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The Silver Lining (continued)


While self-financing—also known as bootstrapping—may be the name of the game for certain types of ventures in a down economy, the same is often not the case in the realm of life sciences, which encompasses biotech, pharmaceutical, and medical devices.

“That's where there are heavy problems for mainly two reasons,” says Roberts. “One, life sciences companies need a lot of money; and two, they take a lot of time … so there's no short run. With a device company, you can say, ‘I can be to market in 12 to 18 months.' Right now, device companies can get funded, but biotech or pharmaceutical companies cannot unless they get money from a foundation like the Gates.”

Roberts, who has also worked for years as an angel investor, said that in tough economic times, angels are “quick to flee.” Or, to quote MIT Sloan's Sarofim Family Career Development Professor Fiona Murray, “In times like this, angels go to heaven.”

“Our preliminary findings suggest that investment from VCs and angels is more limited and more focused on short-term targets and high levels of capital efficiency,” says Murray, who has been working on this issue along with PricewaterhouseCoopers and the Massachusetts Life Sciences Collaborative.

“What this means for entrepreneurs in this sector is finding plans that have shorter time to revenues, are less capital intensive, and can meet value-creating proof-of-concept milestones in a timely and effective fashion,” Murray says. “This is certainly pushing attention toward diagnostics and devices, and away from very high-risk and long-term drug discovery projects.”

Murray also cites “the emerging role of foundations in funding life sciences investments as well as entrepreneurs having to make more creative use of government funding, including Small Business Innovation Research (SBIR) and some dedicated sources of state funding or funds from the American Recovery and Reinvestment Act (Recovery Act).”

It should be noted, however, that it is not only the life sciences entrepreneurs who have a chance to apply for funding through SBIR or the Recovery Act.

“There's a huge stimulus package geared to drive economic activity,” says Harthorne, whose venture has already benefited from a state-based grant. “So you have to ask, ‘What do people need? What sort of hidden assets do I have? And how do I leverage my story and my history?' ”

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