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Crowdfunding: Key to success of biotech startups

Biotech startups having a hard time securing funds must consider launching a crowdfunding campaign instead of relying on venture capitalists.



Startups are facing uphill battles in getting their message across, inviting investors, marketing products, and securing financial boost. All the more if it is a biotech company, which makes things doubly harder. The industry is booming, but fewer biotech startups are becoming successful. What could be the reason behind it, and more importantly, how can they achieve greater success?

According to AlleyWatch, the cost of releasing a new drug in the market is almost $350 million, with the trend increasing as time goes by. Aside from the huge financial requirement, biotech startups must also undergo the time-consuming process of securing an approval from the U.S. Food and Drug Administration (FDA). If a single step is missed, it could hunt the founders and be a reason why it will fail to get approval from FDA.

Another reason is that releasing a drug takes countless studies, experiments and research. With drugs, it can work sometimes, while in other circumstances, they don’t. But biotech startups need not lose faith as there is one way to increase their chances of success: crowdfunding.


Thanks to crowdfunding, biotech startups can now have an alternative source of financial boosts. (Source)

Venture capital (VC) funding has always been the go-to solution for biotechs in the U.K. However, it is high time to explore other viable alternatives such as crowdfunding. From 2014 to 2015, crowdfunding grew by as much as 295 percent in the U.K., per Lexology, and experts agree it could soon replace venture capital as a top source of financial needs. One of the reasons why crowdfunding is enjoying relative success in the biotech industry is the possibility of quickly raising money and providing access to it.

Eyebrain, a biotech startup, serves as proof that crowdfunding is better than venture capitalists. It secured its first tranche of money in under 90 days compared to the nine months in VC funding. Since 2014, online crowdfunding platforms supporting life sciences have been increasing. In the U.S., there are Poliwogg and Medstartr, while in the U.K., there is Syndicate Room.

A startup can secure an average capital of £400,000 in Europe, but there are also those that have reached the million-pound mark such as Cell Therapy, Eyebrain and Riboxx. Capital Cell was able to raise £3.77 million after launching 14 successful campaigns. Now, investors are starting to reap early returns on investment, making early funding crucial. If everything goes well, it’s a win-win situation for investors and entrepreneurs.

The success of a startup is not only dependent on financial assistance. Communication is also vital in such a way that a crowdfunding campaign tells the story of the product or service that is being offered and why there is a need for it in the current market. Choosing the correct platform is crucial as well. Entrepreneurs and founders must exercise due diligence when choosing where to launch their crowdfunding campaign.

To avoid failure, entrepreneurs in the biotech startups are encouraged to take crash courses on regulatory science, AlleyWatch stated in the same article. In this way, they can get the necessary information on legal and ethical issues that they may face along the way.

Anne Kings is a reporter for the financial sector, often tackling Wall Street and shareholders' interests. She also covers the intersection of media and technology, and delves into interesting topics on entertainment. Sometimes she also writes about the cannabis industry, in particular CBD and hemp. She is currently based in New York.