Tech

Benefits and Challenges of Biotechnology Crowdfunding

Biotechnology start-ups face many challenges for raising required funds. High drug failure rate, lengthy times for approvals and many other factors created dubious circumstances for venture capitalists. Because of that, emerging biotechnology companies are searching for alternate finance resource. Equity crowdfunding would be a good option for them to continue their research and drug development activities.

Crowdfunding in Biotechnology

Equity Crowdfunding is thecontribution of thecrowdto assist a company or a project by investing small amounts of money in them, over the internet. This method of crowdfunding became popular in music, film, gaming and software industry.

Biotechnology Crowdfunding is basically generating funds for a start-up biotechnology company. No individual investor invests significant amounts and so the risk is also low. But in general, these investors are let to exit with profits.This also lets the companies to snatch public attention.Though the amount pooled in crowdfunding would not be sufficient to run biotech companies, it gives them space to start work and to approach larger investment firms. Already few companies implemented this non-traditional way of fundraising and enabled their investors to have a profitable exit.

Benefits of Fundraising in Biotechnology

  1. It delivers substantial amounts for biotech start-ups to start their research and drug development.
  2. Itinvolves lessrisk as each individual invested small amount.
  3. It acts as a marketing campaign by giving publicity to fund raising biotech
  4. It acts as aproof for the company when the company approaches venture capitalists for huge investments.
  5. It will get lots of ideas and suggestion in the form of comments and feedback from investors.
  6. It is easier than thetraditional way of raising funds.
  7. Organising crowdfunding campaign is completely free
  8. One can indirectly participate in research activities to develop food or drugs for deadly diseases.

Benefits of Biotechnology Crowdfunding are compelling. But it has challenges too.

Biotech Fund Raising Challenges

  1. The biotech start-up has to establish clear concepts to convenience crowd and make them invest. It has to show its expertise in that system.
  2. The ill effects of therecession made investors reluctant to invest in biotech start-ups.
  3. Crowdfunding will produce limited capital only.The companyhas to convenience investorsthat they will definitely get good profits.
  4. Fundraising demands sharing of some confidential information to a crowd of early investors. But securing confidentiality of that info is a big challenge.

Bottom Line

Biotech start-ups are gradually turning towardscrowdfunding than toventure capitalists. It has been working well for them also.Crowdfunding will give less controland share to theinvestor while raising substantial amounts. Supporting a capableearly biotech indirectly involves investor in drug research of diseases. This will increase biotech fundraising potential to be a win-win.Biotech fundraising hasmany benefits as well as challenges also.

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Vilma M. Gordon

Vilma M. Gordon