How Biotech Startup Funding Will Change in the Next 10 Years

Today, early stage biotech funding is dominated by the “venture creation model”. In the venture creation model, the VC firm creates the company. They have an initial idea and put together a team of favored executives, often from their pool of entrepreneurs-in-residence, to run it. The startup is typically incubated out of the VC’s offices. The VC invests a large amount of money upfront and takes a controlling ownership stake.

Just as VC-incubated tech companies made sense when tech companies were expensive to start, this model made sense when the cost to start a biotech company was high. Until recently, no one could get anything done before a VC wrote a $10M check, so this was the only way to get started.

But that’s no longer the case. Just like new infrastructure brought down the cost to start a tech company, new infrastructure has brought down the cost of doing biology dramatically. Today, founders can make real progress proving a concept for a biotech company for much less, often as little as $100K.