Biotechs may be flush with cash, thanks to the ol’ bullish IPO market and an uptick in venture funding. But startups remain on the lookout for alternative funding models – with crowdsourcing front and center.
This makes British biotech startup Cell Therapy particularly interesting, it just raised £689,246 – or a bit over $1 million – to launch a stem cell therapy for heart failure. This is one of the highest life sciences-related crowdfunding efforts – topped only by Scanadu, whose handheld consumer diagnostic tool raised $1.6 million in Indiegogo.
Cell Therapy, which was founded by 2007 Nobel Prize winner Martin Evans, raised the funding on the site Crowdcube – exceeding its goal of £250,000 with backing from nearly 300 investors. It ceded a mere 0.39% in equity to the backers that include investment bankers, hedge fund employees and scientists, CEO Ajan Reginald said.
When Investment Rhymes with Canada
Canada has a proud history of achievement in the areas of science and technology, and the field of biomanufacturing and life sciences is no exception.
“It was very fast and very efficient,” Reginald told Reuters. “We have spent 5 percent of our time on fundraising, which enables me to spend 95 percent of my time on the business.”
Crowdfunding is increasingly becoming an option for early stage biotechs that want to sidestep the traditional venture-backed approach. On one hand, it’s a relatively simple means to raise a large amount of seed capital – but on the other, there are many more (potentially irate) investors to answer to when a company’s in its nascence.
New York-based Poliwogg‘s entire premise is on bringing crowdfunding to healthcare – with aims to help companies raise funds from accredited investors beyond the seed stage, with rounds ranging from $2 million to $10 million mark. Notably, it has its own regenerative medicine fund.
“Part of the idea here is that people want to invest in the things they care about, but they haven’t always had the opportunity to invest in them,” CEO Greg Simon told MedCity News. “We’re giving people the opportunity to put their money where their passion is.”
That’s all fine and good to have a passion for a cause, but the traditional accredited investor who’s enmeshed in a crowdfunding effort may still not understand the intricacies of what it takes to get results or a return in a tricky field like regenerative medicine.
John Carroll over at Fierce Biotech opined that crowdfunding won’t make a significant dent in the approach to life sciences crowdfunding. Stem cell therapy, after all, generated tons of media pomp and flair a decade ago, but has yet to deliver on many of its curative promises from back then. VCs are often burnt and reticent, and investors on crowdfunding sites will likely be, as well. Carroll says:
So it’s no wonder that companies that find it hard or impossible to garner money from VCs turn to microfinancing outlets like crowdfunding, appealing to individuals with little sophisticated understanding of the science or the budgets needed to do this work. Crowdfunding may be a great way to finance a software app or some individual tech project. But this news says a lot about the tough road that stem cell research is on and the likelihood that crowdfunding will never amount to more than a curiosity in biotech.
