Crowdfunding Meets Biotech Financing – will it end in tears?

crowdfunding, biotech, dealtalk, financing

A growing number of people are looking at crowdfunding as a source of funding for biotech financing. It might seem surprising given that biotech financing is a high risk multimillion dollar bet, however this has not stopped several crowdfunding start-ups appearing on the block.

Crowdfunding is the process whereby individuals club together to provide collective funds for a project or startup business in return for a share in the potential outcomes. Crowdfunding is nothing new to the internet world, but it is certainly new to biotech, primarily due to the large amounts of funds required in order to meaningfully move a a technology forward towards the clinic.

The emerging companies in the biotech crowdfunding space are:

Health Tech Hatch – widens crowdfunding choices for health startups. Visit website.

Medstartr – fund the care your care about. Visit website.

Poliwogg – initial focus is in healthcare, community enterprise and high yield assets. Visit website.

In addition, there is a UK-based player – Crowdcure – which describes itself as ‘platform for people to come together and fund trials of new medical treatments, whilst sharing in the proceeds of successful projects. It's a place where people become pioneers and patients set the priorities'. Visit their website here.

Update: New resource added: Microryza – follow and fund scientific research. Visit website.

All offer a similar business model: submit your business opportunity together with investment requirement, investors will choose to invest (or not), if the minimum investment amount is reached, the funds will be released, equity will be given to investors and the online platform will take a cut of the funds raised.

The leaders of these companies are talking about a big opportunity, and why wouldn't they? The internet is a powerful tool, there are millions of sufferers of under-funded diseases whose only funding outlet at present is charitable donations, and an appetite for making a difference to the advancement of treatment of a disease suffered by themselves or a loved one.

Will funding provisions be emotional then? Well, depending on the entry criteria, I guess many fundings will be driven by emotional thinking which would not be seen in other sectors. Nobody other than direct family is going to get emotional about yet another website or gaming venture, however unmet diseases pull at the heart strings – ‘but for the grace of God there go I' comes to mind.

Will emerging biotechs take crowdfunding seriously? It depends. On the one hand, the best opportunities and companies will probably be on the radars of the leading VCs and as such fight in the premier league for multi-million dollar funding rounds. On the other hand, there is a shrinkage of available funding at present but a suplus of ideas requiring funding to progress to the next stage of development.

So who will crowdfunding help? I would guess we are talking about those opportunities that either sit in the second tier of opportunity potential – either due to limited access to VCs, very early stage seed investments,orphan drug candidates, university start-ups requiring smaller amounts of funding to get started, or early stage ideas seeking proof of principle prior to seeking larger funding rounds down the line.

I believe crowdfunding will have a part to play, but I expect a lot of pain for investors along the way. Perhaps some will shrug and accept that they tried to do their bit and it didn't work out. But for others, there may be a real sense of investing in something they did not realise was very high risk.

Steve Poile

Related items:

View: Financing Scorecard for top deals by investment value

Read: more on crowdfunding deals in pharma, biotech, life science partnering deal news, insights and glossary

Read: Latest life science financing announcements

Signup: Current Partnering Dealmakers News – weekly newsletter covering the latest developments in life science dealmaking

Signup: Current Agreements Review – monthly newsletter reviewing the previous months dealmaking activity – partnering, M&A and financing

Subscribe: Current Agreements deals, M&A and financing database for the life sciences industry

Leave a Reply

Your email address will not be published. Required fields are marked *