Will The Finance And Funding Pendulum Swing Back To Black In 2023?
You know the story: 2022 has been a slow year for biopharma fundraising, M&As, and IPOs. But with valuations inching down and the 30 largest biopharma companies holding over $87 billion in cash reserves, strategic acquisitions may begin to pick back up next year, according to RSM, a financial services firm. Since necessity is the mother of invention, it’s also possible that more companies will explore alternative financing options — such as exchanging future product royalty streams for an up-front payment, crowdfunding, licensing technology, or manufacturing capacity — or getting prayers answered by an angel (investor). Clinical stage companies that manage to find a way to keep some fuel in the tank during the current downturn will be well positioned to hit the gas when economic conditions improve.
Interim CEO and CFO
In my experience, most biotech companies are at a prerevenue stage when contemplating an IPO. In such cases, these prerevenue companies have no choice but to find alternative sources of capital, either from an angel investor or VC, in order to fund themselves and in some situations, under less than favorable terms for the company. If a company is fortunate enough to be in an area where grant research dollars are available, then that is another great avenue of funding. I know of a public company funding itself 100% through grant sources pre-IPO. There is also the option to crowdfund, and I have seen companies crowdfund successfully. However, there is a downside to this option. By going this route, and if then subsequently seeking out VC backing, a company has typically brought on too many shareholders for a typical VC’s preference. Later, the company may be forced to endeavor a reverse stock split to reduce the number of shareholders and address the issue. Another alternative, of course, is equipment financing; however, most startups in the life sciences space don’t have the equipment, just IP, which is an intangible asset and not considered as collateral for financing. There are a lot of options.
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