Technology that makes use of any kind of living organism, for example, micro organisms, is known as biotechnology. Modern medical science, especially biotechnology, has emerged as a booming profitable business in the last few decades. Perceiving further growth in the sector, venture capitalists have increased their investments in this field. However promising the sector looks, venture capitalists are wary of investing their money in the startup firms owing to the risks involved and doubts about their sustainability.
What the report says?
The national venture capitalist Association and Pricewaterhouse Cooper Ltd. reported that $4.73 billion was spent by venture firms on 446 biotechnology companies in 2011 while only 153 pharmaceutical companies and equipment companies were able to receive their first funding from the venture capitalists, thus making it the lowest since 1996.
The number of new firms that have been registered with Food and Drug Administration has also gone up. The rise is calculated of about 43%. Out of these registered companies, only 13% some of them owe their success to venture capital funds.
This decline in the funding for startup biotech companies would affect the future innovation in this sector because of which we would see less number of innovations in the biotechnology field.
Venture capitalists are profit driven people. They decide their own rules before investing in a biotech company while entrepreneurs in this field are idea driven. The idea that they might have hit upon during their academic years might take a little longer to translate into commercial success. The perspective with venture capitalists is generally for 10 years or less than that. Therefore, they are averse to funding projects that may require more than 10 years to be a success, which is generally the case with most of these companies. Hence, we see a decline in funding at the outset. But, the need is to be more patient and have faith in the entrepreneur and his idea so that future innovation is not affected.
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