ON A SOLID FOUNDATION
Funding from disease-focused foundations has become another important source of capital for advancing new therapies for rare
diseases and other areas of unmet need as traditional venture capital funds migrate to later-stage investments. This funding
is often nondilutive and can help derisk research early in the development process. Notable successes, such as the Cystic
Fibrosis Foundation's role in backing development of the cystic fibrosis therapy Kalydeco, approved by FDA in January 2012,
have shown the impact such organizations can play in bringing new medicines to market. Although already spending millions
of dollars each year to fund work on developing new medicines for neurological conditions and rare diseases, foundations are
taking steps to amplify their efforts.
THE WISDOM OF CROWDS
The JOBS Act enables private companies to have as many as 2000 investors and still remain private, opening another avenue
for startups to access capital: Crowdfunding. Already popular in tech circles, crowdfunding—using social media to source small
amounts of capital from a large pool of investors—has begun to create buzz in the biotech world. Several web portals such
as Poliwogg, MedStartr, and ScitechStarter, have already sprung up in the US to enable crowd investments in anticipation of
final regulatory rules, and companies have already begun soliciting investments through them. Although companies can only
raise up to $1 million a year through crowdsourcing, it is still enough as a source of pre-angel funding.
In an early example of what could be done, startup biotech uBiome launched the world's first crowdsourced effort to map the
human microbiome, the trillions of microbes that live in and on the human body, with crowdsourced funding in November 2012.
The company, coming out of the University of California's QB3, seeks to put the latest high-throughput metagenomic sequencing
technology directly in the hands of people who invest in the company through the crowdsourcing portal Indiegogo. By pledging
$79 in support of uBiome on Indiegogo, anyone can have his or her personal microbiome sequenced. Within the first two months,
it raised $120,000 from more than 1000 participants, surpassing
its initial goal of $100,000 and 1000 users.
Crowdsourcing has already been used by life-sciences companies in France with some success. Almost 20% of the pre-IPO investment
in the French biotech Nanobiotix was raised through the fonds commun de placement dans l'innovation, the French version of
crowdsourcing. Nanobiotix raised $18.5 million in an IPO in September 2012. The UK BioIndustry Association is basing its proposal
for a Citizens' Innovation Fund on the French model.
CREATIVITY IS ESSENTIAL
There is no single path to financing a company today. Instead, companies need to take a multidimensional approach to thinking
about potential funding sources. This pool of funding includes not only government grants, but also tapping into nonprofits,
patient advocacy, disease-focused, and philanthropic groups.
Though venture capitalists are moving away from early-stage financing, the reality is that rather than having fewer financing
options, entrepreneurial companies have a range of funding alternatives that they can pursue. Regional differences exist in
both the availability and cost of capital. The only requisite to fund a company today is creativity. In a world in which we
finance one in 100 companies we see, tenacity is a big asset too.
G. Steven Burrill is chief executive officer at Burrill & Company, San Francisco, CA, 415.591.5400, email@example.com