Over the years, former CFO David Johnston has provided help for many firms, including financing assistance for biotech firms. Biotech has become a major part of the economy and is likely to expand as more and more startups enter the field. Johnston recently discussed funding options that these startups could consider when looking to improve their financial standing in their unique field.
Stages of Funding for Biotech Firms Defined
Biotech startups can get funding from many sources, particularly the government sector. David Johnston suggests starting here first because public grants are often an interest-free way to fund a firm. Grants rarely require repayment, meaning that startups can start making money quickly and use the grants to get through the earliest and most difficult planning stages.
It is essential for companies in the earliest research and development phases, as foundational capital like these can help with early investments in materials and the development of new processes. Depending on a company’s specific focus, it can get grants from places like the National Science Foundation, the National Institute of Health, the U.S. Department of Agriculture, or the Department of Energy. Private grants are also available from larger and more established biotech companies.
Next, David Johnston suggests moving onto university funds because these educational companies typically have various grants available due to their connection to their state. Some might even let you use their university resources, such as labs and testing materials, to develop your products. It is particularly useful if your research applies directly to a university’s specialty.
Even better, universities can provide students who may do research for your company either as a school project or even join your team upon graduation. Tapping into the financial and personal resources of a university is a wise step for biotech startups and is one of the best steps if you can’t find government grants or if you need further sources of funding for your company’s progression.
After moving into these fields, former CFO David Johnston suggests trying private investments from biotech experts. These can include various venture capitalists interested in the biotech world or firms with an interest in your project. These investments differ from grants because they often include providing stakes in the business or paying back the funds to these private investors.
After all, even an “angel investor” does expect some return on their money. That’s why it’s best to turn to these individuals later in your investment process, once you’ve developed a small business and it’s on stronger feet. Grants and university funding typically come with fewer to no strings attached, meaning that you can focus on developing your company without worrying about the difficult repayment cycle.
Finding a good angel investor for a biotech startup is usually a great way to keep your firm running strongly. However, there are also startup loans that you may tap into if all other funding fails. It is usually best to save these for last because they do require repayment cycles and are often dependent on your credit score. As a startup, your score may be weak or tied to your personal credit.