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Biotech Continues to Win the Hearts and Minds of Venture Capital

Biotech Continues to Win the Hearts and Minds of Venture Capital

Over the past decade, small startup seedlings have grown to become disruptive companies in a range of industries. Venture capitalists work hard to stay ahead of the trends and can only hope to catch the wave before it reaches its peak. For the past few years, though, there’s one sector that’s received a worthy spike in attention, reception, and investment: biotech.

A report published by the Biotechnology Innovation Organization called  “Emerging Therapeutic Company Investment and Deal Trends” highlighted ten years of biotechnology funding. The report focused on funding in five key areas in the biotech industry, including venture capital and IPOs.

BIO’s Executive Vice President, Cartier Esham, stated: “Investment and licensing are the lifeblood of today’s emerging biotechnology companies searching for cures and treatments for patients suffering from devastating and life-threatening diseases.” 

The report aims to deepen the understanding of investor behavior, and revealed several key findings. For instance, it confirmed that 2015 was the best year on record for venture capital in the United States, and that funding of various disease companies helped fuel those sky-high numbers. 

Those trends remain consistent as biotech continues to win the hearts of venture capitalists. And when a particular industry experiences a boom, the businesses that complement those industries also experience a spike in investor interest. For example, as the amount of active military personnel rises, so too would the need for active duty apparel for suppliers like The domino effect of related industries and underliers help boost economy in other areas, too. 

A large range of various disease setting, from gene therapy to cancer metabolism, have excited investors around the world. These medical ventures present a promising new land for venture capitalists, and have paved the way for others to jump on the bandwagon. That potential shows in reports like BIO’s and Silicon Valley Bank’s “A Year of Dazzling Returns.” 

The Bank’s report found that biotech startups had seen 85 major exits over the last six years, and the value has risen steadily. In 2014, the average total deal value for venture-backed biotech companies was $507 million, up from $366 million. One of its key forecasts predicted that venture investments would continue to post strong returns and fundraising would remain stable or increase.  

There are many biotech startups and products in all stages of growth that are viable candidates for pieces of the pie. As these reports show, the hype around biotech isn’t all smoke and mirrors: there’s so much more to go around. Among those companies are Essen Bioscience, whose IncuCyte Live-Cell Imaging & Analysis System aims to derive deeper, physiologically relevant information about your cells. The system works round-the-clock to acquire and analyze images and provide an easy-to-achieve information-rich analysis. The system also allows for multiple users and is compatible with a wide range of culture vessels and applications.

Other products are blazing a trail, too. Gingko Bioworks, a company that engineers organisms to address fundamental issues of today, was the first biotech startup to participate in Y Combinator’s highly regarded incubator program. Sam Altman, program director at Y Combinator, told Techcrunch that what’s happening in biotech is similar to what was happening with hardware startups several years ago. 

Back then, popular consensus felt it was too risky to invest in hardware versus traditional software, but then hardware starting to make a bold appearance. This is exactly what’s happening to biotech now. Y Combinator’s decision to take on a biotech startup in 2012 was a bold statement of where the company felt biotech could influence the future of technology and investments.

Another biotech startup, Cambrian Genetics, designed the first hardware system for laser printing DNA. The company addresses a gaping need: researchers annually order or clone  around $1 billion of DNA. The growing market demanded high quality sequence, and Cambrian sought to establish itself as the reliable go-to. In 2014, the company raised $10 million in Series A from VC firm Draper Associates and Adam Pisoni.

Major investments like these prove where the money is going, and forecasts and industry analysis reports show why. This is a space that continues to be shaped by pioneers and new technology, and in a space that deals with health, there is always room for improvement. As venture capitalist firms search for the next big addition to their portfolios, they should be inclined to keep a lookout for promising biotech companies.