Life sciences have a profound impact on society, with the potential to change the course of our development as human beings. Financial backers are investing in life science companies more than ever before, funding companies that are now receiving a steady flow of capital to aid their progression.
It is difficult for emerging companies to secure funding when there are so many hurdles to bringing new treatments and therapies to patients. Today’s economic uncertainty has deterred companies from investing in capital-intensive projects, which are even less appealing due to the threat of digital disruptors/innovation bottlenecks.
These days, companies are being forced to consider funding alternatives, to seek new sources of capital in order to grow operations and ultimately survive in a competitive industry. This article will address the venture capital scope as a whole while evaluating emerging opportunities to pursue new sources of capital.
Unfortunately, there isn’t a single blueprint or a one-size-fits-all approach to obtaining funding. However, there are now multiple opportunities beyond self-funding and relying on help from family and friends.
Here are some of the best routes to securing financial backing for your life science startup:
Traditional Non-Dilutive Funding
Non-dilutive funding is not uncommon among today’s startups, which often use traditional bank loans or lines of credit to fund business operations. Providing you have the assets/balance sheet that proves you can pay the money back, non-dilutive funding is an attractive option.
What’s great about this method is that you won’t need to hand over any ownership of your company, enabling you to maintain control of your business operations. Additionally, seeking non-dilutive funding is useful because it saves you time. As a result, you can focus on sourcing more permanent capital sources, which can be used to grow your business from the ground up.
However, with traditional non-dilutive funding, there are also repayment deadlines involved. If these aren’t met, you’ll end up paying over the top, with interest rearing its ugly head at the most inconvenient stages of company development.
Some lenders require a form of collateral or guarantee prior to approving funding. However, repayment terms can be negotiated in mutually beneficial ways, i.e., via revenue sharing.
Non-Traditional Non-Dilutive Funding
There’s a chance you’ll be able to secure a revenue royalty financing arrangement with an investor. As a reward for funding your operations, the investor will be entitled to a percentage of company revenue.
As is true with traditional non-dilutive funding, you’ll benefit from retaining full ownership of your company. Raising capital without the associated drawbacks of borrowing money is a luxury, one which is well worth taking advantage of.
Angel investments are perfect for the startup stages of a business when you’re seeking ways to expand your concept and scale it to the masses. Angel investors are typically either individuals or groups who invest in exchange for a percentage ownership of your company.
This will often include relinquishing an element of control over decision-making, or at the very least, veto rights. Importantly, angel investors can offer years of experience and expertise, acting as mentors during the formative stages of business.
Securing a relationship with an angel investor can elevate your standings within a particular field. They can guide you through areas of difficulty such as business development, capital formation, people and process management. Moreover, they can provide access to networks of investors.
Venture capital can typically help companies in the life science sectors just after the startup stage. Venture capital investments are generally higher-dollar investments, meaning they also come with higher premiums.
Big investments mean owners need to surrender a percentage of ownership and control to the venture capital firm. However, you’ll rarely need to relinquish control of decision making within your company.
Venture capitalists can offer expert advice to help you scale your business. Moreover, they can provide you valuable networking opportunities and connect you with executives.