Today at BioPharm America™, a high profile panel of biotech financiers encompassing traditional and corporate VCs tried to agree on a model for funding newer companies, and getting to a successful exit point. Editas participated in this panel playing the part of poster child for raising huge amounts of money and having a successful IPO.
So, are there new rules in place, and if so, how durable are they?
On a fundamental level, the core investing premise remains the same: Capital is still attracted to strong “transformational” science and strong management teams. But given that there are roughly 100 new biotech companies formed each year, how many truly transformational opportunities are there?
From this basis, there are a several new rules at play:
- If possible, raise as much money as you can (always!) to get to phase I or II, where financing and exit options are stronger.
- Raise cash from deep pocket investors who are not pressured by fixed timelines, and who also have the ability to participate in follow-on funding rounds.
- In these days of ample available investment capital, there is less pressure to string together partnering deals for (non-dilutive) funding. Why give away value if you don’t have to? This is certainly a break from convention, whereby VCs have demanded a technology/platform be de-risked by an industry partner.
How persistent will these new rules be moving forward? The answer, in part, depends on how well the recent crop of IPO companies perform—for example, the much touted CAR-T companies. If they fare poorly, then the fear is that it will trigger a larger public market sector rotation out of biotech into a more in-vogue industry. This in turn would promote a risk-off investment environment dampening investment prospects in the industry.
But, for the time being, it is still an unprecedented time to raise capital.
“New car, caviar, four star daydream
Think I’ll buy me a football team”