Startups come from all industries, and biotech is no exception. However, due to the knowledge-intensive nature of this business, not everyone can really understand how startups in this business work.
But what is a “Biotech Startup”?
Biotechnology is a broad term that when applied can refer to various disciplines and sciences. According to Wikipedia “it consists of any technological application that uses biological systems and living organisms or their derivatives for the creation or modification of products or processes for specific uses”.
A Biotechnology Startup has these distinctive characteristics:
⦁ Its pillars are financing, the legal side, production and research.
⦁ Develops a technology to solve a problem related to biology, medicine or agribusiness.
⦁ It has strict regulatory requirements in the realization of products, with several phases of testing and licensing.
⦁ Intellectual Property implies patents, trade secrets, trademarks and copyrights. This point is crucial to enter the market.
⦁ In biotechnology developing a product that works can take a little longer than in other industries because it usually takes long periods of research, which makes it an expensive and painstaking business.
⦁ The founders often come from science academies. They should partner with partners or mentors who are knowledgeable from the business world and industry.
⦁ You need financing while the product has not been fully developed, but you always find capital for it.
⦁ Technical problems are one of the main obstacles. Ensuring that the product works secures the sources of investment. Otherwise it will be difficult to find willing capital.
⦁ Except in Asia, where before injecting capital investors want a product, sales and a team, in Europe and all of America a defined product is not needed
⦁ A notable challenge for these companies is building trust
⦁ Competition with other companies is important but more important is to develop a product that passes the controls and requirements required by regulatory agents.
The stages of a Biotechnology Startup are very similar to those of a traditional Startup although there are some distinctive key points:
Initial phase:
⦁ No real customers, employees or products are needed although there must be legitimate ideas or a well defined “pre-product” and its associated Intellectual Property (IP).
⦁ IP can include trade secrets, patents, and the expertise of key team members.
⦁ The product or pre-product must be able to be associated with a defined market.
⦁ Funding comes from a combination of government grants, crowdfunding, business angels, and small venture capital funds.
⦁ It is quite normal for this stage to be negative for cash flow.
Intermediate phase:
⦁ It is the growth phase of the company. The market is well defined and the company has gone from an initial prototype to a finished product.
⦁ There will be employees, but not necessarily customers / users.
⦁ Seeks to partner with large, well-established companies, sell their IP, or license their product.
⦁ Funding will be from business angels, venture capitalists (with funds here increasing to millions of dollars), and sometimes industry funds.
⦁ Cash flow would ideally be positive or neutral, although it can still be negative depending on additional expenses or investment in materials.
Late-stage phase:
⦁ Cash flows are positive.
⦁ The product is now reaching a market penetration level and may be making sales to end users.
⦁ Funding can come from product sales, in addition to venture capital funding or IP leverage (license agreements).
⦁ In order to increase liquidity to attract investors, a company can stay at this stage for some time in order to strengthen its position (pay off certain debts, or expand a range of products or the level of market penetration of the product original).
Hand in hand with current digital developments, Biotechnology Startups are in full expansion, directly impacting medicine, genomic disciplines, biotherapies, pharmacology, the food industry and everything related to caring for the environment.
The hot areas today to start such a company are immuno-oncology, bioprinting, AI-powered drug discovery, wearable medical devices, and green technologies.
According to Silicon Valley Bank‘s 2020 annual report, biopharmaceutical investment hit record highs for the fourth year in a row. Until 2021, the outlook for venture capital remained bright, and it appears to be the case for years to come. Earlier last year PitchBook announced “pharmaceutical and biotech venture capital business activity will likely exceed $ 20 billion for the second year in a row.”
Finally, we give you some examples of recent startups that were presented in the latest edition of the “BioArgentina Virtual 2021” Exhibition held last November. Each of them contributed a product that could contribute to generating a more sustainable and healthy future in different fields:
⦁ A precision fermentation platform to improve plant-based foods, designed to boost the alternative protein industry (Food 4 you).
⦁ A genomic sequencing with potential applications in medicine and precision agriculture (ArgentTag).
⦁ The use of perennial crop molecules to apply them to annual crop production systems (Infira).
⦁ A low-cost self-administered kit that detects possible infertility problems caused by the imbalance of the female microbiome (Microgenesis).
⦁ Isolation of Extremophilic microorganisms to promote agriculture in a sustainable way (CKapur).
⦁ The use of synthetic biology and gene editing to develop herbicide resistant crops (Bioheuris).
⦁ The use of nanotechnology for the area of diagnostics in human and veterinary health, highlighted by having developed a molecular test for detection of the SARS-CoV2 virus (Chentest).
⦁ A development of innovative treatments for rare diseases, such as Hemolytic Uremic Syndrome (HUS) and that served as the basis for the creation of the hyperimmune equine serum that was used for the treatment of COVID-19 patients (Immunova).
⦁ The “training” of bees to enhance pollination and transform agriculture towards more sustainable ways (Beeflow).
In the field of biotechnology, a lot of progress has been made and, at the same time, everything is under development. The great objective, in short, is to unite scientific knowledge with the latest trends in digital developments to improve, enhance and care for biodiversity throughout the planet.
Are you thinking of starting a Biotech Startup? Impulsa Ventures can help you boost your idea by providing you with support, guidance, tools and accompaniment for you to undertake in this sector that is so complex and so exciting at the same time.
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