Budding biotechnology companies often face obstacles especially in terms of acquiring capital. This is the same dilemma that businesses aspiring to expand hurdle. During these times of financial difficulty many of these enterprises turn to top venture capital firms to help them with their endeavour. These companies usually do not have enough operating history to be eligible for conventional loans offered by banks. If you are one of those biotech firms, it is best to know more about venture capital options.
What the Capitalists Looking for
Venture capital biotech produce profits by giving equity financing to companies that have high growth potential. Considering that the success of budding companies rely on several factors, capitalists cautiously scrutinize these before they fund the companies. Capitalists look for founders or management team who have the experience in marketing and operational efforts. The biotech companies should also have the competitive advantage and market potential to succeed. Also, barriers to their companies’ entry should be assessed as well as their exit strategy.
Packed with Benefits
Apart from being a source of funding, biotech venture capital offers several value added services to the companies. One great advantage is the mentoring deal that venture capitalist provide. These capitalists give ongoing operational, strategic and financial advice. Often, they go as far as appointing directors to a company’s board or be closely involved with the strategic planning of the company. They can also introduce companies to an extensive network of tactical partners to help them with their efforts. Included in this benefit is the capitalists’ capacity to identify possible acquisition targets for the businesses and thereafter help in its purchase.
Comes with Setback
When a business engages the services of a biotechnology venture capital, this means they are dealing with an enterprise that is highly profit-oriented. Most of the capitalist try to realise the investment in a company in about three to five years. If your business plan reflects on a longer schedule prior to affording liquidity, venture capital may not be suitable. Businesses should also consider whether or not they are prepared for the intrusion and control that the capitalists may employ given certain circumstances. As much as their close involvement with the company’s strategic planning is an advantage, this may come off as an interference that some companies would rather not have. There is also a possibility that the capitalist may take full control of the company if the management is incapable to manoeuvre the business.