of larger rounds. Associations can provide access to new resources, expertise, and markets that can help you grow and weather the storm.
4. Now is the time for grants
In times of economic crisis, competition for limited resources increases. With many scrambling for non-dilutive grants, it is crucial to consider applying early to ensure a stable financial footing and increase your overall chances of survival. Writing grant applications can be time consuming, but it is an essential step in ensuring external validation and government funding.
Federal agencies have money to spend. Only the National Institute of Health (NIH) reserves over $1.200 billion annually exclusively for small businesses. The NIH even offers budget cap waivers for startups working in high-priority commercial health areas.
When applying for grants, it is essential Have clear objectives and marketing strategies. This will help you focus your efforts on key initiatives that align with your long-term vision. Additionally, peer validation of grants can jump-start future fundraising efforts by showing investors that their innovation has been vetted by outside specialists.
5. Put science before the product
As a biotech start-up, you may want to drive product development and demonstrate the underlying science of your innovation. However, this can be expensive and may not be optimal or even feasible during an economic downturn. Instead, it is crucial to de-risk the scientific basis of your technology prior to product development. This will help you limit short-term cash burn, mitigate concerns about technical risk in your next raise, increase credibility with existing partners and investors, and allow you to better time the transition from R&D to product launch. product. Plus, you can enable new external partnerships and potentially even revenue through licensing while you consider strategies for product development.
By focusing on the science, you can also identify areas where you can pivot to address immediate market needs. For example, if your technology was originally developed for a specific application but has broader implications, you may be able to pivot to meet the needs of today's market. This can also help you identify potential grant opportunities that can help you fund your research and development.
An extension of putting science first means prioritizing expenses and optimizing cash flow. This refers to your company's spending habits. Identify areas where you can cut costs without compromising quality or progress. It may also mean reassessing your staffing needs. By being proactive, you can expand your leeway and increase your chances of weathering the economic storm. This can also help you better position your business for future growth and fundraising opportunities.
Ultimately, the key to surviving this economic climate is stay agile and adaptable. By strategically pivoting your strategy and focusing on de-risking your science underpinnings, you can position your startup for long-term success. Surviving tough times requires patience, persistence, and creativity, and by staying true to your vision and being flexible, you can emerge stronger from the crisis.
