Biotechs may find VC funding hard to get

Bioinformatics, biotech and nanotechnology companies seeking venture capital funding may have to look elsewhere, according to speakers at the Silicon Alley Breakfast Club (SABC) meeting held in New York last week (March 7).

For the last two years, the SABC has focused on the business and funding of dot-com companies. But with the downturn in that market, the emphasis at today's meeting was to look at the hot technologies that are getting the interest of the venture capital community.

"Science is the new sexy kid on the block," said Anna Copeland Wheatley, executive editor of Innovation, a newsletter published by the Berkley Center for Entrepreneurial Studies, New York University Stern School of Business.

VCs are definitely interested in the biotech market, but the panel of speakers warned that companies should not expect funds to be as readily available as has been the case over the last few years.

The reason: VCs are returning to past, more sound business practices.

The main message conveyed to biotechnology start-ups at the SABC meeting was that VC funding will not be impossible to get, it is just going to be harder to get.

That means start-ups can no longer simply have a neat idea or cool technology. The idea or technology has to lead to a revenue generating business. And, for that reason, VCs will be looking for things like experienced management teams at the helm.

"For all the talk about vision and strategy, what makes a company successful is good management," said Esther Dyson, chairman of the information services company EDventure Holdings Inc. And that is what the VCs are looking for.

Several speakers at the meeting noted that companies with early-stage technologies and no real products are not likely to get VC funding.

But there are alternatives.

"VC funding is not the only funding on the planet," Wheatley said. She noted that people just assume that to be the case because of the blitz of VC funding over the last few years.

"There is other money out there," said Wheatley. "There's angel funding and private equity, and government money is available for R&D."

For example, "VCs have funded about 15 nanotechnology companies in the US," said Lawrence Phillips, founder and managing director of Value Acceleration Partners, a crisis consulting and interim management firm. "But the total funding into the 15 companies is about one-tenth the amount of public funding going into nanotechnology at universities."