Biotech Crowdfunding - You Must Be Kidding Me

Published: 1/28/2013 9:06:16 AM

A story has recently appeared on Xconomy describing a new entrant into the crowdfunding space - a biotechnology crowdfunding site.

I have been a supporter of crowdfunding to the extent that there are proper safeguards for investors, meaningful reporting requirements for companies seeking funding and transparency into the technology and business model of the company. There are many valid applications for this model of funding.

Biotechnology is one of the most arcane, technology-driven and investment-intensive industries in technology venture capital. Although the definition of a "biotechnology" company can be wide and includes everything from small molecule drug developers to R&D equipment makers, these companies are extremely high risk and there is absolutely no visibility into the technology they are developing.

Furthermore, the time-to-market for any biotech treatment is usually 8-10 years and several hundred million dollars, which would likely result in near total dilution of small-scale early-stage investments, even if they picked a winner.

The notion that a small time, uninformed investor can somehow pick technological winners in the biotech space and make money at it is nonsensical.

I imagine this biotech crowdfunding site will launch and some firms will collect capital from uninformed investors, but I am emphatically against it. You might as well put your money on black in Vegas.

Don Jones



Don Jones
CEO, VentureDeal

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