5 ways biotech startups can mitigate risk to grow sustainably in the long run

The explosion of investment in life sciences over the past decade has resulted in incredible new therapies for patients, strong financial returns for companies and an increase in translation research, which is critical to advancement of the next generation of therapies. Some of the early-stage companies that raised capital were years away from entering the clinic with their first product.

Everyone is excited about the flow of financing. Life science companies can create products that benefit the world at large if they have the capital to do so.

When the funding stops, what happens?

It is extremely capital intensive to develop multiple products that are all going through trials at the same time. The infrastructure needed to maintain these programs can be difficult to maintain.

A lead program is a single product that can be taken through various stages of development and eventually approved by the FDA. Lead programs help companies raise capital through partnerships and licensing.

Founders shouldn’t let peer pressure or investor check size mandates dictate their financing strategy.

There will always be ebbs and flows in funding, so here are five ways life science startup can maximize their success.

Don’t confuse successful fundraising with a successful company

Raising money is a means to an end. Most life science startup's mission is to improve outcomes. Cash in the bank isn't able to overcome the complexity of human biology. A lot of companies have raised a lot of capital but never developed a good product.

The value of a venture-backed company's exit can be an indication of its success in developing a new product. There is no correlation between capital raised and exit value.

The correlation between exit value and total invested capital has been low since 2010. The correlation between the exit value and the amount of capital raised in a company's Series A financing is very low.

The idea that there is no guarantee of a successful investment outcome is supported by these statistics.

Peer pressure shouldn't dictate the financing strategy of the founder. Focus on the key stages of technical and clinical development instead.