Funding biotech

Funding biotech

Venture Capital and the European Biotechnology Industry.

Doing biotechnology needs money. You can make an app in your bed-sit in your spare time, but you cannot make a drug or a biofuel manufacturing plant that way. Or at least, not safely and legally. Traditionally that funding has come from investment, and there lies the problem because, outside the coastal USA, investment has not always been a positive force in biotechnology.

I realised just how toxic investors could be when building my first start-up, which was ironic as I was working for a VC at the time. I wondered then whether the company’s subsequent crash-and-burn was due to my inexperience and naivety, or whether VCs really were a horrible as the internet suggested. So I spent 10 years finding out. This was applied research, working with real data and real companies, not research driven by economic theory. As a result, it sometimes came up with quite different conclusions from the theoretical views of the world that classic business school research teaches.


  • – over 70% of all biotech VC is in the USA. Biotech VC is primarily a US phenomenon. (See here for my map of biotech VC activity in space and time.)
  • – VCs very rarely invest in start-ups. What the call start-ups are often several years old. They also rarely invest in anything new; they wait until someone else’s money has proved it a success before piling in.
  • – VCs usually fire the founders of biotech start-ups from their companies soon after investment. This is objectively not good for the companies.(see my paper here)
  • – The usual investment mechanisms used by institutional investors directly cause conflict and block good business. They usually result in founders making little or nothing even fr
  • om successful companies. (See my paper here)
  • – Most investors in biotech companies are not experienced industry veterans. Many have no more experience of biotech investing than the start-ups themselves. (See my papers here and here)

Why is this? I put this and 80,000 words of other analysis and about 70 charts and tables into a book on this which was published in 2008. Papers since then have just reinforced the message that it is investors’ underlying business model that is the problem. And, of course, poor science, incompetent management, fantasizing founders and all the other problems that start-upsare heir to – it is not all the VCs. But they play a major, destructive role when they could play a constructive one.

The book and my papers are a fact-based polemic, not your average anecdotal feel-good management book. If you want to feel good about things, read Tom Peters or Peter Drucker. If you want to know how the biotechnology industry really works, read this.

Note – I am no longer researching this, so, no, there will not be a new edition. Sorry. But what I see of VC today does not suggest they have changed in the past 15 years.