Success in biotech can bestow rich rewards on an investor, but those successes are hard to come by.
Life science startups usually require a lot of money to get off the ground, and a lot of time. These two factors conspire against an investor’s returns. Recently I interviewed biotech founder and angel investor Patrick Rivelli on what led him to his remarkable record of success in biotech. Patrick founded and exited one biotech startup then helped fund another successful startup founded by his top engineer, all of this in the span of eleven years.
Here are some of Patrick’s thoughts on the matter:
“I think there's a couple things about biotech that make it a little bit different than some other industries. Number one is the time frames tend to be longer … I think the median exit is around seven years… The other thing from an angel perspective that's important to keep in mind is that the total capital needs over the life of the company are going to be large. …What's really important, at least from my perspective is, before you go into a biotech investment, you need to understand the whole trajectory of the company and is your angel round going to be sufficient to trigger an institutional round.”
This is the crucial calculus of biotech investing in the early stages. If angel money (i.e. up to $1.5 million) is not going to get the startup to a stage where a venture capitalist or pharmaceutical company is willing to fund it, then it does not make sense to invest. Rare is the case of the bootstrapped biotech startup. The capital requirements of the industry are too great to allow companies to become self-funding.
You can hear the full podcast of the interview with Patrick by subscribing on iTunes at:
You can read a transcript of the interview and listen at: